Chinese fast fashion giant Shein made a bold move by debuting on the Hong Kong stock market on September 1, despite a significant slowdown in its growth. The Wall Street Journal reported that while the company's valuation has dropped considerably from its peak, there are still opportunities for a rebound.
One of Shein's key strengths is its vast supply chain centered in China, which has helped it generate over $40 billion in annual revenue, comparable to major global brands like Nike.
Analysts suggest that Chinese supply chain companies are eager to collaborate with Shein. According to Singapore-based market research firm Momentum Works Intelligence, "Many suppliers and manufacturers in China prefer working with Shein over Temu due to timely payments and better treatment of suppliers." Temu, operated by Chinese e-commerce company Pinduoduo, competes with Shein in major markets like the U.S.
With a substantial cash reserve of $15 billion, Shein is continuously pursuing new growth strategies. A notable example is its acquisition of the once-popular U.S. clothing brand Everlane earlier this year, indicating potential for further mergers and acquisitions in the global fashion industry.
Sales in regions outside the U.S. and Europe, which face tariff barriers, still showed growth, increasing by 15% last year, compared to an overall revenue increase of 8% for the same period.
Founded in China, Shein is now headquartered in Singapore and produces most of its clothing in China. Its low prices and rapid product turnover have made it popular among consumers in the U.S. and Europe.
However, competition has intensified with the rise of Chinese online retailers like Temu and JD.com, and Shein has faced significant growth challenges due to trade barriers in the U.S. and Europe. The annual revenue growth rate, which reached 41% in 2023, has halved to 21% in the following year, and further slowed to 8% in 2025, with just a 1.1% increase in the first quarter of this year.
Even if Shein manages to increase sales, there are concerns about declining profitability. The high proportion of online sales necessitates significant advertising spending to attract new customers, and the recent expansion into lower-margin product categories has added pressure on profitability. Currently, Shein's marketing expenses account for about 16% of its revenue, up from 11% three years ago.
Last year, Shein's operating profit margin was only 4.1%, roughly half that of Swedish fashion retailer H&M and about one-fifth of the margin for Inditex, the parent company of Zara.
The Wall Street Journal noted, "Shein has yet to clearly demonstrate a concrete growth strategy," adding that the company's plans for 'customer acquisition' and 'product expansion' are somewhat abstract, making it difficult for the market to accurately assess its future value.
On its first day of trading in Hong Kong, Shein's stock opened below the offering price of HK$48.56. According to the Hong Kong Stock Exchange, Shein's shares fell more than 7% during morning trading, reflecting market concerns about the company's ability to secure new growth drivers amid intensifying competition.
Meanwhile, Shein aims to raise approximately HK$13.6 billion by issuing 280 million shares through this IPO. This valuation places the company at around $27 billion, a significant drop from its peak valuation of $100 billion when it rapidly captured the global fast fashion market in 2022.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.