The IKEA franchise, owned by Puiu Popoviciu, one of the most discreet billionaires in Romania, registered net income worth 15.2m RON (4.6m euros) in the first nine months in business in 2007.
Moaro Trading, the firm that operates the IKEA franchise in Romania, ended last year with turnover worth 195.8m RON (58.7m euros) and a 7.8% profit rate.
IKEA representatives have so far chosen not to disclose the value of profit generated by the store in Baneasa's commercial area, but simply specified that it did not make a loss.
"IKEA counts on sales in large volumes. Hence, the key to higher profit does not reside in the margin (a mark-up pre-set to generate profit), but in the high number of products at prices that as many people as possible can afford. A high margin from a small turnover can be much smaller than a small margin from a big turnover," said Cornel Oprisan, retail manager of IKEA Romania.
In comparison, the store in the same area operated by Mobexpert last year had a 6.1% margin, with a net income of 3.4m RON (1m euros) against turnover worth 55.2m RON (16.6m euros). Mobexpert's Pipera store operated at an 11.3% profit margin, while the one of Militari saw a 6% net margin.
Generally, retailers operate at the smallest margins in the economy. On average, profit margins for food retail are not higher than 4-5%, as many networks expanding in full gear register financial losses domestically. On the other hand, in food retail most networks are at the limit of profitability. As far as IKEA stores are concerned, profit emerges as late as 2-3 years after the launch of operations. Initially projected sums were exceeded in terms of turnover, so that in the September 2007-August 2008 financial year, IKEA is expected to reach 80m-euro turnover. The store in Baneasa, in which 25m euros were invested, generated sales per square metre of around 2,300 euros.
The store in Romania is among the top 100 in the world in terms of annual turnover. As soon as the first store opened, IKEA officials voiced their intention to invest in several other locations in Romania.
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