Shein Stock Hits Record Low as Q2 Profit Plunges 67% on Rising Costs

Shares of Shein (HK:0625) plunged to a record low in Hong Kong trading after the fast-fashion giant reported that its second-quarter profit fell by nearly 67% due to soaring operational costs. The sharp decline in profitability overshadowed continued growth in customer orders, signaling significant margin pressure for the recently listed company.

Earnings Under Pressure

According to an interim report released Monday, Shein's adjusted net income for the three months ending June 30 was $228 million, a 66.6% decrease from the same period a year earlier. This came even as net revenue edged up by 0.9% to $11.08 billion.

The company attributed the profit slump to a sharp rise in expenses, which it chose to absorb rather than pass on to consumers. Key figures from the report include:

• Fulfilment expenses: Rose 18.1% to $5.59 billion, making up over half of the company's revenue.
• Adjusted net income margin: Narrowed significantly to 2.1% from 6.2% a year prior.
• Primary cost drivers: Shein cited elevated oil prices and freight rates amid geopolitical tensions in the Middle East as the main reasons for the margin compression.

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Market Reaction and Outlook

Investors reacted swiftly to the news, sending Shein's Hong Kong-listed shares down 12.7% to HK$30.8 on Tuesday, their lowest point since the company's debut on September 1. The sell-off occurred despite some positive operational metrics, including a 7.6% increase in total orders and a rise in active customers during the quarter.

Looking ahead, Shein's management stated it expects "tariff headwinds and logistics-cost volatility to persist" through the second half of the year. While the company remains "cautiously optimistic" about its adjusted net income, the results highlight the challenges it faces in maintaining its low-price model amid a volatile global cost environment.