H&M chief executive Karl-Johan Persson speaks during a news conference in Stolkholm
H&M chief executive Karl-Johan Persson speaks during a news conference in Stolkholm March 29, 2012. Shares in Hennes & Mauritz drop 4.9 percent, having already traded twice their 90-day volume average, as the world's second-largest fashion chain reports disappointing quarterly profits, casting a shadow on the European retail sector, which sheds 1.5 percent. H&M blamed higher purchasing costs - particularly cotton - and discounts for a smaller-than-expected rise in first-quarter pretax earnings, reigniting concerns about the sustainability of its gross margin growth. Reuters

Stockholm-based Hennes & Mauritz (H&M) has confirmed the launch of a new chain store by 2013 after posting a 13 percent rise in sales during the period Dec.1 and Feb. 29, 2012.

However, the company has not given details about the new line and if it will be a luxury label.

The confirmation about the new store by H&M came following the circulation of new rumors earlier this week which indicated that the company was planning to launch its first luxury label. Earlier, H&M has already made numerous collaborations with many high-end designers and luxury labels, including Marni, Versace, Jimmy Choo and Karl Lagerfeld.

We are making these long-term investments in order to build an even stronger H&M, so that we can give our customers an even broader offering going forward. We have many different projects in progress and already next year we will be launching a completely new store chain. Like COS, which today is very successful with good profitability, the new chain of stores will be independent and complement the other offerings from the Group. We have great faith in this new brand and we see considerable potential for further initiatives, Karl-Johan Persson, CE of H&M said in a statement about the new store.

Persson mentioned that the company had strong sales of 13 percent increase in the first quarter and 3 percent in comparable units.

Currently present in 44 markets worldwide, the brand also mentioned positive development during the month of March with strong sales.

Despite increased purchasing costs, we have continued to strengthen our customer offering - for example, by not raising our prices to customers. This has contributed to strong sales even if, combined with the increased purchasing costs, it has had a negative effect on the gross margin in the quarter, Persson explained.

The increased purchasing costs are due partly to higher cotton prices at the time for sourcing for the quarter compared to the corresponding sourcing period the previous year, but also to our long-term investments aimed at broadening our total offering.