H&M has acquired 60% of Fabric Scandinavien. Besides allowing H&M to leverage its scale through the Swedish retailer’s fashion chains, Weekday and Monki, H&M can also exploit the success of its acquisition’s fashion brand, Cheap Monday. With its trendy, fashion-driven style, H&M will be keen to develop the brand further, building on recent efforts to improve the retailer’s fashion credentials.
Ambitious expansion has been at the heart of international fashion chain H&M’s strategy, with new store openings driving sales growth across its European operations. Indeed, the retailer opened 169 stores in the year to October 2007, with robust like-for-likes also key to its positive momentum. Crucial to this achievement has been the retailer’s approach of targeting fast-fashion at a young audience, which has seen it enjoying the European-wide boom in fast-fashion in recent years.

As rivals across Europe have invested in their supply chains and adopted a more flexible and responsive approach to new fashions, H&M has stayed one step ahead of the game. The Love Kylie swimwear and accessories range that was launched in summer 2007 was followed in November with Roberto Cavalli’s collection - which sold out in UK stores in just two days, making it the retailer’s most successful clothing launch to date.

H&M’s latest move in acquiring stylish label Cheap Monday is a logical step in helping to further lift its fashion credentials against a strengthened competitor set, where fast-fashion is becoming increasingly commoditized. Although H&M plans to operate Fabric Scandinavien as a stand-alone business, the retailer believes that it can leverage synergies between the two businesses and, more importantly, use its scale to accelerate expansion into new markets and further develop the brand.

Should H&M decide to introduce the Cheap Monday brand to its core store estate, Verdict Research believes that it has the potential to drive footfall and sales; help H&M to expand into new territories, and help it to gain a further competitive advantage. A successful label such as Cheap Monday will help H&M to stand out from the crowd - a strategy that Verdict Research expects to see repeated. Indeed, further sub-branding and more unique brands are likely to be central to H&M’s strategy going forward.

Related Research: UK Value Clothing Retailers 2007