Shein returns to profit in second quarter but Europe sales drop amid price hikes

Shein returned to profit in the ⁠second quarter and made $11.08 billion in sales. However, the fast-fashion platform saw its Europe sales drop amid price hikes and warned about an uncertain second half as it unveiled its ⁠first results ‌as a public ⁠company on Monday.

An increase in total orders fulfilled supported a more than 20% sequential ​jump ​in Shein’s second-quarter net revenue, although the Iran conflict continued to impact its Middle East operations. The Singapore-headquartered ‌online ​retailer posted a net income of $2.40 billion for the ‌quarter ended June ⁠30, compared with a net loss ‌of $99 million in the previous quarter.

Shein said its Europe sales decreased by 13.9% to $3.77 billion in the second quarter, reflecting weaker ​volumes due to higher prices and lower online advertising spending in anticipation of the European Union ​imposing ‌fees ​on low-value e-commerce parcels from July 1.

The ‌company’s ‌shares had closed 0.5% higher at HK$35.28 before the results on Monday. Since its September 1 ⁠debut in Hong Kong, Shein’s shares have dropped 27.3% from the offer ‌price of HK$48.56 apiece as investors expect the fees to dent its ⁠business in the European market, which accounts for around a third of revenue.
 
Shein’s US revenue fell by 6% to $2.5 billion in the second quarter. Overall sales were up 0.9% from a year ago as growth in Latin America offset declines in Shein’s biggest markets. Shein’s net profit margin shrank to 2.1% in the second quarter from 6.2% a year ago, mostly due to the Middle East conflict pushing up oil prices and freight costs, driving ​Shein’s fulfilment expenses up ​by 18.1%.
 
Shein CEO and Chair Sky Xu said the retailer is planning to push into higher-priced clothes that will boost its ​profitability and hinted at the company’s strategy of expanding its family of brands, including through acquisitions. “As the product ​mix shifts towards brands at higher price points, the platform’s overall average selling price will rise accordingly,” Xu said ‌in ⁠a statement. “Our vision is to become a richly diversified brand collection that meets consumers’ varied needs across multiple price points and occasions.”
 
Known for selling $5 dresses and $10 jeans and running permanent discounts, Shein was already forced to raise prices in the US last year when ​the Trump administration ended de minimis – duty-free access for low-value ecommerce parcels – and ​this year ⁠faces the same challenge in Europe. Since July 1, the EU has imposed fees on low-value parcels ordered online – 3 euros per customs code, adding up to 15 euros if a shopper buys five different types of ⁠item ​in one order. Shein’s third-quarter results will show more of the ​impact, which Shein has previously said could exceed that of the US removing de minimis last year.

FashionNetwork.com with Reuters