Ikea’s UK arm has been hit by people holding off buying big-ticket items such as sofas, which forced it to increase the number of promotions it runs to boost sales.
Sales in the UK dropped by 6.8% to £2.3 billion in the year to August, which included price reductions of around £117 million.
Peter Jelkeby, chief executive said: “In a year of economic uncertainty, our priority was clear: stand with our customers.
“In spite of our reduced turnover, continuing to lower prices remains our long-term priority.”
More than 3,000 products or about a third of its range were reduced in price, Ikea said, which helped sales pick up towards the end of its financial year, particularly in kitchens, bedrooms and storage.
Ikea UK said two new city centre stores in Brighton and on London’s Oxford Street will open next year.
Jelkeby said it wanted "a network of new, smaller stores that offer different experiences, as well as new services".
Parent group Ingka said that globally Ikea’s annual retail sales dropped by 5% to €39.6 billion (£33.2 billion).