Shein Flags Tariff Hits and Reports Loss Ahead of Hong Kong IPO

Shein swung to a $99 million quarterly loss in the first quarter of 2026, according to pre-IPO financial filings released on Sunday.

Regulatory Pressures and U.S. Revenue Decline

The online retailer posted a net income of $395 million during the same period a year earlier. According to the draft prospectus, the downturn was partly driven by an accounting change that incurred a $328 million fair-value charge on convertible redeemable preferred shares, which can later convert into ordinary shares before a listing.

The U.S. government previously allowed packages worth less than $800 to enter the country duty-free under the “de minimis” rule. Following the closure of that loophole, Shein reported that Chinese-origin products shipped to the U.S. face tax rates ranging from 10% to 87.5%.

Shein’s U.S. revenue dropped 14.3% to $2.04 billion in the first quarter, down from $2.38 billion a year earlier. The U.S. market accounted for 22.5% of the company’s quarterly revenue, compared with 29.4% of its annual revenue in 2023, the filing showed.

Global Tariffs and European Market Expansion

Beyond the U.S., regulatory scrutiny is tightening in Europe. The European Union imposed a 3 euro fee this month on low-value e-commerce imports to curb what the bloc defines as unfair competition from China. Europe accounted for roughly one-third of Shein’s revenues in 2025.

Shein warned in the prospectus that trends in the European Union could mirror or exceed the impacts observed in the U.S. market following the removal of the de minimis exemption.

Despite these headwinds, Shein’s overall 2025 net income reached $2.06 billion—a 38.7% decrease from the previous year—while total revenues grew 8% to $41.85 billion, slowing down from a 20.7% growth rate in 2024. The company’s operating margin fell to 2.9% in the first quarter of 2026, down from 3.9% in the prior-year period.

Hong Kong IPO Outlook and Valuation Realities

Shein won approval from the China Securities Regulatory Commission (CSRC) for its Hong Kong listing on July 10, clearing a path forward after previous listing attempts in New York and London stalled. The Singapore-headquartered company did not disclose the size of the share sale, offer price, timetable, or expected proceeds in the draft prospectus.

Reuters reported this month, citing a source with knowledge of the matter, that Shein is seeking a valuation between $40 billion and $50 billion for the IPO. That figure stands significantly below the $100 billion valuation reported by media during a 2022 funding round.

The filing listed founder Sky Yangtian Xu, who established the company in 2012, as chairman and chief executive. Donald Tang, who previously served as executive chairman, was not included among directors or senior management. Goldman Sachs, Morgan Stanley, and JPMorgan Chase are joint sponsors of the listing.

Frequently Asked Questions

Why did Shein post a quarterly loss?

Shein recorded a $99 million loss due to slowing U.S. sales after the removal of the small-package import duty exemption and a $328 million one-time accounting charge on convertible redeemable preferred shares.

How is Shein responding to higher U.S. import duties?

The company stated in its prospectus that it is exploring multiple options, including raising prices in the U.S. market to offset a portion of the increased costs.

When did Shein receive approval for its Hong Kong listing?

The China Securities Regulatory Commission approved Shein’s Hong Kong listing on July 10.

Who are the joint sponsors for Shein’s upcoming IPO?

Goldman Sachs, Morgan Stanley, and JPMorgan Chase are joint sponsors of the offering.