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Shein posted a sharp improvement in its second-quarter performance, returning to profit with sales of $11.08 billion. However, the fast-fashion retailer faced pressure in Europe, where sales declined following price increases, while the company flagged uncertainty for the second half of the year in its first results since going public.
The Singapore-headquartered online retailer reported net income of $2.40 billion for the quarter ended June 30, compared with a net loss of $99 million in the previous quarter. Net revenue rose more than 20% sequentially, supported by an increase in the total number of orders fulfilled. However, Shein said the Iran conflict continued to weigh on its Middle East operations.
Europe remained a key area of concern, with sales falling 13.9% to $3.77 billion in the second quarter. According to the company, the decline reflected weaker volumes following higher prices and reduced online advertising spending ahead of the European Union’s introduction of fees on low-value e-commerce parcels from July 1.
Shein’s shares closed 0.5% higher at HK$35.28 on Monday ahead of the results. Since its September 1 debut in Hong Kong, the stock has declined 27.3% from its offer price of HK$48.56 per share. Investors have been weighing the potential impact of the new fees on Shein’s European business, which contributes around one-third of its revenue.
In the US, Shein’s revenue declined 6% to $2.5 billion during the quarter. Overall sales increased 0.9% year-on-year, with growth in Latin America partly offsetting declines across its larger markets.
Despite returning to profit, Shein’s net profit margin narrowed to 2.1% in the second quarter from 6.2% a year earlier. The company attributed the pressure largely to the impact of the Middle East conflict on oil prices and freight costs, which contributed to an 18.1% increase in fulfilment expenses.
Shein CEO and Chair Sky Xu said the retailer is planning to push into higher-priced clothes that will boost its profitability and hinted at the company's strategy of expanding its family of brands, including through acquisitions. "As the product mix shifts towards brands at higher price points, the platform’s overall average selling price will rise accordingly," Xu said in a statement. "Our vision is to become a richly diversified brand collection that meets consumers’ varied needs across multiple price points and occasions."
Shein has faced growing pressure to adjust its low-price model as governments tighten rules around low-value e-commerce shipments. The retailer, traditionally known for $5 dresses, $10 jeans and frequent discounts, was forced to increase prices in the US last year after the Trump administration ended de minimis treatment for low-value e-commerce parcels.
The company is now facing a similar challenge in Europe. Since July 1, the European Union has introduced a €3 fee on low-value parcels for each customs code, which can rise to €15 when an order contains five different types of items.
Shein’s third-quarter results are expected to provide a clearer picture of the impact of the European charges. The company has previously indicated that the effect could be greater than the impact of the US decision to remove de minimis treatment last year.
