IKEA's Net Profits Rise 7% in First Half

IKEA Israel posted NIS 150 million in revenues and its net profits increased 7 percent in the first half of 2003, compared to the parallel six-month period, reaching NIS 11 million. The store maintained stability in visitor numbers to its single branch in Netanya - 140,000 people passed through its doors.

IKEA pays about NIS 1 million per month in rent and has no bank debt. Past press reports put the company's 2002 sales turnover at NIS 310 million - 1.5 times local rival Betili - and last year's profits were NIS 40 million. IKEA's management said in June it expects a 10 percent increase in sales for 2003.

Accounting firm PwC Kesselman & Kesselman is currently preparing an updated valuation of the furniture giant. Sector sources estimate the new draft will be close to the price tag they set in 2002 - $20 million. The IKEA franchise in Israel is owned by the Blue Square Co-op consumer cooperative society, which is putting it on the block under court orders to dissolve the Co-op.

IKEA figures indicate 35 percent of the country's population have visited the store since its 2001 opening. In 2003, the store reached a 50-percent market share in its three central activities: furniture, housewares and lighting fixtures.

IKEA's financial results are unusual for the furniture sector, with the Furniture Association reporting a drop of 27 percent in sales in the first quarter. Betili CEO Ofer Eitani said IKEA has primarily hit carpenters and small private stores, but boosted the strength of the furniture retail chains. Betili and ID Design recently announced a planned merger, although even after joining forces, both chains of stores will continue to operate separately.

IKEA's August catalog will include 9-percent price hikes, based on the strengthening euro against the local shekel over the course of the year. The company is committed to catalogue prices for the entire year; last year in August the company published a 10-percent price hike.