Fast-fashion platform Shein reported its first results as a public company, revealing a significant drop in adjusted net profit. For the second quarter, adjusted net profit was $228 million, a 67% decrease from the previous year. This squeezed its margin to just 2.1% from 6.2% last year, largely due to increased jet fuel and freight costs exacerbated by conflicts in the Middle East. Fulfillment costs jumped by 18.1%, exceeding analyst expectations, and further concerns were raised about upcoming European fees.
Sales for the second quarter reached $11.08 billion, a modest 0.9% increase year-over-year. However, European revenue saw a sharp 13.9% decline to $3.77 billion, and US revenue fell by 6% to $2.5 billion. These declines were attributed to Shein hiking prices and cutting online advertising in anticipation of $3 fees on low-value e-commerce parcels in the European Union, effective July 1. Latin American growth partially offset these losses.
Investors reacted negatively to the news, as Shein's shares have fallen 27.3% from their offer price of HK$48.56 since their September 1 debut in Hong Kong. Jefferies analysts noted that earnings landed more than 10% below the low end of their implied range. Shein plans to address profitability by shifting towards higher-priced clothes and expanding its brand portfolio, potentially through acquisitions, according to CEO Yangtian Xu. The company is also investing in European warehouse space, including a 740,000 square meter logistics hub in Wroclaw, Poland, and an additional 66,000 square meters this year.
The company faces ongoing challenges, including additional fees in Europe. The EU plans a $3 fee per product category for low-value e-commerce parcels, which could amount to $15 for five different items, and an additional $2 handling fee from November 1. Shein had previously raised prices in the US after the Trump administration ended duty-free access for low-value e-commerce parcels, and expects the European fees to have a greater impact than the US change. Overall operating profit for the first half of 2026 decreased by 50.4%, with net income attributable to shareholders reaching $2.3 billion, up from $1.1 billion in the same period last year.
