What's going on?

H&M, the Swedish fashion retailer, blamed bad weather, the Brexit vote and a stronger US dollar for a big 17% decline in its second quarter sales (versus the same period last year).

What does this mean?

Unlike some of its competitors, H&M pays its suppliers upfront in US dollars before selling its goods (mainly in Europe). That obviously exposes them to fluctuations in the value of the US dollar, e.g. when the dollar strengthens versus the Euro, it hurts H&M�s profits – which is what happened. On top of that, sales in Europe were poor because it was too darn cold � nobody was buying spring clothing. The company also claimed that Brits were holding off spending money due to the economic uncertainty created by the upcoming Brexit vote.

Why should I care?

For the stock: H&M is underperforming. Its stock is down more than 15% this year while the stock of its main competitor, Inditex (which owns Zara), is about flat. Zara is seen as the market leader in �fast fashion,� which involves getting clothes from the runway to the store as quickly as possible � and bringing in new fashion collections more often than traditional retailers. H&M also follows this strategy but seems to be struggling, along with most of the rest of the industry (except for Zara, which is still managing to increase its sales).

The bigger picture: A potential Brexit is being blamed for lots of things � we might find out soon if that assumption is accurate. Weak UK economic data earlier this year was blamed on the uncertainty associated with the Brexit vote. And various companies, particularly in retail, claim that UK consumers are spending less because of the vote. But there�s a very good chance that at least some of this weakness would be happening anyway. If Britain votes to remain in the European Union, Brexit will be off the table and we�ll see if things rebound or if, perhaps, there are more fundamental problems (both for companies and the overall economy).