Profits at Ikea dived 8 per cent last year as the Swedish furniture chain invested in revamping stores and developing e-commerce in a tough market.

Total sales at the company rose by only 2 per cent to £1.09 billion in the year to August 2006, indicating flat underlying sales according to the latest figures from Companies House. Peter Högsted, managing director of Ikea in the UK, said the chain was in the process of a £760 million expansion.

In the year to August 2006 the company spent £33.9 million on building new stores in Ashton, near Manchester, and Coventry, and £27 million on extending and refurbishing stores.

This year Ikea made 350 managers redundant and hired more shopfloor staff as it cut costs and attempted to increase customer service.

By the end of next year Ikea will open another four stores including outlets in Coventry and Belfast, both of which will open in December. One in Dublin and another in Southampton are expected to open next autumn.

Mr Högsted expects to extend e-commerce to cover the whole of Britain by next spring, up from about two thirds of the country now. By then he expects to be achieving about £80 million of sales online, equivalent to a medium-sized store. Ikea has yet to advertise its online store, which began operating as a trial in January.

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