Kim Jong Un likes to threaten to destroy South Korea — but that's not slowing down Ikea

Kim Jong Un likes to threaten to destroy South Korea — but that's not slowing down Ikea

By Leslie Shaffer, CNBC, Aug. 29, 2017

• Ikea Korea said on Tuesday it planned to open its second store in the country in October

That came despite news that North Korea launched a ballistic missile which flew over Japan

South Korea saw two news stories of a very different nature on Tuesday: North Korea launched a ballistic missile that flew over Japanand Ikea planned to open its second store in the country in October.

Markets went into a kerfuffle over North Korea's latest missile launch, which Japan's Prime Minister Shinzo Abe called an "unprecedented, serious and significant threat," with the yen spiking up and stocks around the region falling.

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Jean Chung | Bloomberg | Getty Images

Ikea AB employees assist customers in front of a computer at the company's store in Gwangmyeong, Gyeonggi province, South Korea.

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But Ikea Korea looked past the noise of the launch to announce in a press release that its second store in the country would open in October.

The new store, located on the outskirts of Seoul, will be Ikea's largest globally, with three underground floors and four above ground, supplanting its existing largest store, which is also in the country.

Ikea Korea said via email on Friday that it was "continuously monitoring" current events, adding "at all times, relevant actions are taken in order to safeguard our co-workers, customers and business."

It's an upbeat announcement from the home furnishing icon, coming amid the increased military tension.

But it's in line with a general expectation that the latest incident would play out in a similar manner as previous ones.

"Many businesses that have been in South Korea for quite a long time are fairly inured to the almost chronic tension between North Korea and the U.S., Japan and South Korea," Steve Wilford, Asia-Pacific director for global risk analysis at strategic consultancy Control Risks, said on Tuesday.

"Life has to go on," he said. "Consumption isn't crashing."

Indeed, the tensions don't appear to have dented South Koreans' appetite for Swedish minimalist home furnishings. The company's press release on Tuesday said that Ikea Korea sales for fiscal 2017, which ended this month, rose 6 percent year-on-year to 365 billion won ($324.17 million).

Erika Sirimanne, head of home and garden analysis at market research firm Euromonitor, said that, despite the geopolitical pressure, the South Korean market was quite a prize for the retailer.

While Ikea's core European markets were facing Brexit fallout, housing affordability issues and high youth unemployment, South Korea offers an urbanized, apartment-dwelling population, with a high proportion of single-person households living in cookie-cutter units, she said via email on Tuesday.

She added that the particularly large stores served another purpose: "The restaurant and playgrounds are actually what attracted many Koreans to Ikea in the first place."

Ikea Korea said its South Korean location was one of its busiest in terms of sales and volume, with 6.49 million store visits in fiscal 2017.

Others saw some reasons for concern.

Nobel Laureate Michael Spence, currently a professor of economics and business at New York University, told CNBC's "Squawk Box" on Tuesday that, so far, the increased political turbulence hadn't translated into big economic effects.

"Both economies and markets have essentially assumed that this is a lot of noise," he said. "The worrying scenario is that there's rising risk that's not properly perceived."

While North Korea's missile launch on Tuesday was aimed at Japan, over a period of many years, the pariah nation has repeatedly threatened to turn its southern neighbor into a "sea of fire."

The threats haven't always been idle.

In late 2010, as the North's then-ruler Kim Jong Il, the father of the current leader Kim Jong Un, was believed to be sick, the reclusive country reportedly launched as many as 200 artillery shells at a South Korean border island, killing four.

Tensions on the peninsula have been particularly high this year, with North Korea testing weapons at least once a month every month since February.

That's been compounded by U.S. President Donald Trump's use of bombastic language similar to the North's own saber-rattling style: Pyongyang "will be met with fire, fury, and frankly, power, the likes of which this world has never seen before," Trump said earlier this month.

By Leslie Shaffer, CNBC, Aug. 29, 2017

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