Shein shares dive more than 11% after earnings disappoint

Shares of Chinese fashion retailer Shein dropped more than 11% in Hong Kong after the company disclosed weak financial results on Tuesday. The e-commerce giant has been under scrutiny for its environmental impact and allegations of labor rights abuses, and is facing increasing competition from lower-cost online marketplaces like Temu and AliExpress.

On Monday, Shein announced that its revenue grew by only 1% year-over-year in the first half of 2022, while its operating profit fell by half. By lunchtime on Tuesday, the company's share price had recovered slightly but remained down 10.9% at HK$31.44. Shein's first earnings report since going public in March marked the company's first loss since its high-profile IPO, which valued the firm at around $26.3 billion, far below its private valuation of nearly $100 billion in 2022.

Revenue from Europe declined 13.9% to nearly $3.8 billion in the second quarter, with the drop attributed to price increases and reduced online advertising in preparation for the removal of customs duty exemptions. The United States market also saw a six% revenue decline in April-June due to tariff impacts. Since debuting on the Hong Kong Stock Exchange in September, Shein's share price has fallen more than 35%.

Analyst Catherine Lim of Business Intelligence warned that the company's operating profits are still on a downward trend and that the 2027 recovery outlook remains uncertain, citing the challenges of managing freight and tariff costs and competing with lower-priced brands. Management has decided to absorb these costs rather than raise prices to maintain its market position, though localizing inventory in Europe will increase logistics expenses in the short term.