Swedish fashion group H&M increased second quarter profits and plans to swell the lucrative cheap'n'chic concept to new countries.

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Swedish cheap'n'chic fashion group Hennes & Mauritz, Europe’s second- largest clothing retailer, posted second quarter earnings almost in line with expectations while sale in May was weaker than expected.

The company said second quarter net profit jumped 25 percent, to 5.2 billion kronor ($670 million), boosted by increased gross margin and a weak dollar. Total sales rose 2 percent to 27 billion kronor. 

The fashion giant now plans to expand its concept to new countries and new cities. During the second half-year H&M plans to open 180 stores and close 14. Most of the stores are planned for Germany, USA, the UK, France, China and Italy.

"H&M remains positive towards the future expansion and the company’s business opportunities", the company said in its report. 

Croatia and Romania will become new H&M countries with openings in Zagreb and Bucharest during the spring of 2011. Morocco will become a new franchise market with store opening in Casablanca in the autumn of 2011. 

H&M has also signed a contract to open its first store in Turkey. The store will be located in one of the largest shopping centres in Turkey, Forum Istanbul.

The planned opening of a COS store in Hong Kong in the autumn of 2010 is postponed until 2011. 

H&M -- the world's third-largest fashion chain by revenue behind US-based Gap and Spain's Inditex -- now has more than 2,000 stores in 35 countries.

The shares were down 1.85 percent on a Stockholm Stock Exchange down 1.26 percent in morning trading.

The previous day shares in three other Swedish fashion companies, Kappahl, MQ and RND, also declined on weak reports.

“There was a strong start to the quarter but in the latter half sales were considerably weaker than expected. This was affected by a cold spring and weak consumption”, Kappahl’s chief executive officer Christian W. Jansson said.