Shein profits plunge by two-thirds
Fast-fashion retailer Shein saw its adjusted net profit for the second quarter plummet by 67% to 228 million US dollars. Shares fell over 6% on the Hong Kong stock exchange, and the stock has decreased over 27% from its IPO offer price. The adjusted net income margin for the quarter narrowed to 2.1% from 6.2% a year earlier. This contraction is primarily attributed to increased oil prices and freight rates, driven by geopolitical tensions, impacting its margins. Shein also faces headwinds from the elimination of a customs duty exemption for low-value goods in the United States and new three-euro fees by the European Union on e-commerce parcels, effective July 1. These regulatory changes, coupled with a slowdown in consumer demand, have adversely affected performance in its largest markets. Second-quarter revenue from Europe decreased nearly 14% to 3.77 billion US dollars, while US revenue dropped 6% to 2.5 billion US dollars. Overall net revenue for the second quarter increased a modest 0.9% to 11.08 billion US dollars, indicating deceleration. Operating income for the first half of 2026 also fell 52.9%. These results mark Shein's first earnings report since its public listing in Hong Kong this month. The company’s IPO valuation of approximately 26 billion US dollars is a stark contrast to its peak of nearly 100 billion US dollars in 2022. Shein anticipates uncertainty in the second half of 2026, with persistent tariff headwinds and logistics cost volatility. Despite these challenges, CEO Xu Yangtian expressed cautious optimism. Shein plans to prioritize increasing inventory in Europe and expanding into higher-priced clothing lines to boost profitability.
