Shein's Profit Decline Poses Challenges for IPO, Report Reveals

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Fast-fashion giant Shein faces tougher road to IPO amid 40% profit slump and regulatory hurdles / Broomberg

Shein, the fast-fashion retailer that originated in China and is now headquartered in Singapore, saw a dramatic drop in its profits last year, further complicating its plans for an initial public offering (IPO) in London. According to a recent report by the Financial Times, Shein's net income plummeted by nearly 40% in 2024, reaching just $1 billion. This decline comes despite a significant 19% increase in sales, which totaled $38 billion. However, these figures fell short of Shein's earlier expectations, which had projected $4.8 billion in net profit and $45 billion in sales for the year.

In light of these disappointing results, Shein's IPO ambitions face mounting challenges. The company is under increasing pressure to lower its valuation, which has already dropped from $66 billion in 2023 to approximately $30 billion, a substantial decrease from its peak valuation of $100 billion in 2022. These developments have cast doubt on Shein's IPO prospects, which had initially been slated for this year.

While Shein had confidentially filed its IPO papers in June 2024, the company’s financial struggles have prompted experts to suggest that the listing may be delayed until the second half of the year. One major issue for Shein is the looming regulatory changes in key markets like the United States and the United Kingdom. Proposed modifications to tax exemptions in both countries could negatively affect Shein’s profitability, adding further pressure on its financial outlook.

In addition to regulatory concerns, Shein faces growing competition in the fast-fashion market, particularly from rivals like Temu, which has gained significant market share in recent months. The intensifying competition, along with ethical concerns over Shein’s supply chain practices — particularly its sourcing of materials from Xinjiang, China — further complicate the company's road to a successful IPO.

Shein's business model, centered around high-volume, low-cost fashion, has allowed it to become one of the most valuable startups globally. However, the company’s growth trajectory has become more uncertain due to its declining profitability, regulatory challenges, and the competitive landscape. As Shein continues to navigate these obstacles, its plans for an IPO remain uncertain, and the company’s future growth and profitability may depend on overcoming these significant hurdles.

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