BERLIN, Germany — H&M opened a boutique-like store in a trendy neighbourhood in Berlin on Friday that offers yoga classes, a cafe with a garden and space for other brands as the Swedish budget chain seeks a new look to revive flagging sales.

H&M first piloted the idea of a smaller, more upmarket store in its home town of Stockholm last year and is now bringing the concept to its biggest market of Germany, where it runs 462 of its 4,972 stores worldwide.

The move comes as H&M invests heavily and tries new concepts after years of falling profits and growing inventories due to slowing sales at its core budget stores, recently posting its first rise in quarterly pretax profit in more than two years.

The Berlin store is about a fifth of the size of regular H&M stores and features clothes selected to appeal to local tastes, as well as perfumes, "vegan" cosmetics, handbags and second-hand garments from partner brands.

"We need stores closer to where people hang out. We are not used to operating in smaller spaces," said Anna Bergare, head of business development at the H&M Lab, which is testing new concepts and technology.

The new store stocks a limited range of mostly casual womenswear, but also features a few men's jackets and T-shirts and yoga gear aimed at customers attending classes in the store.

It offers innovations such as buttons shoppers can press in changing rooms linked to devices worn by staff and screens in the cafe area where they can search the full H&M range.

Bergare said the store is an attempt to respond to the rise of e-commerce and to tap into a tendency for people to spend more time and money on experiences rather than possessions.

She admitted that the new concept was demanding in terms of staff training and event management but said its success should not just be measured by its sales, but in terms of how it builds relationships with customers, who might later buy online.

"We see the potential to have this in other places as well," she said. "There are a lot of these hubs that are very creatively driven that could benefit from these stores."

By Emma Thomasson; editor: Alexandra Hudson.