H&M's cheap chic apparel can't save it from Brexit

Fast-fashion star H&M showed signs in its most recent financial report that even its allure of cheap, chic apparel is not immune to broader economic uncertainty — especially worries that the United Kingdom may bolt the European Union.

While H&M continues to rapidly expand into new markets and open shop online in more countries, the Swedish company's growth spurt has hit several snags. Besides a strong U.S. dollar and cold spring weather in several markets, there's the looming possibility of what's being called "Brexit," — that the U.K. could exit the European Union.

CEO Karl-Johan Persson also said on a company statement Wednesday that increased markdowns and longterm investments in stores hurt profits in the second quarter.

Companies like H&M and Zara, which specialize in constantly updating stores with fashionable yet inexpensive clothing and accessories, have posed a threat to traditional retailers and department stores in recent years, which haven't been as traditionally quick on staying atop the latest fashion trends. Particularly in a world awash with an endless array of choices, the trendier apparel on display in these newer stores have tended to keep customers more excited.

But H&M's report points to potential weak spots for global fast-fashion brands.

Sales in the U.K. fell 7%, including value-added tax and converted to Swedish kroner, in the quarter. Sales also saw steep declines in Portugal, France and Switzerland.

In an interview with the Wall Street Journal, Persson said that "uncertainty connected to Brexit" may have affected sales in the U.K. Excluding the effects of local currencies, sales were flat.

"I don't think it's a good thing," he told the Journal, adding that the U.K. exiting the European Union would negatively affect the EU and global economy.

H&M's overall sales were still positive, up 2% in Swedish kroner. That's a dip from the first quarter, when sales were up 8%. Sales increased 1% in the U.S., where H&M had 433 stores as of May 31, its second largest market behind Germany.