Sales of goodsSales of goods refers to wholesale sales of IKEA products to IKEA franchisees. Inter IKEA Group also owns and operates one IKEA store in Delft, the Netherlands. IKEA Delft’s retail sales are also included in this line item.
At the height of the pandemic, more than 350 IKEA stores were closed. As a result, sales of goods dropped significantly for several weeks. Orders were cancelled, and production at both Inter IKEA Group and IKEA suppliers’ factories stopped.
After the lockdowns, sales were significantly higher than initial projections. To meet the new demand, suppliers quickly ramped up production. But the lockdowns were lifted unevenly across the supply chain, hampering logistics. This affected product availability on various markets.
In a franchise setup, one company pays another franchise fees for the right to use their brand, products and intellectual property. IKEA franchisees pay Inter IKEA Group an annual fee of 3% over their net sales. In return, they are authorised to market and sell the IKEA product range and operate IKEA stores and other sales channels.
As retail sales decreased in FY20, franchise fee income decreased accordingly.
Other incomeOther income mainly consists of income from selling the IKEA catalogue and other marketing materials created for IKEA retailers.
Cost of goods soldCost of goods sold describes the total accumulated costs to purchase, manufacture, store and distribute products. IKEA Industry, part of Inter IKEA Group, manufactures about 11% of the IKEA range. Inter IKEA Group sources the remaining 89% from nearly 1,000 external suppliers. This includes both home furnishing and food products.
Total costs this year were less than in FY19, mainly as a result of lower purchase volumes due to the pandemic and lower prices from IKEA suppliers. However, e-commerce sales continued to create increased costs for packaging and logistics in FY20.
Decreased raw material prices offset part of the lost sales volume, resulting in a higher gross margin percentage.
Operational costOperational cost includes staff costs, utilities, rent and other costs related to day-to-day operations.
Staff costs mainly consist of salaries, benefits, training and social costs. During FY20, Inter IKEA Group employed 24,771 full-time equivalent co-workers, compared to 26,227 in FY19. To manage staff costs during the pandemic, several Inter IKEA Group companies introduced recruitment stops.
Operational costs also include expenses to develop new products and solutions. The costs related to development and innovation portfolios amounted to EUR 267 million in FY20. Charitable donations are also included in operational costs.