Ikea has warned of imminent price hikes amid rising costs and supply chain challenges

• Ikea said Wednesday it plans to raise prices in 2022.
• It said higher transport and raw material costs were the reasons for the incoming price hikes.

Ikea, the leading purveyor of affordable flat-pack furniture, is raising prices to offset rising transport and raw material costs.

In an interview with Reuters, Martin van Dam, CFO of the Swedish furniture giant, said that the price increases would come into force next year.

Ikea is among a growing group of retailers and manufacturers that are lifting prices to offset rising inflation caused by higher transportation, packaging, and labor costs. The global supply chain crisis also means that businesses across all industries are struggling to make and ship their products to meet consumer demand.

Ikea operates a franchise model, so it will be up to franchisees to decide whether to pass the higher costs on to their customers, van Dam said.

He spoke after Ikea's latest annual results revealed that margins had been squeezed as a result of leaving wholesale prices untouched as input costs rose.

"Keeping Ikea stores and warehouses stocked has been a challenge," the company said in a presentation of its annual results Wednesday. "Supply chain disruptions led to a substantial drop in the availability of products that we have yet to recover from."

Last month, Ikea CEO Abrahamsson Ring said he's expecting supply chain challenges to continue well into 2022.

Shortages would likely continue "for the better part, if not the whole" of Ikea's financial year, which ends August 2022, Ring said in an interview with the Financial Times.

The company's annual results for fiscal 2021 showed that strong online demand helped boost annual sales compared with fiscal 2019 and 2020, but pretax profits at Inter Ikea Group, which acts as the franchisor to store owners, fell by 16% in the 12-month period ending August 31.

"Raw material prices increased dramatically in the second half of FY21 following an unfavorable combination of scarcity and high demand," the company wrote in its annual summary, adding that transport costs rose due to the "limited availability of containers and carriers as a result of the pandemic."