Profit rebound and sales growth
For the three months ending June 30, Shein posted net income of $2.40 billion, reversing a $99 million loss from the preceding quarter. Sales came in at $11.08 billion, a 0.9% gain year over year, with Latin American expansion making up for weaker performance in its biggest markets. Net revenue climbed more than 20% from the prior quarter on higher order volumes, while the conflict in Iran kept weighing on Middle East business.[S1]
The online retailer, based in Singapore, released these numbers on Monday — its inaugural earnings report since listing publicly. Ahead of the announcement, the stock finished up 0.5% at HK$35.28. Since its September 1 Hong Kong listing, shares have slid 27.3% below the HK$48.56 offer price, reflecting investor concern that new European levies will damage a region that accounts for about a third of its revenue.[S1]
Europe and US sales under pressure
Second-quarter European sales fell 13.9% to $3.77 billion, hurt by lower volumes tied to steeper prices and reduced online ad spending before the EU began charging fees on low-value e-commerce parcels on July 1. US revenue declined 6% to $2.5 billion. Net profit margin narrowed to 2.1% from 6.2% a year ago, largely because the Middle East conflict raised oil prices and freight costs, lifting fulfilment expenses 18.1%.[S1]
Shein, whose reputation rests on cheap apparel such as $5 dresses and $10 jeans plus constant markdowns, had already lifted US prices last year after the Trump administration scrapped de minimis, the duty-free treatment for low-value e-commerce parcels. It now confronts the same situation in Europe. Starting July 1, the EU charges 3 euros per customs code on low-value online parcels, potentially reaching 15 euros for an order spanning five product types. Third-quarter results will reveal more of the effect, which Shein has said could surpass the US de minimis change.[S1]
Strategy shift toward higher prices
CEO and Chair Sky Xu said the retailer plans to push into higher-priced clothes that will boost profitability and hinted at a strategy of expanding its family of brands, including through acquisitions. He said that as the product mix shifts toward brands at higher price points, the platform's overall average selling price will rise accordingly. He described the company's vision as becoming a richly diversified brand collection that meets consumers' varied needs across multiple price points and occasions.[S1]
