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IKEA temporarily closes stores in Russia, flags bigger price hikes -Breaking

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© Reuters. FILEPHOTO: This is the logo of IKEA Group in Saint-Herblain (near Nantes), France. It was taken March 22, 2021. REUTERS/Stephane Mahe

By Anna Ringstrom

STOCKHOLM (Reuters – IKEA has closed its Russian branches and halted all sourcing in Russia. It joins a growing number of Western businesses that are cutting back business with Russia in response to the invasion of Ukraine.

This news was announced by Ingka Group, the retail manager for IKEA stores. He told Reuters that budget furniture manufacturer IKEA expects to increase prices by approximately 12% in fiscal 2019, up from 9% previously due to rising raw material costs, supply chain disruptions, and other factors.

Inter IKEA’s brand owner and Ingka Group jointly stated that “the devastating war in Ukraine” is a tragic human tragedy.

The company group stated, “The war is having a tremendous human impact as well as causing serious disruptions to the supply chain and trading conditions. This is why they have temporarily suspended IKEA operations to Russia.”

Ingka Group is also one the largest shopping center owners in the world. It said that its 14 Russian malls, called “Mega”, will remain open.

IKEA was one of the first companies to stop business in Belarus after the conflict and subsequent sanctions.

“We could not offer security and safety to people in our supply chain, as it was risky for them to cross the border. Henrik Elm, Inter IKEA Core Business Supplier, stated that Belarus was the next to impossible country for him.

Inter IKEA manages supply. Ingka Group, the largest global retailer, has 17 retail outlets in Russia as well as one distribution center. Russia was IKEA’s 10th biggest market in the last year, with retail sales totalling 1.6 billion euro ($1.8 billion) or 4%.

Russia’s operations will be halted for 15,000 workers. Tolga Oncu, Ingka Group Retail Operations Manager, stated in an interview with Elm, that every staff member would receive a salary in roubles over the next three months.

IKEA stated that the company groups would provide employment, income stability, and support for their families.

IKEA makes chipboards, wood-based products and at least 50 other direct suppliers within Russia that can produce a variety of goods. Russia is the main market for most of Russia’s products.

IKEA produces less than 0.5% of its products in Russia. IKEA’s Belarus sourcing market is where most of the goods are produced. They mainly consist of wooden-based products, mattresses, and sofas.

Elm claimed that these decisions were taken before Wednesday’s European Union approved sanctions for Belarus to punish it for supporting Russia’s invasion of Ukraine.

Elm indicated that it was premature to predict whether Inter IKEA might raise prices to its store owners due to the Ukraine crisis.

Russia considers its actions against Ukraine “special”

($1 = 0.9028 euros)

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