IKEA feels impact of housing slowdown

Even the most loyal followers of the Swedish leader in low-priced but sleek home decor are thinking twice about buying ready-to-assemble bookshelves or woodblock tables amid a housing slump that has lasted almost three years and the soaring costs of food and gas.

"I am definitely not shopping big items. And I am focused on sales," said Jewell A. Staley, a real estate investor who loaded her cart Wednesday at the new Brooklyn store with $10 lamps and a $29.99 bistro table. "I am spending $100 on gas every two days."

The man behind the company's global expansion, CEO and president Anders Dahlvig, told The Associated Press that the housing downturn has led to a global sales slowdown at IKEA as shoppers do less impulse buying and focus on price. And he doesn't see any economic recovery for another two years.

"A lot of things are going in the wrong direction," Dahlvig said, rattling off challenges like soaring inflation, the downturn in the job market and tighter credit. Global sales growth slowed to 11 percent in the fiscal year ended Aug. 31, compared to previous increases of about 15 percent. The hardest-hit countries are the U.S., Germany and Britain, but Dahlvig said he's seeing business in Spain and other European countries starting to slow down as well.

Still, Dahlvig believes there are big opportunities for the privately held IKEA Group, which operates about 250 stores in 31 countries. He said IKEA has gained market share in the U.S. from home furnishings rivals like Levitz Furniture, which liquidated, and Linens 'n' Things Inc., which filed for bankruptcy protection in early May.

Instead of scaling back on overall expansion, the company is shifting its emphasis toward developing markets like China, Russia and Eastern Europe, while staying tough on prices and cutting expenses.

"Slowdowns in the economy are not forever," Dahlvig said. "It's better to stick with a strategy than panic."

The U.S. housing downturn has hit home furnishings retailers the hardest, however, as a decline in home sales stifle consumer demand to fill their new houses with curtains and new tables. The home furniture and furnishings category accounted for 27 percent of the total 4,600 store closings in 2007, according to the International Council of Shopping Centers.

"IKEA is not immune to the housing downturn, but they are in a sweeter spot than other retailers," said Shilpa Rosenberry, a senior consultant at WSL Strategic Retail. "Shoppers will spend on home given the right opportunity."