IKEA Stock: 3 Ways to Invest In Home Furnishings

Investing In IKEA Stock A Challenge Because Of Its Secretive & Complex Business Model & Ownership. We Have 3 Alternative Ways You Can Invest.

Simple and sleek designs, low prices, and self-assembly furniture are the hallmarks of Ikea. Love it or hate it, Ikeas rise to global home furnishing dominance makes it one of Europes greatest exports.

IKEA Stock: 3 Ways to Invest In Home Furnishings
IKEA Stock: 3 Ways to Invest In Home Furnishings

IKEA Stock

You cannot buy IKEA stock because the company is privately held by the Interogo Foundation. Interogo wholly owns Inter IKEA, and therefore fully controls all IKEA shares. You cannot buy IKEA stock because the world’s most popular furniture retailers’ shares are floated on any exchange.

IKEA Stock Price

IKEA does not have a publicly available stock price because its shares are not traded on any stock exchange. There is no valuation for IKEA stock because the company is owned by a private foundation established by Ingvar Kamprad, with the sole goal of securing the legacy of the IKEA concept.

IKEA has a complicated business model with two owners; INGKA Holding B.V. and the Interogo Foundation. Under the current ownership model, the IKEA Group; is a franchisee that pays 3% royalties to Inter IKEA Systems; also known as INGKA Holding B.V. Inter IKEA Systems is the official name for the company that franchises IKEA.

Under the current business model, the IKEA Group, which is owned by INGKA Holding B.V., operates the stores. However, Inter IKEA Systems or Inter IKEA Holding B.V. owns the IKEA Concept and supplies the furniture they sell in the IKEA stores.

The Interogo Foundation, a self-owned investment entity based in Liechtenstein, is the ultimate owner of the IKEA Group, and Inter IKEA Holding B.V.  Inter IKEA Holding B.V. franchises the IKEA brand and products to several companies around the world. Those companies include Inter IKEA Systems B.V., IKEA of Sweden AB, IKEA Supply AG, and  IKEA Communications AB.

IKEA Stock Symbol

There is no stock symbol for IKEA because IKEA is privately held by the Iterogo foundation. The foundation’s goal is ensuring the IKEA business and vision continue in perpetuity without outside interference. So IKEA has never been floated on a stock exchange and therefore has no stock ticker.

IKEA IPO

IKEA’s complex business structure has been designed to ensure there will never be a need for an initial public offering (IPO). The Interogo Foundation has the mission to plan for the ongoing operations of IKEA and build finances to ensure IKEA can survive in difficult economic times. We see no evidence of an IPO being considered in the future.

If there were an IKEA IPO, the Interogo Foundation would have to reveal its finances by complying with transparency requirements. That means they will have to explain what the Interogo Foundation is and what it does with the money.

The management of a publicly-held IKEA would have to explain their business model and operations to shareholders. In particular, the managers of a publicly-held company could have to explain why IKEA’s 2020 annual net income was one-fourth of the 2016 net annual income.

IKEA’s annual net income peaked at €4.2 billion ($5.10 billion) in 2016. The annual net income fell to €1.189 billion ($1.44 billion) in 2020. Stockholders could ask managers why the net income collapsed.

Instead, I believe IKEA will stay private for the foreseeable future. As long as IKEA remains private, it can keep its weird business structure, and managers will not have to explain why the company makes less money.

I predict there will be no IKEA ticker symbol for the foreseeable because nobody at IKEA wants to be accountable to stockholders.

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The IKEA Business

IKEA’s businesses include stores and furniture factories operated by IKEA Industry AB. The factories manufacture many of the items IKEA sells.

IKEA operated 445 stores worldwide in 2020, Statista estimates. The number of IKEA stores grew from 345 in 2013.

IKEA is unusual because its stores feature restaurants and groceries in addition to furniture. IKEA’s trademark is self-assembled low-cost furniture with simple modern designs.

The name IKEA is an acronym for Ingvar Kamprad Elmtaryd Agunnaryd. Ingvar Kamprad was IKEA’s founder, Elmtaryd was Kamprad’s family farm in Sweden. Agunnaryd is the Swedish parish (county) where Elmtaryd is located.

Kamprad founded IKEA in 1943 and started selling furniture in 1948. In 1950, Kamprad published the first IKEA catalog. The first IKEA showroom opened in Sweden in 1953. The first IKEA restaurant began in 1960.

