By Helen Reid and Summer Zhen
LONDON/HONG KONG, July 16 (Reuters) – Shein’s ambitions for a valuation of up to $50 billion in its long-awaited Hong Kong IPO are likely to face a tough test from investors, as new fees on e-commerce parcels in Europe weigh on sales growth and profits.
The fast-fashion retailer is seeking a valuation of $40 to $50 billion in its upcoming IPO in Hong Kong. That’s a far cry from the $100 billion valuation that media reported it was given in a funding round in 2022, when it first started pursuing a New York listing.
Shein earned global revenue of more than $40 billion last year and made close to $2 billion in net profit, said two sources with knowledge of the matter, who declined to be named or to give granular numbers as the results are confidential. In 2024 Shein made $37 billion in revenue and $1.29 billion in profit, according to its latest results filing in Singapore.
But the European Union’s imposition from this month of a €3 fee on low-value e-commerce imports, to curb what the EU calls unfair competition from China, is likely to dent Shein’s growth this year.
CEO Sky Xu will have to convince investors this is a temporary blip with growth picking up again in 2027, one of the sources said. Most of Shein’s products are made in China and Europe accounts for a third of the company’s revenue, according to Euromonitor.
“If its valuation is $40 billion, I think that’s still a bit expensive. But if it’s closer to $30 billion, maybe it looks more attractive,” said Eddie Tam, chief investment officer at Hong Kong’s Central Asset Investments, adding that the European fees will have a big impact.
“The problem is that the company is already on a downward trajectory. E-commerce competition is extremely intense, both in China and overseas,” Tam said.
Shein – whose final pre-IPO hearing before the Hong Kong stock exchange listing committee was due to be held on Thursday – has already begun testing the waters with investors ahead of a public filing expected by the end of the month. It targets a listing in September.
Shein did not immediately respond to a Reuters request for comment on Thursday.
FEES HIT DEMAND IN EUROPE
Having previously entered the European Union duty-free, e-commerce parcels worth less than €150 ($171.96) are now subject to €3 fees, applied per customs code – meaning a parcel of five different items could be charged €15 in duties.
“If you’re used to buying €3 T-shirts on Shein, those are now double the price which is quite significant, even if they’re still cheaper than local alternatives,” said Juozas Kaziukenas, an e-commerce industry analyst.
“It’s killing the conversion rates they previously had, and thus they reduced marketing spend,” said Kaziukenas.
Shein has been preparing for the change by expanding warehouse space in Wroclaw, Poland, and shipping top-selling products to the EU in bulk. But, like rival Temu, it has slashed advertising spending in Europe in reaction to the fees, according to an analysis by Smarter Ecommerce based on Google advertiser auction data, as it waits to see how consumers react to higher prices.
That’s a contrast to May last year when both platforms dialled up marketing in Europe, hoping to compensate for weaker growth in the U.S. after the Trump administration ended its own “de minimis” duty-free policy.
While Shein was able to pass higher costs on to consumers in the U.S., that is more difficult in Europe where shoppers are more price-sensitive.
Investor concerns around Shein’s IPO valuation show how much has changed since Temu-owner PDD Holdings made its public debut on the U.S. Nasdaq in 2018.
Pinduoduo, as it was known at the time, raised $1.63 billion in its IPO valuing it at $23.8 billion. The shares soared 40% on their first day of trading, taking the company’s valuation to $33 billion, even though it was loss-making at the time and its revenue was a fraction of Shein’s today.
Since then Chinese e-commerce has become much more political, with companies like Temu and Shein seen as undercutting the retail sector – a significant employer – in the U.S. and Europe, and drawing the ire of politicians and regulators.
($1 = 0.8723 euros)
(Reporting by Helen Reid in London and Summer Zhen and Kane Wu in Hong Kong; Editing by Susan Fenton)
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