Shein's stock hit a low: the retailer reported a 67% drop in profits

Shares of Shein, a Singapore-based online retailer of clothing and home goods, fell 14% during Tuesday’s trading—to their lowest level since the company went public about a month ago. This came after the company released its first financial report as a publicly traded company: Shein reported a sharp drop in quarterly profits and a decline in sales in Europe. The weak results heightened investors’ concerns about declining margins and a slowdown in business growth, according to Reuters.

Since its debut on the Hong Kong Stock Exchange on September 1, Shein’s shares have lost about 35% of their offering price of 48.56 Hong Kong dollars per share. Shein shares closed down 10.7% on September 29.

Shein’s adjusted net income in the second quarter fell 67% year-over-year to $228 million, while the net profit margin plummeted from 6.2% in the same period last year to 2.1% in the most recent reporting period. Overall, the retailer’s operating profit declined by 53% in the first half of the year. The main cause of the financial losses was the conflict in the Middle East: it triggered a surge in jet fuel and freight costs, which proved critical for a company that delivers its inexpensive goods to customers around the world by air.

“We expect the external environment to remain uncertain in the second half of 2026, with negative factors such as tariffs and volatility in logistics costs likely to persist,” said Shein CEO Sky Xu. He also pointed to a deterioration in consumer sentiment: due to rising inflation, shoppers are becoming more selective in their spending.

Although Shein’s total quarterly revenue showed a modest 0.9% year-over-year increase to $11.08 billion, the company saw a decline in sales in key Western markets due to tighter regulations. In the U.S., for example, Shein’s revenue fell by 6% to $2.5 billion. The business was hit by the government’s elimination of duty-free import privileges for small packages from overseas online retailers, according to The Wall Street Journal. In Europe, second-quarter revenue fell 13.9% year-over-year to $3.77 billion. In preparation for the European Union’s introduction of a €3 duty on inexpensive packages from foreign online retailers starting July 1, Shein was forced to raise prices in advance and cut its online advertising budgets in the region, Reuters notes.

Moreover, the decline has affected more than just Shein, according to Bloomberg. Two of the retailer’s suppliers told the agency that their business with the competing platform Temu has also declined. The company’s global web traffic has been falling since March, and the time users spend on the Temu and Amazon apps has dropped significantly this summer, the agency notes.

Despite expectations that the external environment will remain challenging in the second half of 2026, Shein anticipates improved performance in the fourth quarter, which is traditionally a strong period for retail. “The fourth quarter... remains our most important period for running advertising campaigns and should lead to a significant increase in orders,” the company emphasized.

Sky Xu also added that Shein plans to expand its higher-priced apparel segment to boost profitability. He also hinted at a strategy to expand the brand portfolio, including through acquisitions. “As the share of higher-priced brands in [the company’s] product lineup grows, the average selling price on the platform will rise accordingly,” he noted. “We see ourselves as a diverse collection of brands that meets the varied needs of shoppers across different price segments and for different occasions,” the top executive added.

Analysts at Jefferies noted that Shein’s earnings “came in more than 10% below the lower end of the range indicated in the prospectus.” Nevertheless, in a recent report, they called the retailer “one of the most talked-about stocks,” according to the WSJ. “Bulls, who are bullish on the stock, argued that a data-driven approach to merchandising, supply chain capabilities, and speed to market continue to structurally differentiate Shein from its competitors,” the analysts noted. “Bears, on the other hand, questioned whether these advantages are eroding amid slowing growth and increasing regulatory pressure,” they noted.

This article was AI-translated and verified by a human editor