SHEIN Passes Hong Kong Stock Exchange Hearing, Valuation Halved from Peak as Profit Growth Slows and Tariff

SHEIN submitted its post-hearing information set to the Hong Kong Stock Exchange on the evening of July 26, formally passing the main board listing hearing. The target valuation for the listing is in the range of $40 billion to $50 billion, down more than 50% from the $100 billion valuation after its Series D round in 2022.

According to the prospectus, SHEIN's revenue for 2023, 2024, and 2025 was $32.103 billion, $38.748 billion, and $41.847 billion respectively, representing a three-year compound annual growth rate of 14.2%. However, year-on-year growth slowed from 41.1% in 2023 to 20.7% in 2024, and further to 8% in 2025. In the first quarter of 2026, revenue was $9.052 billion, up only 1.1% year-on-year. Net profit for 2025 was $2.064 billion, down 38.7% from $3.365 billion in 2024, with the net margin falling from 8.7% to 4.9%. In the first quarter of 2026, the company recorded a net loss of $99 million, compared with a net profit of $395 million in the same period of 2025. The loss was mainly due to a $328 million fair value loss on convertible redeemable preferred shares; excluding that change, operating profit for the quarter was $258 million, down 25.9% year-on-year.

SHEIN's capital structure includes special terms for preferred shares. The company pays cash compensation to holders of Pre-D, D, and D+ round preferred shares, with interest calculated at a fixed annual rate of 8% on the issue price in the initial period, rising to 12% if the IPO is not completed after March 5, 2026. As of the end of March 2026, the cumulative compensation payable in the first stage reached $1.1 billion, of which $369 million had been paid, with the remaining $713 million recorded as a liability. The D+ round preferred shares include a full ratchet mechanism: if the final issue price is lower than the conversion price, the conversion price will be forcibly adjusted downward. As of March 31, 2026, the company's convertible redeemable preferred share liability stood at $17.294 billion. The listing will trigger the automatic conversion of these preferred shares into Class B ordinary shares, eliminating the billions in redemption liabilities on the balance sheet.

Fulfillment costs and marketing expenses continue to erode profits. In 2025, fulfillment costs (including warehousing, logistics, transportation, and tariffs) reached $19.072 billion, accounting for 45.6% of revenue; in the first quarter of 2026, this ratio rose to 47.7%. Marketing expenses for 2025 were $6.191 billion, up 48.9% year-on-year, and in the first quarter of 2026, the marketing expense ratio rose to 15.8%, with single-quarter advertising spending of $1.098 billion. Tariff policy changes have further pushed up costs: the United States eliminated duty-free treatment for packages under $800 from May 2025, with rates ranging from 10% to 87.5%. In the first quarter of 2026, SHEIN's revenue from the U. S. market fell 14.3% to $2.04 billion, with its share of total revenue declining from 26.6% to 22.5%. The European Union will remove tariff exemptions for packages under 150 euros from July 1, 2026, imposing a flat tariff of 3 euros per category. Europe contributes about one-third of the company's revenue (32.1% in the first quarter of 2026), which will add to fulfillment pressure.

SHEIN's core operating model is "large-scale automated small-order quick-response" (LATR). New products are tested in small batches of 100 to 200 units, with rapid replenishment within five days based on consumer feedback. Inventory turnover is about 36 days, well below the traditional fast-fashion industry range of 90 to 150 days. As of the end of 2025, the platform had 273 million active users, covering approximately 160 markets. In 2025, the company had over 7,500 global contract manufacturers, most of which are small and medium-sized enterprises. Supplier payment terms have been compressed to 30 days after shipment, with a minimum of seven days. To address tariff and logistics changes, the company is shifting from direct shipping from China to overseas warehousing and bulk sea freight. As of the end of June 2026, it had activated large logistics centers in Poland and other locations, with global warehousing space exceeding 6 million square meters.

Industry competition is intensifying. Pinduoduo's Temu, leveraging its fully managed and semi-managed models, has expanded rapidly, with its global cross-border parcel share rising to 24% in 2025, matching Amazon, while SHEIN's parcel share remained at 9%. In the first half of 2026, the Hong Kong IPO market raised HKD 210 billion, up 92% year-on-year, but capital preference has been concentrated in hard-tech sectors such as AI large models, semiconductors, and computing infrastructure. SHEIN's target valuation of $40 billion to $50 billion implies a price-to-earnings ratio of about 20 to 24 times its 2025 net profit, roughly in line with Inditex, the parent company of global fast-fashion leader Zara.

SHEIN launched the SHEIN X program in 2021, upgrading it to the SHEIN Xcelerator brand incubation platform in October 2025, providing supply chain services and a global sales platform to partner brands. One brand participating in the program saw its sales increase approximately 15 times in the second year, with operating profit margin improving by more than 30 percentage points and inventory turnover days reduced by about two-thirds. The operating margin of the brand empowerment business is approximately twice the group average.