IKEA franchiser slashes 850 jobs in cost-cutting drive as consumer spending falls

Inter IKEA, which franchises the Swedish budget home furniture brand in 63 countries, is laying off 850 workers in a cost-cutting drive as consumer demand falls and the blue big-box retailer works to become more efficient and bring down prices.

The vast company manages the sourcing of IKEA products from factories around the world and supplies 13 franchisees operating IKEA stores. It has been squeezed by rising costs and U.S. tariffs, and is in the midst of a strategic shift from big suburban warehouse stores to more smaller city-centre locations as it tries to draw shoppers back in.

"We need to become faster, shorten the decision-making processes, and simply concentrate our efforts on these priorities," Inter IKEA Chief Financial Officer Henrik Elm told Reuters in an interview.

IRAN WAR HAS 'ACCELERATED' CONSUMER CONFIDENCE DECLINE

Both Inter IKEA and its biggest franchisee Ingka Group, which owns most IKEA outlets worldwide, changed CEOs late last year after IKEA reported its second consecutive year of declining sales.

Ingka also announced plans in March to cut 800 jobs from its office-based workforce.

Elm said declines in consumer confidence, already falling for a long time, had been "accelerated" by the Iran war. The conflict has driven fuel prices up sharply, hurting household budgets and sapping consumers' willingness to spend on non-essentials like a home renovation or new sofa.

"In times when consumer confidence is very much affected, the disposable incomes are really going down for many, especially the consumers we want to reach," said Elm.

"Our ability to lower the prices so they can afford IKEA is more essential than ever before, and of course you can't achieve that if you have too high a cost base," he added.

The 850 affected roles include 300 job cuts in Sweden, home to one of Inter IKEA's main hubs in Almhult, where IKEA was founded in 1943. The cuts represent around 3% of Inter IKEA's 27,500 employees.

-Reporting by Helen Reid; Editing by Joe Bavier/Reuters