Shein profits suffer as tariffs and Middle East war hit hard

Shein reveals quarterly financials ahead of planned Hong Kong listing

Shein clothing for sale. Shein has became an online retail sensation and social-media phenomenon, shipping cheap clothing to customers around the world. Picture: Bloomberg

Fast-fashion retailer Shein disclosed slowing profitability and revenue growth in the first detailed look at its finances ahead of a planned Hong Kong listing, adding pressure on the valuation it can command in one of the year’s biggest initial public offerings.

The closely held company posted a loss of $99m in the first three months of 2026, versus a $395m profit a year earlier, while revenue rose just 1.1% to $9.05bn.

Operating income fell 26%, although Shein said the quarterly loss was largely driven by a $328m fair-value hit on convertible redeemable preferred shares, according to a Hong Kong Stock Exchange filing. Last year’s profit was $2.06bn, down from $3.37bn in 2024.

The weaker results are likely to reinforce investor concerns over the sustainability of Shein’s rapid growth, potentially lowering the valuation it can command in its long-awaited IPO. The company is looking to list as soon as August and raise about $2bn to $3bn, Bloomberg has reported, with the final amount dependent on investor valuation and feedback.

“The lack of strong fundamental growth outlook ahead will inevitably weigh on valuations,” Bloomberg Intelligence senior consumer analyst Catherine Lim said.

Bloomberg reported in February that investors were pushing for a valuation of about $30bn, down from $66bn in a 2023 funding round — and as much as $100bn in 2022.

Shein’s disclosure is part of its Hong Kong listing process, for which it won approval after years of delays and failing to push ahead with an IPO in both New York and London. In recent years, Shein has only provided investors with headline guidance on profit and sales, leaving them with limited visibility into its underlying performance.

Shein’s backers include IDG Capital, Mubadala Investment Co., Tiger Global Management and HSG. For 2025, it had told investors that it was expecting a mid-teen percentage growth in sales, Bloomberg has reported. The filing showed net revenue growth instead increased 8%, below that target and down from 21% in 2024.

Originally founded in mainland China and now headquartered in Singapore, Shein built a global fast-fashion empire by offering low-priced, trend-driven apparel shipped directly from suppliers. Shein opened a new 16,000 sq ft warehouse and e-commerce logistics facility in Rathcoole in Dublin in June.

However, globally, US tariffs followed by the Middle East war have translated into higher material costs and eventually increased prices for consumers.

Shein’s global web traffic growth slowed from more than 60% year-on-year in the second half of 2025 to about 30% earlier this year — before easing to single digits in June and July — according to Similarweb.

Worldwide app downloads declined in most of the 12 months through mid July, falling by as much as 30% year-on-year at their steepest, according to market researcher Apptopia.

US sales fell for most of the 12 months through the week of July 19, according to data compiled by Bloomberg Second Measure, which analyzes credit and debit card transactions in the country. They saw a 13% drop in June from the previous year, and the fall further deepened in July.

Shein has said US president Donald Trump’s removal of the so-called de minimis exemption on tariffs for parcels carrying goods worth no more than $800 had an adverse impact on its US sales and overall growth in net revenues, although it had since observed a normalization in sales trends there. "In response to the increased duties and taxes, we are pursuing a wide range of options, including increasing our prices in the U.S. market to offset a portion of the increased costs," Shein said.

The European Union’s removal of the €150 ($170) customs duty exemption may also have a material impact on Shein’s business, the retailer disclosed, as it generated about one-third of its revenues from Europe in 2025 and in the first quarter of 2026. Shein said the impact from the EU move may be the same or even greater than that of the de minimis removal in the US.

Shein has also been contending with intensifying competition from PDD Holdings Inc.’s Temu in key markets including the US and Europe, while regulators have stepped up scrutiny of the retailer’s operations.

Going forward, “scrutiny on platform compliance in the EU is rising and this may result in rule changes which could curtail Shein’s growth,” BI’s Lim said. “Tariff workarounds might only partially blunt an industry-wide squeeze on low-cost, China-origin platforms as regulators close long-used loopholes.”

Bloomberg