Ikea soars to top of profits league

IKEA has become Britain's most profitable shopping chain with margins often twice as high as rivals, according to figures from the retail research group Verdict.

It estimates that profit margins at Ikea's UK business are about 18%. The closest rival, DFS, makes just 11%. No other furniture store margins are even into double figures.

'Ikea in Britain is the envy of its rivals and of other Ikea stores around the world,' said Steve Gotham, senior analyst at Verdict.

Ikea's total sales in the UK are estimated by Verdict at about £917 million. An 18% margin would bring operating profits of £165 million.

Since it opened its first store in north London in 1987, Ikea has captured a huge market, typically of young homeowners looking for designer style at bargain prices. Its trademarks are its flatpack products, which have to be put together at home, and a catalogue of Scandinavian names. This Easter month, about 3.5 million people will visit Ikea stores in the UK - more people than regularly attend church.

The spectacular success of Ikea's 12 UK stores helps to explain how the Swedish firm with the strange sounding products has become one of the global brands of the 21st Century, and how its founder, Ingvar Kamprad, was last week dubbed the world's richest man by a business magazine.

The report said that as owner of the group, valued at ?44 billion (£30 billion), Kamprad was the world's richest man. The decline in the dollar means his fortune eclipsed that of Microsoft chief Bill Gates in dollar terms. Kamprad is worth $53 billion (£29 billion) against Gates's $47 million (£25.7 billion).

Ikea flatly denies the claim, arguing that Kamprad, who founded the firm in 1943, gave the ownership of Ikea to a charitable foundation based in the Netherlands in 1982 and so should not be regarded as the owner. But to most observers, this is academic. Kamprad is clearly among the world's super-rich - he lives in tax exile in Switzerland - and Ikea is clearly very big.

One of the few figures published by Ikea is its total global sales - ?11.3 billion (£7.5 billion) in the year to August 2003. While its other stores are not thought to match the massive 18% profit margin achieved in the UK, they are likely to be high.

Verdict's Gotham said the group had high margins because the products were the same worldwide, which allowed it to keep its costs low and make large profits while still appearing to offer value for money.

In Britain, it quickly usurped the position once held by Habitat and in fact it took over that business in 1992. Growing resistance among planning authorities to large out-of-town stores has recently hampered the group's plans to expand its British base to more than 30 by 2015.

A spokeswoman for Ikea in the UK said: 'It's not going as quickly as planned, but we've just had confirmation that we can go ahead with a site in Edinburgh, so we hope that is a sign that things are getting moving again.'

There are still plenty of parts of the world to be conquered by Ikea. It opened its first store in China in 1998 and its first in Russia in 2000.

Next year, it aims to open in Japan - possibly the toughest test yet of whether its cool northern European styles can appeal in any culture.