Shein shares dive more than 11% after earnings disappoint

Shein, the Chinese fast-fashion company, experienced a significant drop in its stock price by more than 11 percent in Hong Kong on Tuesday following the release of disappointing financial results. The company reported that its revenue grew by just one percent on-year in the first six months of the year, while its operating profit halved.

This performance marked Shein's first earnings results since its initial public offering this month, where its valuation was around $26.3 billion, a considerable drop from the nearly $100 billion it reached during private fundraising rounds in 2022.

European revenue from Shein decreased by 13.9 percent, reaching nearly $3.8 billion for the second quarter, while the United States saw a six percent decline in revenue for the same period, attributed to the impact of tariffs. The company attributed the decline to raising prices and reducing online advertising spending in anticipation of the removal of customs duty exemption.

Analyst Catherine Lim from Business Intelligence noted that the accelerating decline in Shein's operating profit raises questions about the company's 2027 recovery prospects, especially considering the freight relief and the company's plans to enter higher-priced brands. Lim suggested that Shein's strategy to absorb freight and tariff costs rather than raise prices could help protect its competitive position, but she also pointed out that localizing stock in Europe would lead to higher logistics costs in the short term.