Shein Shares Drop Over 3% on Second Day as Import Duties Weigh on Growth Story

HONG KONG – Shares of Shein fell more than 3% on Wednesday, the second day of trading in Hong Kong, after a lacklustre debut that saw the stock drop as much as 10% before recovering. The market disappointment reflects mounting investor concern over the company’s growth outlook amid higher import duties, tighter regulation and stronger competition.

The stock traded at HK$46.94 in early trade, below its HK$48.56 issuance price. The recovery late Tuesday was aided by so-called stabilisation measures that can be applied to large listings to prevent a sharp decline on debut, according to a source and analysts.

Shein raised $1.7 billion in its initial public offering, pricing at HK$48.56 (approximately $6.19 per share). The IPO valued the company at $26.5 billion, about a quarter of its peak valuation of nearly $100 billion in 2022.

“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,” said Brandon Ho, head of investment advisory for Singapore at Arta Finance, in comments cited by Reuters.

The end of “de minimis” tariff exemptions in the United States and the European Union has raised duties on low-value parcels from China, including Shein’s products. Higher logistics costs partly due to the war in Iran have further squeezed the company’s low-price business model and profitability, according to a report by the Arkansas Democrat-Gazette.

“Tariff costs have forced Shein to raise prices, cutting into its main advantage,” said Jacob Cooke, CEO of WPIC Marketing + Technologies, as reported by the Arkansas Democrat-Gazette.

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, the same report noted.

The company’s weak performance “reflects investors reassessing a growth story that has become harder to underwrite,” Ho added.

Shein originally sought to list in New York and London but shifted to Hong Kong after increased scrutiny from regulators in Beijing, the U.S. and Europe. The company moved its headquarters from China to Singapore around 2021 but has since re-emphasised its Chinese roots.

“Guangdong is Shein’s roots, and the starting point of our journey,” founder Sky Xu said in a speech in February, as cited by the Arkansas Democrat-Gazette. Chief Financial Officer Leigh Gui said at the listing ceremony that “Shein’s Hong Kong listing marks a new starting point,” the same source reported.

The company faces other hurdles in Europe. In February, the European Union launched a probe into Shein focusing on “illegal” products, including alleged child sexual abuse material. In May, Shein acquired San Francisco-based eco-friendly clothing retailer Everlane, a move that some analysts said was not the best fit.

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

Despite the weak start, Shein’s listing provides a lift for Hong Kong, which has been working to maintain its status as a global financial hub after a downturn in 2023. The city’s stock exchange has raised more than $40 billion in IPOs so far this year, and a backlog of companies are seeking to list, said Lorraine Tan of Morningstar, according to the same report.