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The share price of Shein, the Chinese fast-fashion giant, plunged more than 11% in Hong Kong on Tuesday after the company released disappointing financial results.
The company is under scrutiny over its environmental footprint and allegations of human rights abuses. It also faces growing competition from low-cost e-commerce companies such as Temu and AliExpress.
The firm said on Monday that revenue grew just 1% year-on-year in the first six months of the year, while its operating profit, earnings from its core business before interest and taxes, halved.
By around lunch on Tuesday, Shein's share price had pared some of the losses but was still down 10.9% at HK$31.44.
Monday's results were Shein's first since its high-profile initial public offering (IPO), the process of selling shares to the public for the first time, this month. The listing valued the company at around $26.3 billion, well short of nearly $100 billion during private fundraising rounds in 2022.
Since its first day of trading on the Hong Kong Stock Exchange in September, Shein's share price has fallen more than 35%. Net revenue from Europe fell 13.9% to nearly $3.8 billion for the second quarter, Shein reported.
The decrease "reflects a decline in sales volume as we raised prices and lowered online advertising spending" in anticipation of the removal of the customs duty exemption, the company said. The exemption is a rule that lets low-value parcels enter a market without paying import duties.
Another key market, the United States, saw revenue drop 6% in April-June, reflecting the impact of tariffs, or taxes on imported goods.
The accelerating decline in Shein's operating profit "clouds the extent of a 2027 recovery from freight relief and an unproven push into higher-priced brands," said Catherine Lim, an analyst at Business Intelligence.
"Management plans to absorb freight and tariff costs rather than raise prices to protect the company's competitive position," she said, adding that localizing stock in Europe will lead to higher logistics costs in the short term.
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