The first IKEA store outside of Sweden opened in Norway in 1963. In 1965, IKEA opened the largest furniture store in Northern Europe at Kungens Kurva, outside Stockholm. That store became IKEA’s flagship location. IKEA introduced self-service in 1971 after a fire damaged its flagship store.

IKEA expanded throughout Europe in the 1970s and overseas to Canada, Hong Kong, and Singapore at the same time. IKEA entered the United States in 1985 and the United Kingdom in 1987. IKEA entered Latin America in 2010.

Does IKEA Make Money?

IKEA is a lucrative company, generating €39.6 billion ($48.04 billion) in annual revenues in 2020.

IKEA’s annual revenues fell from €41.3 billion ($50.10 billion) in revenues in 2019 because of COVID-19. IKEA is a fast-growing company; its annual revenues grew from €23.5 billion ($28.51 billion) in 2010

Although its revenues have brown, IKEA’s income has shrunk in recent years. Statista estimates that IKEA’s annual net income peaked at €4.2 billion ($5.10 billion) in 2016. The annual net income fell to €1.189 billion ($1.44 billion) in 2020.

IKEA is a popular company its website IKEA.com received four billion visitors in 2020, Statista estimates. However, IKEA is a small player in the American business. Statista estimates that IKEA had just 2% of the online furniture market in the United States.

Thus, IKEA is a niche player in the US furniture and home furnishings market. In America, IKEA is considered something of a joke and better known for its Swedish meatballs than furniture. Notably, IKEA is often mocked in the American media and is a frequent target for US comics and comedy writers.

Some IKEA Alternatives in the Stock Market

There is no IKEA stock, but there are some good IKEA alternatives in the stock market. Some of IKEA’s biggest and most successful rivals are publicly traded.

1. Wayfair Inc. (NYSE: W)

 The American furniture and home-goods website Wayfair (W) was the eighth most popular US e-commerce website, attracting 77.7 million visits in 2020.

Wayfair had almost 20 million active customers in 2020, Statista estimates. Digital Commence 360 estimates  Wayfair’s sales grew by 65.5% between the third quarter of 2019 and the third quarter of 2020.

The number of active Wayfair customers grew by 50.9% between the 3rd Quarter of 2019 and the third quarter of 2020, Digital Commerce 360 estimates.

Interestingly, Digital Commerce 360 estimates Wayfair had 28.8 million active customers in the 3rd quarter of 2020. That number is higher than Statista’s estimate.

Wayfair attracts customer loyalty. Repeat customers placed 11.3 million orders at Wayfair in the 3rd quarter of 2020, Digital Commerce 360 estimates. The repeat customers made up 71.9% of Wayfair’s orders during the 3rd quarter of 2020. Digital Commerce 360 estimates the value of the average Wayfair order at $243 in the 3rd quarter of 2020.

Does Wayfair Make Money?

Wayfair is making money after a long period of losses. Wayfair reported a quarterly operating income of $221.85 million on 30 September 2020. In 2020, the quarterly operating income rose from -$305.42 million on December 31, 2019.

Wayfair also reported a quarterly gross profit of $1.447 billion on September 30, 2020. The quarterly gross profit rose from $577.35 billion on December 31, 2019.

During 2020, Wayfair’s quarterly revenues grew from $2.533 on December 31, 2019, to $4.305 billion on June 30, 2020. The quarterly revenues fell to $3.84 billion on September 30, 2020.

Stock Rover estimates that Wayfair’s revenues grew at an astounding rate in 2020. The revenue growth rate was 83.71% in the quarter ending on June 30, 2020. The revenue growth rate rose 19.81% in the quarter ending on March 31, 2020, and fell to 66.54% in the quarter ending on September 30, 2020.

I attribute Wayfair’s astonishing revenue growth to the COVID-19 pandemic. The highest period of revenue growth was the quarter ending on June 30, 2020.

Those three months were at the height of the coronavirus epidemic and lockdowns in the United States. The pandemic trapped millions of people at home, and many wanted to improve their living environments. However, those people were afraid or unable to go out shopping, so they went to Wayfair.com.

Wayfair’s platform generates some cash. The company reported a quarterly operating cash flow of $1.135 billion on June 30, 2020, which fell to $331.03 million on September 30, 2020. Wayfair began 2020 with a quarterly operating cash flow -$36.30 million on December 31, 2019.

