MINNEAPOLIS — Profits dropped at municipally-operated liquor stores in Minnesota last year, despite record sales, a new analysis shows.

The state Auditor’s Office reports that the 228 stores had more than $344 million in sales in 2016, which is more than 2 percent more than the previous year.

The combined net profit statewide dropped by more than 8 percent from 2015 to 2016, to just under $23 million.

Lakeville had the highest sales, at more than $14 million.

Savage was the only municipality in the Twin Cities area that lost money. The city’s two stores lost more than $106,000.

The report found that profits have fallen by more than 16 percent over the past five years despite more than 20 years of increasing sales. At least 10 cities have seen shrinking profits from 2015 to 2016.

While the report gave no explanation for the decreasing profits, municipal liquor stores have felt increasing competition in recent years. Total Wine has expanded in many Twin Cities suburbs and Target has also begun selling liquor in Minnesota stores.

The state also began Sunday liquor sales in July.

Minnesota municipalities were originally given permission to own and operate liquor establishments as a method of controlling alcohol sales.

The operations provide communities outside the Twin Cities area which may not be able to attract a privately run establishment with access and convenience to alcohol. Liquor stores generate money to supplement traditional tax and fee revenue for metro municipalities.