Ikea has suffered a slump in full-year earnings after ploughing investment into opening smaller stores and improving its ecommerce business.

Pre-tax profits at Ingka, the company that operates most of Ikea’s stores, fell 36% to €2.1bn (£1.8bn) in the year to August 31.

Group sales increased 2% to €37bn (£32.8bn).

In Ingka’s retail division, which consists of 367 Ikea stores, sales grew 4.7% on a constant currency basis, buoyed by a 45% spike in online sales and the launch of 12 new stores, including its first in India.

Ingka said it invested €2.8bn during the year, the majority of which funded 14 new warehouses to help fulfil online orders. It also snapped up odd-jobs firm TaskRabbit and bought windfarms in Portugal and Finland as part of its sustainability drive.

Juvencio Maeztu, deputy chief executive and chief financial officer of Ingka, said: “During the year we have increased our efforts and investments to start to transform our business.

“While this has had an impact on our results, it is a conscious decision for us to start a three-year period to transform our business and be better equipped for the next 75 years.

“Our financial strength enables us to invest over the long term, and with purpose, in our own future.”

Ingka’s fall in profits, reported by The Guardian, came a week after Ikea revealed it was cutting 7,500 jobs worldwide, with 350 at risk in the UK.

The Swedish furniture giant is rapidly reshaping its business to be fit for the modern consumer, focusing on its online proposition and smaller city centre stores.

Ikea currently employs 160,000 people and its stores are operated by 11 different franchisees, of which Ingka is the largest.