Shein shares dive more than 11% after earnings disappoint

Shares in Chinese fast-fashion giant Shein plunged more than 11 percent in Hong Kong on Tuesday after releasing disappointing financial results.

Shein app. Photo: Kyle Lam/HKFP.

The company has faced scrutiny over its environmental footprint and allegations of human rights violations, and faces growing competition from low-cost e-commerce companies such as Temu and AliExpress.

The firm said on Monday that revenue grew just one percent on-year in the first six months of the year, while its operating profit halved.

By around lunch on Tuesday, Shein’s share price had pared some of the losses but was still down 10.9 percent at HK$31.44.

Monday’s results were Shein’s first since its high-profile initial public offering this month, which put the company’s valuation at around $26.3 billion — well short of the nearly $100 billion during private fundraising rounds in 2022.

Net revenue from Europe fell 13.9 percent to nearly $3.8 billion for the second quarter, Shein reported.

Exchange Square in Central, Hong Kong. File photo: Kyle Lam/HKFP.

The decrease “reflects a decline in sales volume as we raised prices and lowered online advertising spending” in anticipation of the removal of the customs duty exemption, the company said.

Another key market, the United States, saw revenue drop six percent in April-June, reflecting the impact of tariffs.

Since its first day of trading on the Hong Kong Stock Exchange in September, Shein’s share price has fallen more than 35 percent.

The accelerating decline in Shein’s operating profit “clouds the extent of a 2027 recovery from freight relief and an unproven push into higher-priced brands”, said Catherine Lim, an analyst at Business Intelligence.

“Management plans to absorb freight and tariff costs rather than raise prices to protect the company’s competitive position,” she said, adding that localising stock in Europe will lead to higher logistics costs in the short term.