Ikea has reported a sharp fall in UK profits and pulled out of opening what would have been its second largest store in the country.
The Swedish retailer blamed higher wages and the cost of investments in its stores and website for a near-40% slump in profits in the year to 31 August 2017. Pre-tax profits slid from £140m to £87m, according to accounts filed at Companies House.
The figures coincided with Ikea’s decision to abandon a plan to open one of its famous blue sheds in Cuerden, near Preston. The company said the store, which would have created 350 jobs in 2020, was no longer viable.
The decision is another blow for the retail sector, which is reeling after a string of chains including Mothercare, Carpetright, New Look and House of Fraser announced plans to close stores.
Richard Rands, the property manager for Ikea UK and Ireland, said: “Our decision is due to increased development costs and delays outside of Ikea’s control which no longer make this location viable. We will continue to look for new sites and opportunities in this region.”
Despite the fall in profits, UK sales rose 6% to £1.8bn with the retailer winning market share from rivals during the period.
Ikea, whose founder, Ingvar Kamprad, died in January, opened its first UK store in Warrington in 1987, but its expansion has been slow.
After a seven-year hiatus Ikea has recently opened several stores in quick succession, including in Reading, Sheffield and Exeter. It is also planning a fourth London store in Greenwich and another in Lancing, near Brighton.
However, the retailer is also experimenting with small Argos-style stores in town centres that are basically order and collection counters.