Shein shares tumble as earnings disappoint

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Shein shares tumble

Highlights

Shein shares fell as much as 12%.
Quarterly adjusted profit dropped 67%.
Adjusted margin narrowed to 2.1%.

The stock dropped as much as 12.1%, its steepest decline since the Sept. 1 Hong Kong debut, cutting Shein's market value to about $16.8 billion from roughly $26 billion at listing, according to Bloomberg. First-half operating income fell 53%, with the decline accelerating during the second quarter.

Margins shrink as costs rise

Adjusted net profit for the second quarter was $228 million, down 66.6% from a year earlier. The adjusted profit margin narrowed to 2.1% from 6.2%, reflecting rising freight and jet-fuel expenses for a business that relies heavily on air shipments to deliver inexpensive clothing directly to customers.

The results also showed weaker momentum in Europe. Shein raised prices and reduced online advertising ahead of the European Union introducing a €3 fee on low-value e-commerce parcels from July 1.

Jefferies analysts said Shein earnings expectations for 2026 and 2027 may prove too high as the company faces additional pressure on margins. The European Union is also eliminating a customs exemption for low-value parcels, adding another cost challenge to Shein's cross-border model.

Demand shows signs of slowing

The pressure is not limited to Europe. U.S. sales declined more than 10% during the three months through August and early September, according to transaction data analyzed by Bloomberg Second Measure.

Shein sales have trailed the broader U.S. apparel industry since late last year, while global web traffic has also slowed. The company had already raised U.S. prices after the end of duty-free de minimis treatment for low-value e-commerce shipments.

Management is now looking to hold more inventory in Europe and expand into higher-priced clothing. That would represent a shift for a company whose rapid growth was built largely on inexpensive products, frequent discounts, and a supply chain designed to respond quickly to changing consumer demand.

Public markets put Shein margins under scrutiny

The earnings report adds to a difficult first month as a listed company. Shein was valued at roughly $26 billion when it went public, already far below the approximately $100 billion valuation it reached in private markets in 2022. Tuesday's decline reduced that figure by roughly another $9 billion.

The immediate question is whether Shein can restore profitability while absorbing higher logistics and import costs without further weakening demand. With its second-quarter margin down four percentage points from a year earlier and U.S. sales already declining, its post-IPO performance increasingly depends on balancing prices, volumes, and delivery costs.

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