Ikea, the world's largest home furnishings retailer, is expanding at a "much lower" pace as a global economic slowdown erodes sales, Chief Executive Officer Anders Dahlvig said yesterday.

Closely held Ikea, which has stores in 37 countries, is being affected "quite a lot" by slowing economies, Dahlvig said in a presentation at a retail conference in Barcelona, Spain.

Capital investment in coming years will be mainly in emerging markets such as Croatia, Slovenia and Ukraine, the CEO said. Spending power is ebbing in Europe and the US as inflation rises and higher energy and food bills sap incomes, while sliding stock markets weigh on consumer confidence.

"I definitely see big challenges in the western world and opportunities in emerging markets," Dahlvig said.

Carrefour SA's Jose Luis Duran, chief executive officer of the world's second-largest retailer, said yesterday cost growth is outpacing price increases and that the retail industry "has never before faced so many challenges."

UK consumer confidence fell to the lowest in almost four years in March as the housing-market downturn worsened, and former Chancellor of the Exchequer Nigel Lawson said the economy is heading for a recession. That is cutting into purchases of higher-priced versions of goods from stereos to vehicles.

"When you are short on money you will not look at home improvement," Greg Hodge, non-food research manager at Planet Retail in London, told Bloomberg News. "People are starting to get concerned. Consumer confidence is low and a lot of people will scale down on spending. 2008 will be a difficult year."

Ikea, which has about 260 outlets worldwide, will open more than 20 stores this year and next year, mainly in emerging markets, Dahlvig said.

Sales climbed 14 percent to 19.8 billion euros (US$31.3 billion) in the fiscal year to August. Germany was the retailer's biggest market, generating 16 percent of revenue, followed by the US, France and Britain. Increased labor costs in China and higher transport costs have led to a shift to local sourcing.

"The dollar has had an impact on how we look for our sourcing," Dahlvig said, adding that Ikea has opened its first production factory in that country.