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Main IKEA store owner's full-year operating profit falls 10%

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By Reuters
Main IKEA store owner's full-year operating profit falls 10%
People in the street are seen from inside an IKEA kitchen showroom and planning studio in the centre of Stockholm, Sweden November 25, 2019. Picture taken November 25, 2019. REUTERS/Anna Ringstrom   -   Copyright  ANNA RINGSTROM(Reuters)

STOCKHOLM (Reuters) – Full-year operating profit at Ingka Group, which owns most IKEA stores, fell 10% as savings and increased sales failed to make up for higher purchasing costs and large investments as it adapts to digitalisation and fast-changing shopper habits.

The world’s biggest furniture retailer, previously known as IKEA Group, on Tuesday reported an operating profit of 2.03 billion euros (£1.9 billion) for its fiscal year through August, down from 2.25 billion euros a year-earlier.

Ingka, which owns 374 traditional self-service out-of-town IKEA stores as well as online retailing and a number of new smaller store formats, said total capital expenditure amounted to 2.6 billion euros in the year.

“We’re investing more than ever in our business with new city stores, a stronger digital meeting and more affordable service offers to our customers,” it said in a statement.

Chief Financial Officer Juvencio Maeztu told Reuters capital expenditure would be higher in the current fiscal year than in 2018/19.

Brand owner Inter IKEA, which is in charge of supply, raised the prices it charges store owners during the year due to high raw material costs.

Ingka last year announced plans to cut 7,500 jobs, and in September reported a 5.0% rise in full-year local-currency retail sales to 36.7 billion euros.

It said on Tuesday it expected to accelerate sales growth going forward.

(Reporting by Anna Ringstrom; editing by Niklas Pollard and Kirsten Donovan)