This is the second consecutive year of losses for IKEA in Romania, after the company had recorded loss of EUR4.8 million in 2011 and sales of EUR76.6 million.
The results show how much Romanians have tightened their belt, considering that the past few years have not seen wage rises or new hiring. The extension of the crisis has led people to save rather than invest in renovation and in acquisitions of new homes.
IKEA figures are reflective of the purchasing power of the Romanian middle class (who earn between EUR800 and EUR2,000 per month).
Other strong brands, which have made a name for themselves on the Romanian market, such as Pepsi and McDonald’s, also had a difficult year in 2012. This shows that even big names started to feel the crisis and the decline in purchasing power, even if later than the rest of the economy.
For instance Quadrant – Amroq Beverages, the bottler of PepsiCo in Romania, was loss-making last year for the first time in more than a decade, with a loss of 66 million lei (EUR15 million), while McDonald’s, the largest player on the restaurant market, saw its profit shrink ten-fold during the crisis years, to less than one million euros at the end of 2012, from EUR9 million in 2007.
“In terms of reputation, there are no developments in the recent history of these brands that affect them significantly. So the most likely assumption would be that their sales have been affected by the decline in Romanians’ purchasing power,” says Adriana Liute, managing partner of branding agency Storience.
IKEA does not make exports from Romania as it has no local manufacturing plant, so the company has been dependent on the Romanian market, which continued to shrink.
Exports have been a lifeline during these crisis years for many local furniture manufacturers.
Furniture sales on the Romanian market declined for four consecutive years and major players do not expect this trend to change in 2013.
“The shift from operating the IKEA store under a franchise agreement to its joining IKEA Group [the IKEA store was taken over by the Swedish giant in 2010 from businessmen Puiu Popoviciu and Radu Dimofte] generated costs that will affect our financial results over the next few years, until we ‘reset’ our operation to suit the way in which IKEA Group works,” says Cornel Oprisan, retail manager of IKEA Romania.
The results are surprising considering that the 26,000 square-meter store was profitable since its very first year on the Romanian market (2007) and the company remained profitable until 2010.
(English version by Daniela Stoican)