IKEA gives vote of confidence in France with expansion drive

By Dominique Vidalon

PARIS (Reuters) - IKEA, the world's biggest furniture retailer, will accelerate its expansion in France over the next three years, creating 1,200 jobs and giving a vote of confidence in a struggling economy.

The Swedish group, known for its low-priced but stylish furniture, said it would invest over 600 million euros ($811 million) by 2016 to open six new stores and renovate four existing stores in France.

The plan is an acceleration from the 500 million euros spent in the last five years and part of a longer-term ambition to lift the number of stores in France, the euro zone's second-largest economy, to 40 by 2020 and 45 by 2025 from 29 now.

"We are sending a very positive message in a lackluster economic climate," IKEA's chief executive for France, Stefan Vanoverbeke, told a news conference.

IKEA's announcement comes as President Francois Hollande's Socialist government struggles to tackle high unemployment and kick-start economic growth.

France was dealt a fresh blow this week when Franco-American group Alcatel-Lucent <ALUA.PA> unveiled plans to lay off 900 French workers as part of a plan to cut 10,000 jobs worldwide[ID:nL6N0HZ12].

France, which accounts for around 10 percent of group sales, is IKEA's third-largest market after Germany and the United States. It currently operates 29 stores in France, where it employs 9,300 people and competes with retailers Conforama and But in a furniture market worth 10 billion euros.

IKEA is the top furniture retailer in France, where its market share rose 0.1 percentage points to 17.9 percent in the year ended August 31, according to the company.

The group is targeting a market share of around 20 percent within 3-4 years thanks to its expansion plans and a continued policy of offering low prices to cost-conscious consumers.

Like-for-like sales fell 4.3 percent to 2.39 billion euros in fiscal 2012/13, however, in an economic climate Vanoverbeke described as difficult.

The overall French furniture market fell 5 percent during the period, hit by low consumer morale and a steep fall in real estate transactions, Vanoverbeke said.

For the current fiscal year, Vanoverbeke said he remained "cautious" though he was "less pessimistic than a year ago". He declined to make any forecasts.

(Editing by Mark Potter)