Sales of goodsSales of goods refers to wholesale sales of IKEA products to IKEA franchisees. Inter IKEA Group owns and operates one IKEA store in Delft, the Netherlands. IKEA Delft’s retail sales are also included in this line item. Sales of goods are up following the necessary price increases on the goods sold to the franchisees and offset the effect of lower volumes. Unlike in FY21, we were no longer able to absorb the continuous increase in purchasing and transport costs.
Franchise feesIn a franchise setup, one company pays another franchise fees for the right to use its intellectual property. The IKEA franchise offer includes the IKEA trademarks and IKEA Concept.
IKEA franchisees pay Inter IKEA Group an annual fee of 3% over their net sales. In return, they are authorised to operate IKEA stores and other sales channels for marketing and selling the IKEA product range.
As retail sales increased in FY22, franchise fee income rose accordingly. Due to the war in Ukraine, no franchise fees were collected from the Russian and Ukrainian markets from March 2022 onwards.
Other incomeOther income mainly consists of income from marketing materials created for and sold to IKEA franchisees.
Cost of goods soldCost of goods sold describes the total accumulated costs to manufacture and distribute products. The cost of goods sold relates both to wholesale and IKEA Delft store sales.
Purchasing costs continued to increase throughout FY22. Costs also rose on the back of supply chain inefficiencies and the first effects of fast-rising inflation. Inter IKEA Group absorbed some of these increased costs, resulting in a large decrease in gross profit. Consequently, our supply chain activities only recorded very limited profits. Our ambition to absorb costs – and not pass them on to IKEA franchisees and eventually customers – was overtaken by a continued sharp increase in raw material and transport prices. This was due to the scarcity of both created by Covid-19 related effects and difficulties caused by the war in Ukraine.
gross profit % in FY22
gross profit % in FY21
Operational cost includes co-worker costs, utilities, rent and other costs related to day-to-day operations. The organisation grew in its number of co-workers during FY22. This is due firstly to managing the complexities and inefficiencies of our supply chain, particularly those effected by the consequences of the war in Ukraine. Secondly, a continued build-up of resources took place to secure capability for the strategic and digital changes needed to improve the IKEA value chain and the (online) IKEA sales experience.In June 2022, Inter IKEA Group decided to scale down business and operations in Russia and Belarus after nearly a four-month pause. This means that the franchise agreement with the local franchisee is terminated and that the IKEA Industry business in Russia has reduced its workforce and started the process of finding new ownership for all its factories. The import and export of IKEA products to and from Russia and Belarus has stopped and the offices in Moscow and Minsk will close permanently. The consequence of this decision has led to one-time costs in relation to writing down assets and provisioning of cost.
Staff and travel costs
Other operating expenses
FY22 operational cost per category
Financial income and expense
Financial income and expense are revenue and costs regarding loans, investments and positions in foreign currencies. Favourable currency developments partly offset the interest expenses.
TaxationIn FY22, the Inter IKEA Group tax charge was EUR 221 million – equal to 23.7% of pre-tax income, compared to 16.0% in FY21. The effective tax rate increased significantly following low profit in IKEA Supply AG based in Switzerland, which in turn was due to the high cost of goods and low gross margin.
Inter IKEA Group’s total tax contribution amounted to EUR 1,996 million and mainly consisted of corporate income tax, custom duties, VAT and payroll taxes. Read more in the Inter IKEA Group Tax Report FY22.