Wayfair reported a quarterly ending cash flow of $1.557 billion on June 30, 2020. The quarterly ending cash flow rose from $624.48 million on March 31, 2020, and fell to $261.47 million on September 30, 2020. Wayfair began 2020 with a quarterly ending cash flow of -$712.63 million.

Wayfair did borrow some money in 2020. It reported a quarterly financing cash flow of $427.52 million on June 30, 2020. The quarterly financing cash flow rose from $100.13 million on March 31, 2020, and fell to -$75.21 million on September 30, 2020.

Wayfair’s debt grew in 2020. The company had $1.456 billion in long-term debt on December 31, 2019. The long-term debt grew to $2.862 billion on September 30, 2020.

The value at Wayfair is growing. Wayfair’s Total assets grew from $2.953 billion on December 31, 2019, to $4.558 billion on September 30, 2020.

I think Mr. Market overpaid for Wayfair at $271.05 on February 17, 2021. However, I think Wayfair has enormous growth potential.

2. Lowe’s Companies Inc. (NYSE: LOW)

Lowe’s (LOW) is one of two enormous companies that dominate the home improvement and hardware market in North America. Lowe’s and its competitor Home Depot (NYSE: HD) operate giant home improvement centers. Americans and Canadians can purchase everything from nails to washing machines at a Lowe’s store. Lowe’s is an indirect competitor to IKEA because it sells many home furnishings.

Lowe’s operated 1,977 stores in 2019, Statista estimate. Lowe’s store count peaked at 2,152 in 2017. In recent years, Lowe’s store count has shrunk because the company has been closing smaller hardware stores.

Lowe’s makes enormous amounts of money from hardware and home furnishings. The company reported a $7.3 billion quarterly gross profit, a quarterly operating income of $2.175 billion, and quarterly revenues of $22.309 billion on October 31, 2020.

Lowe’s made more money during the COVID-19 pandemic in 2020. Its quarterly revenues grew from $16.027 billion on January 31, 2020. The quarterly gross profit grew from $4.982 billion on January 31, 2020. The quarterly operating income grew from $958 million on January 31, 2020.

The revenues are growing fast at Lowe’s. Stock Rover research reports show Lowe’s revenues grew by 28.3% in the quarter that ended on October 31, 2020. The revenue growth rate rose from 30.06% on July 31, 2020, 10.9% on April 30, 2020, and 2.44% on January 31, 2020.

Lowe’s is capable of generating enormous amounts of cash. It reported a quarterly operating cash flow of $7.302 billion on July 31, 2020. The quarterly operating cash flow from $4.45 billion on April 30, 2020, and fell to -$267 million on October 31, 2020.

Lowe’s also reported a quarterly ending cash flow of $5.686 billion on July 31, 2020. The quarterly ending cash flow fell from $5.955 billion on April 30, 2020, and fell to -$3.392 billion on October 31, 2020.

There was a negative quarterly ending cash flow on October 31, 2020, because Lowe’s pays enormous amounts of debt. Lowe’s reported a quarterly financing cash flow of -$2.033 billion on Halloween Day 2020.

Lowe’s had $21.185 billion in long-term debt on October 31, 2020. In 2020, Lowe’s long-term debt grew from $16.768 billion on January 31, 2020.

I think Lowe’s offered enormous value in the form of $10.101 billion in cash and short-term investments on October 31, 2020. The cash and short-term investments grew from $876 million on January 31, 2020.

Lowe’s had $50.88 billion in total assets on October 31, 2020. The total assets grew from $39.417 billion on January 31, 2020.

I think Mr. Market fairly priced Lowe’s at $177.24 on February 17, 2021. Lowe’s has experienced enormous share value growth in 2020. Over the past year, Lowe’s share price rose from $123.33 on February 18, 2020.

I consider Lowe’s an excellent income investment because it paid a 60₵ quarterly dividend on February 3, 2021. That quarterly dividend grew from 55₵ on August 5, 2020. In total, Lowe’s paid a $2.30 annual LTM dividend and a 1.30% annual dividend yield on February 17, 2021, Dividend.com estimates.

3. TJX Companies Inc. (NYSE: TJX)

The TJX Companies (TJX) is one of IKEA’s biggest direct competitors. TJX competes with IKEA by operating the HomeGoods, Sierra, and Homesense furnishing stores in the United States.

