Investors are expected to closely examine whether online retail giant Shein can justify its requested valuation of $40 billion to $50 billion as part of its planned initial public offering on the Hong Kong Stock Exchange. Investor doubts were triggered by a prospectus the company filed on Sunday, which revealed a slowdown in growth alongside a steep decline in profitability.
According to data published in the prospectus, the company’s revenue rose by 8% in 2025 to $41.8 billion, but net profit plummeted by 39% to $2.06 billion. The negative trend continued into the current year, with the company shifting to a net loss of $99 million in the first quarter.
The loss recorded in the first quarter stemmed in part from a $328 million fair value charge on redeemable and convertible preferred shares following a change in accounting rules. Nevertheless, the slowdown in revenue growth and the retreat in core profits reflect the growing challenges facing the company.
Eroding profit margins are heightening concerns that Shein’s rapid growth is running into obstacles in the form of higher trade costs, tight regulatory oversight, and escalating competition in the global e-commerce arena. The company noted that the elimination of the customs exemption on low-value shipments in the US hurt sales growth and increased company expenses, and it is now examining several options to address the issue, including raising product prices in the US to offset part of the added costs.
Another challenge facing the company comes from the European Union, which imposed a new fee on low-value imports. Shein noted that trends and impacts in Europe could be similar to those recorded in the US, or even surpass them. Conversely, Citi noted in a review that Shein’s difficulties in Europe could reduce competitive intensity at the budget end of the market, a development that could benefit rival fashion retailers such as Primark and H&M.
Data disclosed in the prospectus shows that Shein’s valuation has experienced a continuous decline in recent years: From $98.2 billion in a funding round held in 2022, to $64 billion in another funding round in 2024.
Source:
www.jpost.com
