IKEA profits plunge more than a quarter after tariff uncertainty

With the fiscal year ending in August, Sweden’s Inter IKEA – which supplies furniture to IKEA stores globally – said its annual operating profit dropped 26% due to the impact of U.S. tariffs driving up costs.

Operating profit for the fiscal year ended on Aug. 31 was 1.7 billion euros ($1.98 billion), down from 2.3 billion euros the year before, while revenue fell to 26.3 billion euros from 26.5 billion euros, after it cut prices, according to the IKEA brand owner.

IKEA stores across 63 markets around the world fell for a second year in a row to 44.6 billion euros ($52.01 billion), the furniture maker announced.

Inter IKEA said in a statement that commodity prices and logistics costs had risen in the second half of the financial year due to uncertainties following U.S. tariff announcements.

While IKEA has cut prices overall, higher U.S. tariffs have forced it to increase prices on some products in the United States, which it imports from factories in Europe and China. Lithuanian furniture manufacturer SBA, which supplies IKEA, last month launched its first U.S. factory, in North Carolina, manufacturing IKEA products such as its BILLY bookcases and KALLAX shelving units.

The factory was planned well before U.S. President Donald Trump embarked on his tariff-hiking policies, Henrik Elm, chief financial officer at Inter IKEA, told Reuters.

But it is “very timely, of course, since that is also helping us to mitigate the effects of the tariffs on those top-selling products,” Elm said in an interview.

Inter IKEA said wholesale sales volumes rose by around 6% compared to the previous year as shoppers responded to lower prices by buying more.

U.S. Supreme Court justices raised doubts on Wednesday over the legality of Trump’s tariffs in a case that has broad implications for how Trump governs. The president, who has warned that a decision stripping him of the right to set tariffs would be a disaster, said on Thursday his administration would need a Plan B of sorts if the court’s ruling went that way.

During a back-and-forth with journalists in the Oval Office about the issue, a reporter noted that Chief Justice John Roberts had asserted that tariffs were actually taxes paid by Americans.