How to Invest in Ikea

Ikea is one of the world's largest furniture retailers. The company has made a name for itself by selling ready-to-assemble furniture, decorations, and accessories that resonate with consumers.

While Ikea is a well-known global brand these days, it had humble beginnings. The company started in 1943 when 17-year-old Ingvar Kamprad, who grew up on the Elmtaryd farm in the southern Swedish village of Agunnaryd, registered the trademark IKEA based on the first letters of his name and where he grew up.

Ikea has grown into a very large, profitable, and popular global retailer. That has many of its fans and investors wondering whether it will ever go public through an initial public offering (IPO). Here's a look at everything you need to know about how to invest in Ikea, as well as some alternatives to consider while the company remains privately owned.

Is Ikea publicly traded?

Is Ikea publicly traded?

Ikea is not a publicly traded company. The Inter Ikea Foundation owns the Inter Ikea Group. The foundation is a self-owned entity. Its purpose is to ensure Ikea maintains its independence.

When will Ikea IPO?

When will Ikea IPO?

Ikea didn't have an IPO on the calendar as of early 2024. The company likely won't complete an IPO anytime soon. The company's owner, Inter Ikea Foundation, has one main purpose: to maintain the independence of the Ikea concept. One way to ensure Ikea remains independent is to keep it private.

How to buy

How to buy Ikea stock

You can't buy Ikea stock because it's a private company owned by a foundation (Inter Ikea Foundation) with the express purpose of protecting its independence. Given that ownership structure, investors might never get the chance to buy shares of Ikea in an IPO.

However, investors do have alternative options to Ikea worth considering. Here are three top retail stocks with excellent track records of growing value for their shareholders.

Amazon

Amazon (AMZN 3.43%) is an e-commerce leader. The company's net sales totaled $143.1 billion in the third quarter of 2023, up 13% from the year-ago period.

Meanwhile, its net income more than tripled to $9.9 billion. Amazon's rapidly rising revenue and soaring profits have enabled it to produce robust returns for investors for many years. Its average annual return over the last decade was 22.8%, smashing the S&P 500's 12.1% annual total return.

Costco

Costco (COST 1.01%) is a leading membership warehouse operator with almost 900 locations, including 600 in the U.S. Costco rang up $56.7 billion of net sales in the first quarter of its 2024 fiscal year, a 6.1% increase from the prior year. Further, the warehouse giant's net income totaled almost $1.6 billion, up from less than $1.4 billion in the year-ago period.

Costco's steadily growing revenue and earnings have enabled it to deliver strong total returns for its investors over the last decade (22% annually). Costco routinely returns a portion of its profits to shareholders through dividends. It paid a whopping $15 per share special dividend in 2023 ($6.7 billion total), adding to its $1.02 quarterly payout.

Home Depot

Home Depot (HD 0.94%) is a leading home improvement retailer with over 2,300 locations across North America. The company posted $37.7 billion in sales during the third quarter of 2023. While that was down 3.1% from the year-ago period, the company expects to return to growth in the future.

It aims to grow its sales by 3% to 4% per year as the home improvement market stabilizes, which should drive mid- to high-single-digit earnings per share growth. The company's steady sales, profits, and dividend growth over the years have helped drive market-beating total returns (18.7% annualized over the past decade versus 12.1% for the S&P 500).

Investors who want to buy one of these Ikea alternatives can purchase shares in any brokerage account. Here's a step-by-step guide on how to invest in stocks like Ikea.

Step 1: Open a brokerage account

You'll have to open and fund a brokerage account before buying shares of any company. If you still need to open one, here are some of the best-rated brokers and trading platforms. Take your time to research the brokers to find the best one for you.

Step 2: Figure out your budget

Before making your first trade, you'll need to determine a budget for how much money you want to invest. You'll then want to decide how to allocate that money. The Motley Fool's investing philosophy recommends building a diversified portfolio of 25 or more stocks you plan to hold for at least five years.

