Ikea ups sales and profit despite tight market On track: Ikea resorted to aggressive discounting and promotions to maintain sales. Australians love affair with flatpack furniture, the Allen key and hip Swedish interior design ascended new heights last year, although global retail giant Ikea relied on massive discounting and promotional offers to keep customers plodding along its one-way store footpaths. The local offshoot of the Swedish phenomenon, which has annual global revenue of nearly 28 billion euros ($42 billion), reaped record full-year sales of $666.15 million in Australia for 2013, up from the $649.97 million pocketed for 2012. The revenue came from its five stores on the east coast of Australia, with the accounts for the 12 months to 31 August 2013 including two new store openings, one in the Melbourne suburb of Springvale and a new store in Tempe, NSW. It comes as Ikea faces increasing competition by other retailers in the housewares and furniture space, with a rejuvenated Kmart under the ownership of Perth-based conglomerate Wesfarmers pushing into the housewares space through massively discounted shelf prices while overseas players Aldi and Costco also widening their offering to take in home interiors. Hardware rivals Masters and Bunnings are also broadening into home furnishings and housewares. This along with heavy price deflation is expected to have put a cap on Ikea's sales growth trajectory in Australia. Despite Ikea's modest jump in annual revenue, up only 2.5 per cent, there was a massive boost to its profitability in Australia as net profit leaped to $19.22 million from $13.53 million in 2012, a gain of 42 per cent - easily eclipsing the earnings momentum of the broader discretionary retail sector which continues to suffer from poor consumer sentiment and generally flat trading conditions. But much like the remainder of the retail sector Ikea has been forced into a price war to maintain the loyalty of shoppers, with Ikea's decision in 2011 and 2012 to cut prices on thousands of products, some by as much as 50 per cent, continuing into 2013 with the retailer currently running a deeply discounted sale. However, that stretched promotional cycle doesn't seem to have tarnished Ikea's margins or bottom line earnings as it has with other local businesses. For 2013 Ikea Australia's profit margins were a slim 2.8 per cent, up 80 basis points from its margins of 2 per cent in 2012. According to furniture and appliances company Harvey Norman's latest report its profit margin was 6 per cent in fiscal 2013. The Ikea Australia accounts are complex, in keeping with its parent, but it seems as though IKEA managed to slash its ""other expenses"" by 14 per cent to $47.28 million in 2013 while it is also believed to have trousered a handsome franchise fee of $22.2 million for the period from the operators of IKEA stores in Perth and Adelaide. Industry researcher IBISWorld believes Ikea holds a 4.8 per cent share of total furniture retailing in Australia and a 7.5 per cent share of the housewares category. Late last year Ikea, the world's largest furniture retailer, claimed it had gained market share in nearly all its markets to lift sales 3.1 per cent for fiscal 2013 to 27.9 billion euros with comparable store sales up 1.8 per cent. Ikea had set itself a global target to double sales to around 50 billion euros by 2020 - but later dropped that aggressive goal as sales failed to track to its budget. A Swedish company registered in The Netherlands, UK newspaper reports last year claimed Ikea legally halved its corporation tax bill in the UK by siphoning off profits abroad in the form of royalty payments to a sister company. According to its latest Australian financial filings, Ikea Australia paid $8.33 million in taxes for 2013, up from $7.4 million in 2012.