Shein’s quarterly profits have reportedly tumbled 67 per cent due to higher freight costs and weaker sales across Europe and the US.
The retailer posted adjusted net profit of $228m (£169m) for the second quarter, down from a year earlier, while its margin narrowed sharply to 2.1 per cent from 6.2 per cent.
Revenue edged up 0.9 per cent to $11.08bn (£8.2bn), with growth in Latin America helping offset declines across Shein’s two largest markets.
European sales fell 13.9 per cent to $3.77bn after it raised prices and cut advertising ahead of new EU charges on low-value ecommerce parcels, while US revenue dropped six per cent to $2.5bn.
The results mark Shein’s first earnings update since its Hong Kong flotation on 1 September, with its shares having fallen 27.3 per cent from their offer price by the time the figures were published.
Rising jet fuel and freight costs also weighed heavily on profitability, with fulfilment costs jumping 18.1 per cent during the quarter as geopolitical tensions in the Middle East pushed up transport expenses.
Jefferies analysts said earnings came in more than 10 per cent below the bottom of the range implied by Shein’s prospectus and flagged the rise in fulfilment costs as a concern.
Shein is now looking to shift more stock closer to customers and reduce its reliance on air freight. Chief executive and chairman Yangtian Xu said increasing inventory held in Europe was a key priority, with the company investing further in warehouse space in Poland.
It opened a 740,000 sq m logistics hub in Wroclaw last year and has since leased an additional 66,000 sq m of warehouse space in the country.
Shein is also looking to push further into higher-priced fashion to improve margins and diversify beyond the ultra-low-cost products that fuelled its rapid international growth.
Xu said it planned to broaden its mix of brands and price points, including potentially through acquisitions, as it aims to lift its average selling price.
Regulatory changes are increasingly challenging Shein’s cross-border ecommerce model. The EU introduced a €3 charge on low-value parcels from 1 July and is set to introduce a further €2 handling fee from 1 November.
It has previously said the European measures could have a greater impact on its business than the US decision to remove duty-free treatment for low-value imports.
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