Shein quarterly profit falls 67% as costs jump, Europe sales slump

On September 28, Shein, the fast-fashion platform, disclosed its first results as a public company, revealing a sharp decline in profit and a drop in European sales. The company's adjusted net profit for the second quarter was $228 million, a 67% decrease from the previous year, and its profit margin fell to 2.1% from 6.2% the year before.

This decline was attributed to rising costs, particularly in jet fuel and freight, caused by the Middle East conflict. Shein's sales in Europe also plummeted by 13.9% in the quarter ending June, to $3.77 billion, while US sales fell by 6% to $2.5 billion. Overall sales grew by only 0.9% compared to a year ago, as growth in Latin America counterbalanced the declines in Shein's biggest markets.

Despite this, Shein's shares fell 27.3% from the HK$48.56 offer price. Industry analysts noted that the company's earnings fell more than 10% below the range suggested in its prospectus. Shein's CEO, Yangtian Xu, emphasized the need to increase inventory in Europe and hinted at a shift towards higher-priced clothing to improve profitability. Shein also plans to expand its brand portfolio through acquisitions and diversification.