Shares of Chinese fast-fashion retailer Shein fell sharply following the release of its first quarterly results since listing on the Hong Kong stock exchange on September 1, reflecting a significant profit decline and raising concerns about growth and margin pressures. The company reported a 66 to 67 percent drop in second-quarter net profit compared to the previous year, with figures around £173 million (approximately US$228 million). Shares declined as much as 14 percent during trading, leaving the stock down nearly 40 percent from its initial public offering (IPO) price, and closing about 11 percent lower at HK$31.50.

Shein, which is headquartered in Singapore and founded in China, attributed the profit slump primarily to soaring oil prices and freight costs driven by geopolitical tensions in the Middle East, as well as rising import duties in key markets. The company said that these factors pushed up shipping expenses significantly, given its reliance on air freight to deliver affordable fashion items worldwide. Additionally, the retailer faced headwinds in Europe, where sales slid sharply after it raised prices and reduced online advertising ahead of new e-commerce tariffs introduced by the European Union on low-value parcels from July 1.

These European fees are seen as a major challenge for Shein, with the company suggesting they could have a greater impact than the earlier removal of duty-free allowances for low-value parcels in the United States, which prompted price increases in that market in 2025. Shein’s chairman and chief executive, Xu Yangtian, noted that the external environment remains uncertain and highlighted the ongoing need to expand inventory in Europe. He also emphasized the company’s plans to focus more on higher-priced clothing items to improve profitability, moving beyond its traditional low-price offerings known for constant discounts.

Market analysts and investors have expressed growing concern over Shein’s ability to maintain its rapid growth trajectory amid rising costs and market challenges. Li Jianggan, CEO of Singapore-based consultancy Momentum Works, pointed to the significant margin compression and weakening performance in Europe as reasons for caution about the retailer’s near-term outlook. Analysts from Jefferies noted that Shein’s earnings for the quarter fell more than 10 percent below the lower end of expectations outlined in its IPO prospectus, highlighting the difficulty of sustaining both strong growth and healthy margins simultaneously.

As of midday trading on September 29, Shein’s market capitalization stood at approximately US$17 billion, down from about US$26 billion at the time of its public listing. The company’s second-quarter margin shrank to 2.1 percent from 6.2 percent the previous year, underscoring the pressure on profitability amid the complex backdrop of global geopolitical tensions and evolving trade policies.