Shein’s profits have plummeted nearly 40% amid increased competition and regulatory challenges, prompting a delay in its planned IPO on the London Stock Exchange.
Shein, the fast fashion retailer, has reported a significant decline in profits, which has raised concerns over its planned flotation on the London Stock Exchange. According to the Financial Times, the company’s net profit for 2024 fell by nearly 40%, amounting to £789 million ($1 billion), following a challenging final quarter and increased competition from rivals like Temu. However, Shein’s sales showed a notable increase, rising 19% to £30 billion ($38 billion).
These financial results fall considerably short of the projections Shein had set for itself earlier in 2023, when the company anticipated achieving a net profit of £3.8 billion ($4.8 billion) and sales of £42.6 billion ($45 billion). The stark contrast between expectations and actual performance has cast doubt on the timing and valuation of its initial public offering (IPO).
The retailer has been navigating a complex path toward its IPO, having filed confidential documents for a listing in June of the previous year. However, it remains in a waiting period for regulatory approval from authorities in both the UK and China. Furthermore, reports indicate that Shein may need to adjust its valuation downwards, potentially to around £23.83 billion ($30 billion) from an earlier estimate of £50 billion, which would have made it the largest flotation in London’s history.
In light of the evolving regulatory landscape, Shein has also postponed its IPO, moving the anticipated launch from Easter of 2024 to the latter half of 2025. This decision follows recent changes to import tariffs implemented by the Trump administration, which announced a halt to the “de minimis” duty exemption and imposed an additional 10% tariff on all Chinese imports. These tariffs are particularly significant for Shein, as they challenge the retailer’s ability to maintain low prices.
To counter the impact of these tariffs on its supply chain, Shein is reportedly increasing its production capabilities in Vietnam. This strategic shift is aimed at mitigating rising costs while attempting to sustain its competitive edge in the fast-paced fashion market. The unfolding financial and regulatory context continues to evolve, as stakeholders monitor Shein’s next moves in the face of formidable competition and regulatory hurdles.
Source: Noah Wire Services