You don't have to get there on the first day. For example, if you have $1,000 available to start investing, you might want to begin by allocating that money equally across at least 10 stocks and then grow from there.

Step 3: Do your research

It's essential to thoroughly research a company before buying its shares. You should learn about how it makes money, its competitors, its balance sheet, and other factors to ensure you have a solid grasp on whether the company can grow shareholder value over the long term.

Step 4: Place an order

Once you've opened and funded a brokerage account, set your investing budget, and researched the stock, it's time to buy shares. The process is relatively straightforward. Go to your brokerage account's order page and fill out all the relevant information, including:

• The number of shares you want to buy or the amount you want to invest to purchase fractional shares.
• The stock ticker (AMZN for Amazon, COST for Costco, and HD for Home Depot).
• Whether you want to place a limit order or a market order. The Motley Fool recommends using a market order since it guarantees you buy shares immediately at market price.

Once you complete the order page, click to submit your trade and become a shareholder in one of these top retail stocks while you wait to see whether Ikea ever completes an IPO.

Investors would follow a similar process to buy an IPO stock if Ikea goes public. Should shares ever become available, fill out the order page at your brokerage account with Ikea's selected stock ticker and submit your trade.

Profitability

Is Ikea profitable?

Ikea publicly releases its annual financial results, which is rare for a privately held company. So, we know it's a profitable company.

Inter Ikea Group reported that its total revenues reached 29.1 billion euros (about $31.7 billion at the exchange rate in early 2024) in its 2023 fiscal year from wholesale sales to retailers, franchise fees, and retail sales from the Ikea Delft store. That was a 5.4% increase from its 2022 fiscal year.

The company also posted 1.6 billion euros ($1.7 billion) in net profit for its fiscal year, up more than 900 million euros (almost $1 billion) from the previous year. The main factor driving the profit improvement was keeping its cost of goods sold and operational costs down.

Ikea's strong and consistent profitability allows it to remain private. The company can retain its earnings to fund its operation and growth, so it doesn't need capital from outside investors.

Should I invest?

Should I invest in Ikea?

You can't invest in Ikea because it's a private company. It seems unlikely that outsiders will get the opportunity to invest in Ikea since the primary aim of the foundation that owns it is to keep it independent. However, you can invest in other retailers capitalizing on the same trends driving Ikea's growth.

For example, Amazon, Costco, and Home Depot have grown their sales and earnings at healthy clips over the years. And that has helped drive their strong total returns over the past decade. While past performance is no guarantee of future success, they're in a strong position to continue growing value for their shareholders.

ETF options

ETFs with exposure to Ikea

Many people prefer to invest passively rather than actively manage a portfolio of stocks. Exchange-traded funds (ETFs) make it easy to invest passively in the market or in specific sectors, like retail.

While you can't gain passive exposure to Ikea because it's not a publicly traded company, you can invest in ETFs focused on retail stocks. Here are a couple of the top retail ETFs to consider:

• SPDR S&P Retail ETF (XRT 1.4%): This ETF aims to provide investors with broad exposure to the entire retail sector. It held shares of 76 companies as of early 2024, with relatively equal weighting given to each stock. Its holdings included Costco (1.6% of its assets) and Amazon (1.5%). The fund has a 0.35% ETF expense ratio.
• VanEck Retail ETF (NYSEMKT:RTH): The fund focuses on the top 25 U.S.-listed retailers. Its top three holdings in early 2024 were Amazon (20.3% of its assets), Home Depot (9.6%), and Costco (8.9%). The ETF also had a 0.35% expense ratio.

Related investing topics

The bottom line on Ikea

While you can't invest in the privately held Ikea, investors interested in the company have lots of alternatives. Leading retailers, like Amazon, Costco, and Home Depot, have produced strong returns over the years. Meanwhile, ETFs can provide exposure to the retail sector's growth and returns, so you could still potentially profit from stocks capitalizing on the same trends driving Ikea's growth.

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