TJX operates over 4,500 stores in nine countries. The TJX retail brands include Homegoods, T.J. Maxx, Sierra, Winners, Homesense, Marshalls, and T.K. Maxx.

In similarity to IKEA, TJX has a unique business model of deep discounting high-quality products. Unlike IKEA, TJX sells clothing, including many fashion items. However, some TJX stores sell furniture and home furnishings in direct competition with IKEA.

Many Americans shop at TJX stores because it sells many unique and unusual items, including name-brand fashions, at low prices. TJX can offer deep discounts because it sources items directly from over 21,000 vendors in over 100 countries. In contrast to many American retailers, TJX concentrates on sales to a working-class market and shoppers in urban areas.

TJX can make enormous amounts of money from its store. The TJX Companies reported a $3.055 billion quarterly gross profit and a $1.069 billion quarterly operating income on October 31, 2020.

The COVID-19 pandemic hurt TJX’s business in 2020. TJX’s quarterly revenues, for instance, fell from $12.206 billion on January 31, 2020, to $4.408 billion on April 30, 2020. The quarterly revenues rebounded to $6.68 billion on July 31, 2020, and $10.117 billion on October 31, 2020.

Likewise, TJX’s quarterly gross profit fell from $3.464 billion on January 31 to -$5.58 million on April 30, 2020. The quarterly operating income fell from $1.329 billion on January 31, 2020, to -$1.319 billion on April 30, 2020.

TJX recovered fast from the pandemic. The quarterly revenues rose to $6.668 billion on July 31, 2020, and $10.117 billion on October 31, 2020. The quarterly gross profit rose to $1.493 billion on July 31, 2020, and $3.055 billion on October 31, 2020. The quarterly operating loss rose to -$34.68 million on July 31, 2020, and the quarterly operating income rose to $1.069 billion on October 31, 2020.

The TJX companies can generate enormous amounts of cash. TJX reported a quarterly operating cash flow of $4.0479 billion on October 31, 2020. In 2020, the quarterly operating cash flow fell to -$3.16 billion on April 30, 2020, but rose to $3.357 billion on July 31, 2020.

TJX compensated for the -$3.16 billion quarterly operating cash flow with a quarterly financing cash flow of $4.491 billion on April 30, 2020. That led to a $4.288 billion ending quarterly cash flow on the same day.

To survive the pandemic, TJX had to take on more debt. TJX had $2.237 billion in total debt on January 31, 2020. The total debt rose to $7.192 billion on April 30, 2020, and fell to $5.445 billion on July 31, 2020, and rose slightly to $5.447 billion on October 31, 2020.

In 2020, TJX’s quarterly ending cash flow rose from $1.157 billion on January 31, 2020, to $4.288 billion on April 30, 2020. The quarterly ending cash flow fell to $2.333 billion on July 31, 2020, and rose to $3.962 billion on October 31, 2020.

TJX’s value grew in 2020. Its total assets grew from $24.145 billion on July 31, 2020, to $31.565 billion on October 31, 2020.

One attraction at TJX is a stable stock. Mr. Market paid $63.46 for TJX on February 18, 2020, and $66.83 for TJX on February 17, 2020.

Another attraction at TJX is a dividend. TJX will pay a 26₵ quarterly dividend on March 4, 2021. That dividend will grow from 23₵ on March 5, 2020. TJX did not pay dividends for three quarters in 2020 because of the coronavirus.

I consider TJX a value investment because it is cheap, cash-rich, and pays an impressive dividend. TJX is also a growing company that offers income in the form of its dividend.

Summary: IKEA Stock

You cannot buy IKEA stock, and there is no stock symbol for IKEA. There is absolutely no plan for an IKEA IPO as the company is owned by a foundation that will ensure the companies independence.

In the final analysis, traditional retailers such as Lowe’s and TJX Companies are probably better investments than IKEA. Investors do not need an IKEA stock because they can find many excellent alternatives.

Daniel G. Jennings is a highly-experienced freelance writer and blogger who lives and works in Colorado, USA. Jennings has written extensively about value investing, the stock market, retail, cryptocurrency, politics, marketing, technology, and many other subjects. His writing has appeared at Seeking Alpha, The Motley Fool, Geek Crunch Reviews, Empresa Journal, and many other websites. Jennings makes daily posts of his latest writing to www.MarketMadHouse.com

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