Shein’s Hong Kong-listed shares fell as much as 14 percent on Monday, hitting a record low after the fast-fashion giant reported a 67 percent decline in quarterly profit, its first earnings release since a September 1 initial public offering. The drop wiped roughly $9 billion off the company’s market value, leaving it at about $17 billion by the midday break, down from the $26 billion valuation at listing. The stock traded at HK$31.44, down 10.9 percent.
Margin compression drives the miss
Adjusted net profit for the quarter ended June 30 came in at $228 million. The profit margin collapsed to 2.1 percent from 6.2 percent in the same period a year earlier. Shein ships the bulk of its low-priced apparel by air, and the conflict in the Middle East drove up jet fuel and freight costs sharply. Jefferies analysts said the result landed more than 10 percent below the low end of the range implied by the prospectus.
Europe sales slide after fee anticipation
Revenue in Europe dropped sharply after Shein raised prices and pulled back on online advertising ahead of the European Union’s €3 per-parcel fee on low-value e-commerce shipments, which took effect July 1. The company has said the European levies could prove more damaging than the loss of de minimis duty-free treatment in the United States, which forced price increases there in 2025.
Pivot to higher price points
Chief executive and chairman Xu Yangtian said on September 28 that a key priority is building more inventory in Europe and moving into higher-priced clothing to restore profitability. The retailer, known for $5 dresses and $10 jeans sold under near-permanent discounting, is attempting to shift a model built on ultra-thin margins and air-freight speed.
Analysts question the growth-margin trade-off
“Shein is still growing orders and diversifying across markets, but the scale of the margin compression and the weakness in Europe raise questions over how quickly it can return to a combination of stronger growth and improving margins,” said Li Jianggan, chief executive of Singapore-based consultancy Momentum Works. The market’s reaction suggests investors are not waiting for the answer.