Officials of Hutzler Brothers Co., one of this city's major department store retailers, confirmed this week that a branch store is being planned for the burgeoning Inner Harbor complex - at a time when the City Council is taking major steps to redevelop Baltimore's old retail strip where the main Hutzler store is located.

Baltimore City Council member Thomas Waxter tipped the hand of the Hutzler management Monday night when he told the council that the retail company has signed an agreement to locate a 33,000-square-foot store in a new Equitable Bank building on the harbor's edge.

The Council has moved toward approving a costly redevelopment of the retail strip along Howard Street, including a mall that would connect the Lexington Market food complex with the city's major department stores.

Hopes for revitalizing the older retail district are pinned on a decision by Hutzler and its competitors to keep their large downtown stores there. But the revelation that Hutzler's was planning a relatively small store several blocks away raised some questions about the retail firm's future plans.

Business in Baltimore's traditional downtown area has been plummeting in recent years and, for the first six months of 1977, downtown department store sales here were off 15 per cent from the same period last year.

The sales figures are even more stark because Hochschild, Kohn - long one of Baltimore's "big five" department stores - closed its downtown store during the summer. Thus, the sales figures for later months are expected to show a steeper decline.

In its lead editorial Wednesday, the Baltimore Sun said Hutzler's plans for a branch at the Inner Harbor could be a "fatal blow" to hopes for a revitalized downtown retail center. On the other hand, the newspaper said, it could a sign that the department store company is simply enlarging its commitment to the downtown.

Hutzler management said later that the Inner Harbor store would be considered a branch and that, for now, there are no plans to close its main unit.

Stewart's, owned by Associated Dry Goods, has announced plans to remain on Howard Street as long as plans for redevelopment are progressing. The Hecht Co., owned by May Department Stores, also has indicated plans to stay put. Both Stewart and the Hecht Co. have been moderninizing their stores here.

The City Council, acting on a $200 million rebuilding prgram developed by the Greater Baltimore Committee, already has given tentative approval. A final vote is expected Monday, after which a urban renewal area will be designated. The city expects to receive federal aid for the renewal.

In essence, city officials and business leaders hope to use federal and local money as the "seeds" for development - enough of a commitment to convince private sector investment in rejuvenation of a 10-square-block area.

W. Austin Kenly, who became Hutzler' chief operating officer when chief executive Charles G. Hutzler III died last summer said the new store will be devoted primarily to apparel and accessories for men and women.

The company currently operates six stores, including a 50,000-square-foot branch in Salisbury. Because of the retail firm's recent business downtown, two floors of its flagship store have been closed.