Shein’s profits fall by two-thirds in first earnings report as a public company

Shein swung to a $99 million quarterly loss in the first three months of 2026, a stark contrast to the $395 million net income reported a year earlier. This decline was attributed to several factors, including the removal of a U.S. import duty exemption on small packages, a substantial one-time accounting charge related to a drop in investor share value, and slowing sales. Despite higher annual sales in 2025, the company's profit dropped, indicating a challenging financial environment leading into its IPO.

The fast-fashion giant, headquartered in Singapore and founded in China, saw its operating income fall by 52.9% in the first half of 2026. This extended a trend of deteriorating profitability observed in the first quarter. Net revenue growth for the first half of 2026 was a modest 1% reaching $20.1 billion. The company's valuation at its Hong Kong IPO on September 1, 2026, was approximately $26 billion, significantly lower than its peak valuation of around $100 billion in 2022.

Shein's U.S. sales experienced a decline of over 10% in the three months ending in August and early September, a steeper contraction compared to the broader specialty online retail category. Analysts anticipate a further slowdown in revenue growth to about 2.5% in 2026 and a more than 19% drop in adjusted operating profit, primarily due to higher oil and freight costs exacerbated by the Iran war, which led to an 18.1% increase in fulfillment expenses. The company's net profit margin shrank to 2.1% in Q2 from 6.2% a year prior.

However, Shein did return to profit in the second quarter of 2026, posting a net income of $2.4 billion, recovering from the $99 million loss in the previous quarter. Overall sales were up 0.9% year-on-year to $11.08 billion for Q2, driven by growth in Latin America, which offset declines in key markets like Europe (down 13.9% to $3.77 billion) and the U.S. (down 6% to $2.5 billion). Shein's chairman, Sky Xu, acknowledged the uncertain external environment for H2 2026, citing persistent tariff headwinds and logistics cost volatility.