[Reuters/Yonhap]
[Reuters/Yonhap]

Fast-fashion giant Shein could not escape the shock of US tariffs. A preliminary prospectus filed ahead of its Hong Kong listing showed the company swung to a loss in the first quarter of this year, with sales in its largest market, the United States, falling by double digits. Washington's elimination of the de minimis exemption on low-value imports drove the reversal.

With US sales already shrinking by double digits and the EU now imposing a new fee on low-cost e-commerce imports, questions are mounting over Shein's growth prospects after the listing.

Shein disclosed in its preliminary prospectus for the Hong Kong initial public offering that it posted a net loss of $99 million in the first quarter of this year, Reuters reported Monday. That compares with a net profit of $395 million in the same period last year. Its operating profit margin also fell, from 3.9 percent to 2.9 percent.

Shein identified the US elimination of the de minimis exemption as the primary cause of the earnings deterioration. The United States scrapped duty-free treatment on Chinese imports valued under $800 starting in May last year, and tariffs of between 10 percent and 87.5 percent now apply to Chinese goods sold into the country through the platform, the company said.

The tariff burden translated directly into weaker US sales. First-quarter revenue from the United States came in at $2.04 billion, down 14.3 percent from the same period a year earlier. Total sales edged up just 1.1 percent to $9.05 billion, and the US share of overall revenue shrank to 22.5 percent from 29.4 percent in 2023.

Shein said it is pursuing a range of measures to offset the tariff burden in the US market, including raising prices.

However, a one-time accounting charge also contributed to the loss. A fair-value adjustment on convertible redeemable preferred shares held by pre-IPO investors produced a $328 million valuation loss.

Europe has also emerged as a new variable. The EU began imposing a fee of 3 euros per item on low-cost e-commerce imports this month. Shein warned in its prospectus that the impact could be comparable to, or greater than, that of the US de minimis elimination. Europe accounts for roughly one-third of Shein's total revenue based on fiscal year 2025 figures, making it a critical market.

The results carry added significance because they were disclosed as part of Shein's push for a Hong Kong listing. After plans for listings in New York and London fell through, the company pivoted to Hong Kong and received approval from China's securities regulator, the China Securities Regulatory Commission, this month. The offering price, size and timeline have yet to be announced.

Reuters estimated that Shein would seek a valuation of between $40 billion and $50 billion in the IPO — less than half the $100 billion valuation it commanded when it raised funds in 2022.


kacew@heraldcorp.com