Shein Shares Slip Further on Second Day as Tariffs, Growth Concerns Weigh

Shares of Shein fell more than 3% in early trade on Wednesday, a day after the online fast-fashion retailer’s long-awaited Hong Kong listing ended flat only with the help of stabilisation measures. The stock was trading at HK$46.94 at the open, versus its HK$48.56 issuance price. Hong Kong’s Hang Seng Index was down about 0.9%.

The stock had dropped as much as 10% during its debut session on Tuesday before recovering to close near the IPO price. The rebound was the result of so-called stabilisation measures that can be applied to large listings to prevent sharp declines on debut, according to a source and analysts.

Shein raised $1.7 billion in the offering, which valued the company at $26.5 billion – nearly a quarter of its peak valuation of roughly $100 billion in 2022.

Higher import duties in key markets, growing regulatory risks, and intensified competition from rivals are hampering Shein’s growth prospects, investors and analysts said.

“Shein’s weak performance reflects investors reassessing a growth story that has become harder to underwrite,” said Brandon Ho, head of investment advisory for Singapore at Arta Finance. “Revenue growth has slowed over the past few years and margins are under pressure, while higher tariffs and customs costs in the U.S. and EU are weakening the economics of its low-cost cross-border model.”

The end of “de minimis” tariff exemptions in the U.S. and the European Union has raised duties on low-value parcels from China, including Shein’s products, the Arkansas Democrat-Gazette reported. Higher logistics costs partly due to the war in Iran have also squeezed the company’s low-price business model and profitability, the outlet added. Tariff costs have forced Shein to raise prices, “cutting into its main advantage,” Jacob Cooke, CEO of WPIC Marketing + Technologies, told the newspaper.

Shein recorded a $99 million loss in the first three months of this year, compared with a $395 million profit in the same period a year earlier, according to the Arkansas Democrat-Gazette.

The company had explored listing in New York and London before shifting its headquarters from China to Singapore around 2021. But increasingly strict scrutiny by Beijing and by regulators in the U.S. and Europe led it to embrace its Chinese roots and switch to a Hong Kong listing, the outlet reported.

“Shein has probably missed its golden listing window due to the shift of momentum toward AI and tariffs, which can affect valuations and profitability,” Gary Ng, a senior economist for Asia Pacific at French bank Natixis, told the Arkansas Democrat-Gazette.

Other headwinds have piled up. In February, the European Union launched a probe into Shein focusing on “illegal” products, including suspected child sexual abuse material. And in May, Shein acquired San Francisco-based eco-friendly clothing retailer Everlane, a move that some analysts said was not the best fit, according to the Arkansas Democrat-Gazette.

The company’s founder, Sky Xu, said in a February speech that “Guangdong is Shein’s roots, and the starting point of our journey,” the outlet reported. Pivoting its focus back to China also highlighted the advantages Shein derives from the supply chain system that “only exists” in Guangdong, said William Ma of GROW Investment Group.

At the listing ceremony, Shein’s chief financial officer, Leigh Gui, said the “Hong Kong listing marks a new starting point,” the Arkansas Democrat-Gazette reported.

Despite the stock’s weak start, Shein’s listing is welcome news for Hong Kong, which is working to hold onto its role as a global financial hub after a downturn in 2023. Hong Kong’s stock exchange has raised more than $40 billion from IPOs so far this year, and there is a backlog of companies seeking to list, Lorraine Tan of Morningstar told the outlet.