The sprinting SHEIN has slowed down

sprinting SHEIN, According to The Information, SHEIN’s revenue growth slowed to 23% in the first half of this year, with revenue reaching $18 billion. Last year, SHEIN’s revenue growth was 40%. On the profit side, SHEIN’s profit in the first half of this year dropped by over 70%, to less than $400 million.

It’s worth noting that on March 31, the Financial Times revealed that SHEIN’s profit exceeded $2 billion in 2023, with a GMV (Gross Merchandise Volume) of around $45 billion.

The Financial Times also disclosed in 2023 that, according to a presentation for investors, SHEIN had been profitable for four consecutive years, with a profit of $700 million in 2022 and $1.1 billion in 2021. The decline in profits was attributed to “rising logistics and production costs eroding a portion of the profit.”

In other words, SHEIN’s profit significantly shrunk in the first half of 2024. According to The Information, SHEIN’s growth slowdown may be related to the rise of Temu.

The reason is Temu’s rapid expansion in the U.S. market, which not only weakened SHEIN’s market share but also indirectly increased its operating costs. In the first half of this year, airfreight and marketing costs were on the rise.

With Temu as a new challenger, SHEIN had to adjust its strategy. At the end of last year, SHEIN began exploring new heights—selling categories beyond fashion, including electronics and children’s toys. Additionally, starting in May last year, SHEIN opened its platform to third-party sellers, allowing them to sell clothing, which also affected SHEIN’s growth rate to some extent.

Evidently, this mountain is not easy to climb. SHEIN fell into a “low-price trap,” and its profit margin this year slid from 8% in the same period last year to 2%.

However, SHEIN’s management has decided to step back from direct competition with Temu and return to its original focus—spending more energy on brand products and fashion items.

There are also speculations that SHEIN’s slowdown is related to its IPO plans.

This is a common occurrence—when preparing for an IPO, a company often has to make many compliance adjustments and incur additional expenses, which can affect its original business and profits. SHEIN’s IPO journey has been full of twists and turns. Initially, it planned to make a big splash on the U.S. stock market, but after finding the path difficult, it quickly switched gears and aimed straight for London.

Furthermore, SHEIN is considering an unconventional route—not a traditional IPO, but a Direct Public Offering (DPO), where it would sell its existing shares directly to the UK public. The valuation is set at £50 billion.

In a rare move, SHEIN’s usually elusive CEO Xu recently made an appearance in the UK, meeting with investors. Accompanying him were SHEIN’s CFO and some bankers. This visit to London included several informal “tea parties,” which everyone knows were really about SHEIN’s IPO plans.

Some media predict that if these meetings go well, SHEIN’s IPO show could take place in early 2025.

However, SHEIN’s IPO journey is still fraught with uncertainty. At last week’s London International Investment Summit, UK Prime Minister Keir Starmer was asked about SHEIN’s IPO. He didn’t address SHEIN directly but emphasized the importance of high standards and clearly stated that labor rights would be closely watched. This suggests that while the London Stock Exchange is eager for large IPOs to boost the market, it won’t relax its review standards for companies looking to go public.

The IPO road is tough, and SHEIN still has work to do.

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