Shein flags tariff hits after posting quarterly loss ahead of Hong Kong IPO

SINGAPORE/BEIJING, July 26 (Reuters) – Shein swung to a $99 million quarterly loss due to slowing sales after the U.S. removed an import ​duty exemption on small packages and a hefty one-time accounting charge, the online retailer’s pre-IPO financial filings showed on Sunday.

The filing, which lays the groundwork for investor roadshows and ‌official bookbuilding of its much-awaited Hong Kong IPO, showed that Shein posted a loss in the first quarter of 2026 compared with a net income of $395 million a year earlier.

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The Singapore-headquartered company, which was founded in China, did not disclose the size of the Hong Kong share sale, the offer price, the listing timetable, or expected ​proceeds from the offering in the draft prospectus.

Shein won approval from the China Securities Regulatory Commission (CSRC) for its Hong Kong listing on July 10, clearing the way for a listing after failed ​attempts in New York and London.

UNDER PRESSURE

The financial details give investors a sharper look at the pressure facing Shein as it seeks new funds amid higher ⁠costs, slower growth, and growing regulatory scrutiny in key markets.

The first-quarter loss partly reflected an accounting change under which it took a $328 million fair-value charge on convertible redeemable preferred shares. These are investor shares that ​can later convert into ordinary shares, and their accounting value can change before a listing.

The accounting loss comes as Shein, which sells $5 dresses and $10 jeans in around 160 countries, saw a sharp drop in its valuation ​in recent years as a pandemic-driven online shopping boom faded and the U.S. closed the “de minimis” duty loophole.

‘DE MINIMIS’ REMOVAL

Since May 2025, the removal of the de minimis exemption has had an “adverse impact” on sales in the U.S., Shein’s biggest ​market, and on overall growth, and has contributed to an increase in expenses, the company said in the filing.

The de minimis rule had allowed packages worth less than $800 to enter the U.S. without duties. Shein ​said Chinese-origin products sold by it or through its marketplace and shipped to the U.S. are now subject to tax rates ranging from 10% to 87.5%.

“In response to the increased duties and taxes, we are pursuing a wide range ‌of options, ⁠including increasing our prices in the U.S. market to offset a portion of the increased costs,” it said.

Shein’s U.S. revenue fell 14.3% to $2.04 billion in the first quarter from $2.38 billion a year earlier. The U.S. accounted for 22.5% of quarterly revenue, down from 29.4% of annual revenue in 2023.

Europe accounted for about one-third of Shein’s revenues in 2025 and could also be affected this year by the EU duty.

“Although it remains too early to fully assess, it is possible that trends in the EU could be generally in line with or exceed the impact observed in the U.S. after the removal of the U.S. de minimis exemption,” Shein ​warned in the prospectus.

For the entire business, the company’s ​2025 net income fell 38.7% to $2.06 billion from ⁠the preceding year, while revenues grew 8% to $41.85 billion, slowing from 20.7% growth in 2024, the filing showed.

Its operating margin dropped to 2.9% in the first quarter from 3.9% in the year-ago period.

REGULATORY CHALLENGES

Founded in Nanjing, Shein has found itself at the centre of growing trade tensions between the U.S. and China.

It has ​faced criticism from rivals, regulators and advocacy groups over issues including working conditions in supplier factories, allegedly addictive features of its shopping app, and the ​environmental impact of shipping large ⁠volumes by air.

Shein has said it has a zero-tolerance policy on labour abuses, and has invested in risk assessments and mitigation frameworks to safeguard users.

In the prospectus, Shein said the majority of products manufactured by its supply chain partners are stored in central warehouses in China before shipping. In 2025, products stored in Chinese central warehouses accounted for more than 90% of net revenue.

The company said its IPO proceeds would be used to improve technology, raise ⁠brand awareness, ​expand its global presence, promote corporate responsibility and for general corporate purposes.

Shein’s pre-IPO investors included IDG, Sequoia Capital, HongShan, Tiger Global, ​Boyu, Brookfield and General Atlantic, among others, the draft prospectus showed.

The filing listed founder Sky Yangtian Xu, who founded the company in 2012, as chairman and chief executive. Donald Tang, who had served as executive chairman, was not listed among Shein’s directors or senior ​management.

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Yantoultra Ngui is the Southeast Asia Deals Correspondent of Reuters in Singapore, covering M&A and capital market activities in a region that is fast emerging as one of the world’s biggest economies. He previously was a reporter at Bloomberg and The Wall Street Journal (WSJ). Notably, he was part of WSJ’s team that covered the financial scandal at Malaysian state fund 1MDB, and that won SOPA Excellence in Breaking News award for the coverage of the assassination of Kim Jong Nam, the half-brother of North Korea’s leader Kim Jong Un, in Malaysia in 2018. Yantoultra graduated with an MBA in Finance from Universiti Putra Malaysia (UPM) in 2010.

Liz Lee covers an extensive range of China-related stories from Beijing, including diplomacy, policy, economic data and extreme weather events. She has reported on breaking news and enterprise stories from when she joined Reuters in Malaysia. She previously focused on corporate deals and news in Kuala Lumpur, from IPOs to labour issues. Liz is a fellow at the International Strategic Forum and is part of the Oxford Climate Journalism Network. Her work also contributed to a story picked as a Pulitzer finalist looking into scam centres in Southeast Asia.