Europe's second largest apparel retailer, Hennes & Mauritz AB (SE-HMB), has lost third quarter profit less than analysts expected, as the company reduced cotton prices and Asian labor.

Stockholm based H&M said in its statement that the operating profit in the 3 months of August was 17% to 4 billion 710 million kroner ($700 million) over the same period last year, which is better than that of analysts surveyed by Bloomberg analysts. The median profit is 4 billion 350 million kroner.

Gross margin declined from 60.5% in the same period last year to 58.6%, up from 57.8% of the forecast.

H&M shares rose to its highest level in more than 1 months.

H&M is facing a 1 fold increase in cotton prices last year, and the problem of rising labor costs in Asia.

H&M produces about 75% of clothing in Asia.

Belson, chief executive of H&M, said in a statement: "the challenge of fashion retailing continues, and the market share of H&M continues to grow in this environment," said Karl-Johan, chief executive of H&M.

This proves that H&M has a strong market position. We regard this as evidence that consumers value our efforts to produce products.

H&M plans to launch Vasis's (Donatella Versace) dress design in the autumn, and this year, the target of additional stores will be increased from 250 to 265.

The time for H&M to open online stores in the United States extends from the spring of 2012 to the autumn.