STOCKHOLM, Sweden -- Hennes & Mauritz AB, Europe's second-largest clothing retailer, reported sales that dropped more than analysts anticipated.

Revenue from stores and operations open at least a year dropped 3 percent, the Stockholm-based company said today, exceeding the SME consensus of a 1.9 percent drop.

H&M, the purveyor of 10-euro ($13) studded T-shirts, is trying to expand its customer base by diversifying its brand portfolio. To compete with Spain’s Inditex SA, H&M is bringing the more upscale ‘& Other Stories’ brand to 10 European markets. After earlier overtaking H&M by total sales, Inditex last year also passed H&M by market value as its shares surged 67 percent, outpacing the Swedish clothing company’s 1.5 percent gain.

Revenue including value added taxes rose 2 percent to 33.1 billion kronor ($5.2 billion) in the three months through February, H&M said today. The total number of outlets increased to 2,818 as of Feb. 28 compared with 2.491 last year.

Editors: Celeste Perri, Kim McLaughlin