Ikea chief drops plan to double pace of store openings; rapid pace of the expansion had been opposed by Ingvar Kamprad, Ikea’s mercurial 87-year-old founder, who favoured more investment in existing stores

September 1, 2013 3:09 pm

Ikea chief drops plan to double pace of store openings

By Richard Milne in Älmhult

Ikea’s new chief executive has rowed back on his predecessor’s pledge to double the pace of store openings, underlining a power shift at the world’s largest furniture retailer. In his first interview as chief executive, Peter Agnefjäll told the Financial Times he was hoping to increase the number of annual store openings from five this year, a figure he called a “record low”. But asked about his predecessor Mikael Ohlsson’srepeated pledge to open 20-25 stores a year, Mr Agnefjäll said: “I don’t recognise that, really.” The shift is significant because the rapid pace of the expansion had been opposed by Ingvar Kamprad,Ikea’s mercurial 87-year-old founder, who favoured more investment in existing stores.Mr Agnefjäll, who unlike Mr Ohlsson is a former assistant of Mr Kamprad’s, said he would put the emphasis on improving the company’s existing shops. He added that he hoped Ikea could increase its sales by 10 per cent a year and thereby double its annual revenues to about €50bn by 2020.

Both current and former Ikea executives worry the retailer’s strong corporate culture – which comes from its roots in rural southern Sweden where thriftiness is a virtue, and Mr Kamprad’s emphasis on shared moral values among employees – could be damaged by too quick an expansion into countries such as India and China. Previous big pushes into Japan and the US in the 1970s and 1980s had to be halted after difficulties.

Mr Ohlsson’s time in charge from 2009 was also tarnished by scandals in various parts of Ikea’s empire, including a bribery case in Russia and allegations of spying on customers and workers in France.

The 42-year-old Mr Agnefjäll said: “I would say we can, of course, never grow faster than we can secure the culture and the vision, and that [is] what we are working with. I think that is a big challenge for us . . . But I think to grow Ikea is [about] much more than expansion.”

Ikea’s ability to open new stores has been held back by planning delays in several countries. Mr Ohlsson singled out several German local authorities earlier this year and shifted his 20-25 stores a year goal back from this year to 2015.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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