Shein's Profit Craters 67%, and Its Post-IPO Honeymoon Is Already Over
Shares in the fast-fashion giant have fallen more than 27% since its Hong Kong listing on September 1, and a brutal quarterly profit report just knocked another 6% off the price.
Shein priced its Hong Kong IPO at HK$48.56 a share on September 1. By this week it was trading around HK$33.40, a 27.3% drop, and the latest quarter gave shareholders another reason to keep selling: adjusted net profit fell 67% to $228 million, with margins compressed from 6.2% to 2.1%. Jefferies analysts said the number landed more than 10% below even the lower end of what the prospectus had promised.
The culprit, per Shein, is geography and geopolitics: Middle East conflict has pushed up jet fuel and freight costs for a retailer that ships nearly everything by air, and air freight is not a line item you can quietly ignore when your entire model depends on getting a $9 dress from a Chinese factory to a customer's door in days.
CEO Yangtian Xu's fix is to grow up a little, building out European inventory and pushing into higher-priced clothing to protect margin. That is a reasonable strategy, and also the exact opposite of the endless-nine-dollar-dress pitch that got Shein to a public listing in the first place.
Source: FashionNetwork
Kyle Duford, Founder & Editor, BRNDWIRE. More from Kyle →
