Shein posts quarterly loss before Hong Kong IPO
Small-parcel duty changes in US and EU squeeze direct-from-China model, price rises shift risk to shoppers
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Shein slumps to loss as sales hit by Trump’s tariff blow
independent.co.uk
Shein reported a quarterly net loss of $99 million ahead of its planned Hong Kong listing, after posting a profit of $395 million in the same period a year earlier, according to The Independent. Sales barely grew, rising 1.1% to $9.05 billion for the three months ending March, a slowdown the company linked in part to new duties on the small parcels that have powered its direct-to-consumer model.
The immediate hit came from accounting, not demand: Shein said the quarter included a $328 million charge tied to special investor shares. But the company’s prospectus-style warnings focus on a more durable problem: the low-friction shipping channel that let it send individual garments from China to Western consumers is being narrowed by policy decisions in multiple jurisdictions. The Independent reports that the US removed the “de minimis” tariff exemption on small packages in May 2023, and that Shein said the change harmed its sales and net revenue growth in the US.
Europe is now the larger exposure. Shein said roughly one-third of its sales last year came from Europe, and it warned that the EU’s move in early 2024 to impose a three-euro duty on small parcels from outside the bloc could have a “material adverse effect” on its business. The company told investors the European impact could match or exceed what it experienced in the US, and it is considering price increases in both regions to offset higher duties and taxes.
That sets up a familiar trade-off for a retailer built on ultra-low prices and rapid inventory turnover. Higher prices can protect margins per item, but they also test whether consumers are buying the clothes or the bargain. Meanwhile, the UK is debating a similar clampdown: The Independent notes that the government plans to review and potentially close its own small-parcels customs loophole, with reforms expected by 2029, while high street retailers are pressing for earlier action.
Shein’s first-quarter numbers were disclosed in the run-up to the IPO it is planning in Hong Kong. The company is asking public investors to underwrite a business model whose unit economics depend increasingly on customs policy rather than design or logistics.
In March, Shein sold $9.05 billion of clothing in three months and still ended the quarter in the red.