H&M branches out with Monki strategy The Monki store on Hamngatan in Stockholm stands opposite a large H&M outlet. But there is little to suggest the two are related. Clothes in Monki are hung on strings connected as if in a carousel, and tinsel hangs from the silver-plated ceiling, highlighting its pitch for a slightly older and more upmarket customer than typically shops at H&M. Asked while buying a SKr500 ($75) jumper if a shopper knew that Monki was a brand belonging to H&M, she replies: "I had no idea. That's quite interesting. H&M is in a hurry to add new brands. Five years ago, the Swedish clothing retailer only had its core H&M brand. But then it founded the more upmarket Cos, made a small acquisition that added Monki, Weekday and Cheap Monday, and will launch another new brand next year called & Other Stories. The Stockholm-based company, still controlled by its founding family, says it is aiming to target new customers away from its core young, price-conscious shopper. But in some ways it is only catching up with its rivals, particularly Spain's Inditex with its nine brands, and Gap of the US with five brands including Banana Republic and Old Navy. The comparison is most unflattering with Inditex, which started adding brands alongside its main Zara stores 20 years ago and now uses lines such as Massimo Dutti and Pull & Bear to fuel the explosive growth that saw the Spanish group overtake H&M last year as the world's biggest fashion retailer. But Pernilla Wohlfahrt, H&M's head of new business, says that while the Swedish group looks at what competitors are doing it makes its own decisions on which fashion segments to enter. It is one way for H&M to grow. We can still grow in existing stores, existing markets and new markets with the H&M brand but we can also add new product groups such as Home or target new customers looking for another quality and price segment as we did with Cos," she adds. One example is the launch next year in about 10 European cities of & Other Stories, a brand focused on accessories as well as clothes. She adds that all the brands share the same desire to offer value for money but keep their own identities with separate head offices and designers. Analysts say that one of H&M's reasons to start multiple brands is that the financial crisis and its aftermath have not been kind to the Swedish group's young customers. Isabel Cavill, an analyst at Planet Retail, says slightly older shoppers such as the over-25s and the over-35s have carried on shopping much more and that H&M needed to do something to appeal to them. They felt the need to diversify so that they could attract a new demographic of shopper. In this day and age it is quite risky to rely on one brand," she adds. Investors are, however, still a little wary of H&M, particularly when compared with the nimble Inditex and its ability to get clothes in two weeks from the design board to the shops. H&M's shares are up 9 per cent in the past year, while shares in Inditex are up 47 per cent over the same period. Adam Cochrane, analyst at UBS, says: "Unfortunately H&M is being compared to a company that is right on the ball . . . due to a mixture of its product, culture and flexibility of its business model." Despite the sudden growth in the number of brands, H&M is expanding cautiously. It has about 150 non-H&M brand stores around the world with Cos its big success, opening about 20 this year alone. Inditex is on the verge of having its sixth brand reach the 500-store milestone. Yet Ms Wohlfahrt insists H&M will not be rushed: "We just started and we want to do this slowly and with quality." The recent comparison leaves H&M looking second-best in other areas. The Spanish group posted forecast-beating second-quarter results while H&M's disappointed somewhat, although on Monday it reported better than expected sales for September. H&M also postponed the launch of its US website for a second time while Inditex enjoys rising online sales there. Karl-Johan Persson, H&M's chief executive, insists the Swedish group is happy doing its own thing: "I know there is a lot of comparison. Honestly, it is not frustrating. We look at our development compared with last year and we are up 11 per cent [in sales in the first nine months] in a tough market. We are doing that at a time when we are investing a lot in long-term initiatives such as new brands.