Updates with comment on US price hikes

By Greta Rosen Fondahn and Helen Reid

STOCKHOLM/LONDON, Oct 16 (Reuters) - IKEA's annual sales fell for a second consecutive year, it reported on Thursday, as the budget furniture retailer stuck to a strategy of cutting prices to attract cash-strapped consumers and gain market share in a fiercely competitive market.

Having hiked prices during the pandemic due to supply chain disruptions, the world's biggest furniture retailer has cut prices by 10% on average over the past two years as high inflation and weak housing markets worldwide dented consumers' demand for furniture and homeware.

Global IKEA retail sales in the 2025 financial year - which ended on August 31 - fell 1%, or 0.3% adjusted for currency effects, to 44.6 billion euros ($51.9 billion). The total number of products sold, however, was up 3%, with customer numbers and store visits also up.

"One of the reasons we could take that decision was the fact that we are not on the stock exchange - we can be very long term together with our franchisees and decide that it's most important right now to have better prices," Jon Abrahamsson Ring, CEO of IKEA franchisor Inter IKEA, told Reuters.

"We do that because we see that people in all our 63 markets, their wallets are thinner right now and we see that consumer confidence for many years has gone down."

In the U.S., however, IKEA has raised prices on some products due to higher tariffs on imports, though Abrahamsson Ring said IKEA is trying to absorb the extra cost.

IKEA competes in the U.S. with Wayfair W.N and Walmart WMT.N, but more of its furniture is made in factories in Europe, giving it a slight advantage over retailers relying on imports from China which face a higher tariff rate.

"The agreement that today exists between the European Union and the U.S. ... that at least gives us good predictability and we want that to stay consistent," said Abrahamsson Ring.

BIGGEST IKEA RETAILER 'CAUTIOUSLY OPTIMISTIC'

Ingka Group, the biggest IKEA franchisee, which owns stores in 31 markets, also reported on Thursday its lowest annual sales since 2021, down 1.6% at 39 billion euros due to price cuts, but said quantities sold were up 1.6%.

Ingka CEO Jesper Brodin told Reuters he was cautiously optimistic about consumer spending picking up again.

"The impact of falling inflation and falling interest rates ... it usually takes a while before people open their wallets. We are starting to see the tendencies towards that," he said, adding that uncertainty over trade and conflict around the world made it difficult to predict.

($1 = 0.8596 euros)

(Reporting by Greta Rosen Fondahn in Stockholm and Helen Reid in London; Editing by Emelia Sithole-Matarise and Aurora Ellis)

((Greta.RosenFondahn@thomsonreuters.com;))