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IKEA Israel's sales totaled NIS 323 million last year, up 6 percent from 2002, according to the company's financial statements.

While the company's revenues increased, despite the economic recession, they fell short of the target of 10 percent sales growth that was announced in mid-2003 by CEO Gil Unger.

Operational profit last year soared by more than 20 percent to NIS 50 million, but net profits slipped to NIS 28 million, some NIS 5 million less than the previous year. Industry sources explain that the drop in net profit is due to an increased tax burden. Established in 2001, IKEA Israel paid lower taxes during its first two years due to start-up costs. But last year, the tax bill jumped from NIS 13 million to NIS 30 million.

Blue Square Consumer Cooperative Society is under a court directive to sell its holdings, including its 75 percent share of IKEA Israel. IKEA International held the other 25 percent until selling it in 2002 to Canadian-Jewish businessman Albert Gnat, who died last weekend. IKEA International also retains first right of refusal for the Blue Square cooperative's stake.

The Kesselman & Kesselman accounting firm was asked by Blue Square to conduct an assessment of IKEA Israel's value and came up with a figure of NIS 22 million. IKEA International and Gnat thought this assessment was too low and commissioned Shlomo Ziv's accounting firm to make another assessment, which ended up being 10 percent lower than that of Kesselman & Kesselman. But industry sources expect the assessment to now be revised upward.

IKEA Israel has dramatically changed the furniture market in Israel, pushing prices down some 30 percent. In early 2003, Unger announced plans to open two more stores in Israel, but these plans have been delayed due to uncertainty over the ownership issue. This uncertainty also explains why no replacement has yet been named for Unger, who has been named CEO of Blue Square Israel and is slated to finish his term at IKEA Israel next month.