Shein reported a quarterly loss of US$99 million in the first quarter of 2026, marking a significant reversal from a net income of US$395 million in the same period a year earlier, according to financial disclosures submitted in advance of its planned Hong Kong initial public offering (IPO). The loss reflects the impact of higher import duties, slower sales growth, and a substantial one-time accounting adjustment related to investor shares.

The China-founded, Singapore-headquartered fast-fashion retailer cited the removal of a U.S. import duty exemption on small packages as a key factor behind its weaker sales performance. Since May 2025, the termination of the so-called “de minimis” rule—previously allowing packages valued under US$800 to enter the United States without tariffs—has subjected Chinese-origin products sold by Shein or its marketplace partners to duties ranging from 10% to 87.5%. The company said the change has not only reduced growth in its largest market but also led to higher expenses.

In response, Shein is exploring various strategies to mitigate the increased costs, including raising prices in the U.S. market. Despite these efforts, first-quarter U.S. revenue declined 14.3% to US$2.04 billion from US$2.38 billion a year earlier, with the country’s share of quarterly revenue falling to 22.5% from 29.4% in 2023.

Shein’s European market also faces growing regulatory challenges. The European Union recently introduced a €3 fee on low-value e-commerce imports to address what it describes as unfair competition from China, a development Shein acknowledged could have an impact comparable to or even greater than that seen in the United States.

The company’s full-year 2025 financial results showed a slowdown in growth, with net income falling 38.7% to US$2.06 billion and revenue increasing 8% to US$41.85 billion, down from 20.7% growth the previous year. Operating margins narrowed to 2.9% in the first quarter of 2026 from 3.9% in the year-earlier period.

The reported loss included a US$328 million fair-value charge on convertible redeemable preferred shares—investor shares that may later convert into ordinary shares—and was partly driven by changes in accounting rules ahead of the IPO. Shein did not disclose details regarding the size, pricing, or timing of the Hong Kong share sale but noted that it received regulatory approval from the China Securities Regulatory Commission on July 10, following unsuccessful attempts to list in New York and London.

Founded in Nanjing, Shein operates in approximately 160 countries, offering low-cost apparel such as dresses priced around US$5 and jeans at US$10. The company has faced criticism and regulatory scrutiny over labor practices in its supply chain, the environmental impact associated with rapid shipping, and certain features of its shopping app. Shein has maintained a zero-tolerance stance on labor abuses and said it has implemented mitigation frameworks and risk assessments.

According to the prospectus, over 90% of products are stored in central warehouses in China before being shipped to customers. The company’s major investors include IDG, Sequoia Capital, HongShan, Tiger Global, Boyu, Brookfield, and General Atlantic. The latest filings provide insight into the challenges facing Shein as it seeks to attract new capital amid increased operating costs and regulatory pressures in its core markets.