SHEIN’s Quarterly Loss Exposes the Cost of a Changing Global Trade Regime

The draft listing prospectus provides the clearest public view yet of SHEIN’s financial performance. Revenue increased from US$32.1 billion in 2023 to US$38.7 billion in 2024 and US$41.85 billion in 2025, but annual growth slowed sharply to approximately 8 per cent last year from 20.7 per cent in 2024. Net profit simultaneously fell 38.7 per cent, from US$3.37 billion in 2024 to US$2.06 billion in 2025, reducing the company’s net margin from about 8.7 per cent to 4.9 per cent. In the first quarter of 2026, its operating margin declined further to 2.9 per cent from 3.9 per cent a year earlier, indicating that pressure extends beyond the non-cash accounting charge recorded during the period.

The most immediate disruption comes from the United States, historically SHEIN’s largest market. Until May 2025, packages valued below US$800 could generally enter the country without import duties under the “de minimis” exemption, allowing SHEIN to ship inexpensive individual orders directly from Chinese warehouses to American customers. Following the exemption’s removal, China-origin products sold through the platform became subject to tax rates ranging from 10 per cent to 87.5 per cent. SHEIN’s US revenue subsequently fell 14.3 per cent year on year to US$2.04 billion in the first quarter, while the market’s share of group revenue dropped to 22.5 per cent, compared with 29.4 per cent in 2023.

SHEIN is considering higher US prices to recover part of the additional duties, but this creates a difficult trade-off. Price increases could protect gross profit per item while weakening the affordability that drives customer traffic, particularly as SHEIN competes with Temu, Amazon Haul and conventional fast-fashion retailers. Absorbing more of the tariff cost would preserve price competitiveness but place additional pressure on margins. The company’s “on-demand” manufacturing system can reduce inventory risk by ordering small initial batches and rapidly replenishing successful products, but it cannot eliminate customs duties or international delivery expenses. More than 90 per cent of SHEIN’s 2025 revenue came from products stored in central warehouses in China, leaving the company highly exposed to changes in cross-border trade policy.

Europe presents the next major test. The region accounted for approximately one-third of revenue in 2025 and the first quarter of 2026, but the European Union introduced a €3 fee on low-value e-commerce parcels in July. SHEIN has warned that the effect could match or exceed the disruption experienced in the United States. The company is also facing stricter European scrutiny of product safety, marketplace supervision and environmental practices. Meanwhile, conflict in the Middle East has weakened regional consumer demand, and higher material, transportation and fulfilment costs are adding further pressure. These developments challenge the assumption that SHEIN can offset slower growth in one market simply by expanding into another.

The quarterly net loss was magnified by a US$328 million fair-value charge on convertible redeemable preferred shares, whose accounting value can fluctuate before an IPO. This means the headline result does not entirely represent an operating cash loss. Nevertheless, investors will focus on the simultaneous slowdown in revenue growth, contraction in operating margins and weakening of the US business. SHEIN is reportedly seeking a Hong Kong valuation of US$40 billion to US$50 billion, far below the US$100 billion assigned during a 2022 funding round. After unsuccessful listing attempts in New York and London, the Hong Kong offering could provide liquidity for early investors and capital for technology, international expansion and supply-chain diversification. Its success, however, will depend on whether investors believe SHEIN can rebuild profitable growth without the customs exemptions that helped create its original cost advantage.