Shein Global Holdings Ltd. shares crashed 6% after reporting a 67% plunge in quarterly profit to $228 million in the second quarter, with margins narrowing sharply to 2.1% from 6.2% a year earlier. According to Reuters, the margin squeeze came as conflict in the Middle East drove up jet fuel and freight costs, with the company heavily relying on air shipments to deliver its low-priced clothing globally. The Singapore-based fast-fashion retailer's shares have now declined 27.3% since their Hong Kong debut on September 1, trading at around HK$33.40 on Tuesday compared to the offer price of HK$48.56 ($6.19). Analysts at Jefferies estimated that Shein's quarterly earnings were more than 10% below the low end of the range implied by the company's prospectus.
Third-party data and supplier reports suggest conditions have deteriorated further during the third quarter, marked by softer US sales and declining global web traffic. As reported by Bloomberg Second Measure, Shein's US sales fell more than 10% in the three months through August and early September, according to Bloomberg Second Measure, which analyzes credit and debit card transactions. This contraction was steeper than the single-digit decline in the broader specialty online retail category. Two core suppliers in China told Bloomberg their orders from Shein have fallen roughly 20% during the third quarter, with declines worsening in August and September. The same suppliers noted that their Temu business also weakened, with Temu's global web traffic slipping since March and time spent on Temu and Amazon declining over the summer.
Shein CEO and Chair Yangtian Xu said on Monday that increasing inventory levels in Europe was a key priority for the company, as reported by Reuters. The company also plans to expand its offering of higher-priced clothing, a strategy aimed at improving profitability. However, Jefferies analysts said earnings estimates for Shein in 2026 and 2027 may be too optimistic, as margins will face growing pressure with the European Union eliminating a customs exemption on low-value parcels in July. The company had cautioned before listing that the Iran war would weigh on its first-half results, and analysts noted that third-quarter sales will be 'the key test' for the company's recovery prospects. Chanson & Co. executive Shen Meng noted that 'Without a clear strategy to address growth concerns in the short term, reversing its long-term slide will be challenging.'
Shein's sales have underperformed the broader apparel industry in the US since late last year, while rivals including PDD Holdings Inc.'s Temu and Amazon.com Inc. have posted single- to double-digit growth since April. According to Bloomberg, some of the weakness may reflect a broader pullback in e-commerce, with Similarweb data showing Shein's global web traffic declined from a year earlier in August, marking its first contraction since late 2024. Time spent on Shein also declined more than 10% in July and August, while app downloads plunged more than 40% in August, according to Apptopia. The broader e-commerce cooling is evident across the sector, with suppliers noting that Temu's global web traffic has slipped since March.
