San Francisco Frontiers - Ikea vows lower prices as it boosts investments

The group unveiled last month plans to spend more than two billion euros ($2.2 billion) to expand in the United States, creating 2,000 jobs in its biggest investment in almost four decades in the country.

On Sunday, on the eve of a foreign investment conference organised by the French presidency, Ingka Group, the holding company, announced a 1.2-billion-euro spending plan in the country over the next years.

"Ikea today is performing really well," Ingka chief executive Jesper Brodin told AFP.

The group, which controls the majority of Ikea's stores and accounts for more than 90 percent of its total sales, is aiming to woo new customers after a difficult 2022 marked by the fallout from Russia's war in Ukraine and high inflation.

Brodin said supply chains, which have been disrupted since countries emerged from Covid pandemic restrictions, are "getting back to normality".

At the same time, inflation in the United States and Europe is easing after central banks hiked interest rates to cool the economy.

Within a couple of months, the situation is expected to return to "the place we were before the pandemic", Brodin said.

"We were probably one of the last companies to accept the fact that also we were not immune to inflation so we have to pass on some of the cost to our customers," Brodin said.

"We know for a fact that some of our costs are coming down. We're absolutely of the opinion that prices will go down. It's not only our prediction, but it's also our mission to do that," he said.

- French investment -

In France, its third biggest market, the group believes it can "further grow our business", Brodin said.

The 2023-2026 spending plan includes 906 million euros in new investment and 377 million euros still to be deployed from a previous announcement.

The money covers the acquisition of a sprawling shopping centre in Paris that was announced in April and where another store will relocate.

It will also open a new distribution centre in the southern city of Toulouse next year and another near Paris in 2026.

Ikea France chief executive Johan Laurell said the aim is to make the brand "even more accessible", and new jobs will likely be created.

The company said the investment will accelerate its "omnichannel transformation" -- a business that offers both choices of online and physical shopping.

The spending will also go into stepping up efforts to reduce the company's carbon footprint, Ikea said.

Ikea has invested in a solar park in Langeron, central France, and delivering its products via the Seine river for Parisian customers.

It is also investing in Dutch startup RetourMatras, which recycles mattresses.

The aim is to increase recycling capacity in France by 500,000 mattresses, the company said in a statement.

The group wants in return for France to stop subsidising the incineration of mattresses, Brodin said.

He praised the European Union's Green Deal, which aims to make the 27-nation bloc carbon neutral by 2050 as a "revolution" in terms of "supporting and incentivising the transition to a carbon free economy".

But the $370 billion US Inflation Reduction Act, which promotes clean tech investments, has raised "fears" that it is "favouring" domestic companies, he said.

H.King--SFF