Shein’s first earnings report as a publicly traded company showed a return to quarterly profit, but the stronger signal for investors came from its largest markets: sales fell sharply in Europe and declined again in the United States while costs continued to squeeze profitability. Second-quarter revenue reached $11.08 billion, up just 0.9% from a year earlier, as growth in Latin America offset weaker business in Europe and the U.S.
The Singapore-based retailer’s shares closed Monday at HK$35.28, up 0.5% before the results were released. That leaves the stock 27.3% below its HK$48.56 initial-public-offering price less than a month after its Hong Kong debut, extending the valuation reset that took Shein from a private-market valuation near $100 billion in 2022 to roughly $26 billion at the time of its listing.
The earnings report offers some evidence that demand remains substantial. Shein processed 298 million orders during the second quarter, up 7.6% from a year earlier, while revenue increased more than 20% sequentially from the first quarter. Yet the combination of rising order volume and barely higher year-over-year revenue underscores the pressure on monetization as Shein absorbs higher trade, freight and fulfillment costs while trying to preserve the low prices that helped build its global customer base.
Europe Weakens Before the Full Tariff Impact
Europe generated $3.77 billion of second-quarter revenue, down 13.9% from a year earlier and equal to roughly one-third of Shein’s total quarterly sales. U.S. revenue fell 6% to $2.5 billion, meaning more than half of Shein’s quarterly revenue came from two major regions where sales were declining.
The European decline is particularly important because the second quarter ended before the European Union’s new customs regime took effect. Shein had already raised prices and reduced online advertising ahead of the change, contributing to weaker volumes during the quarter, but the actual €3 customs duty on low-value imported items did not begin until July 1. The EU also eliminated the previous customs-duty exemption for imported e-commerce goods valued at €150 or less.
That timing makes the third quarter a more consequential test than the period Shein just reported. Second-quarter European results largely captured customers’ response to Shein preparing for higher import costs; the September-quarter numbers will begin to show demand after those costs became part of the economics of every qualifying shipment.
The change strikes directly at a model built around rapidly producing merchandise in China and shipping inexpensive individual orders directly to shoppers. The United States had already removed a similar low-value import advantage, forcing Shein to adjust pricing there, and Europe is now creating another cost hurdle in a market that accounts for roughly one-third of company revenue.
Margins Show the Cost of Protecting Growth
Shein’s profit picture was substantially weaker than its top-line growth might suggest. The company’s second-quarter net profit margin fell to 2.1% from 6.2% a year earlier, a contraction of more than four percentage points, while fulfillment expenses increased 18.1% as higher oil prices and freight costs related to conflict in the Middle East raised logistics expenses.
The deterioration is also visible across the first half. Shein reported that first-half net revenue increased about 1% to $20.1 billion, but operating income declined 52.9% and adjusted earnings before interest and taxes fell 50.4%. That divergence — essentially flat revenue alongside roughly halved operating earnings — is more important to the investment case than the quarter-to-quarter swing back from Shein’s first-quarter reported loss, which had itself been affected by a $328 million fair-value charge tied to convertible preferred shares.
Management is responding by trying to move Shein beyond the ultra-low-price positioning that made it one of the world’s largest online fashion platforms. Chairman and Chief Executive Sky Xu said the company intends to increase its exposure to higher-priced apparel and broaden its portfolio of brands, potentially including acquisitions. Shein has already expanded its third-party marketplace and acquired U.S. apparel brand Everlane earlier this year.
Higher average selling prices could support margins, but the strategy presents a different challenge: Shein must determine how far it can raise prices without weakening the value proposition that drove its growth. The second-quarter European decline provides an early indication of that tension, because sales weakened after the company increased prices and cut advertising even before the new customs duty formally took effect.
The next meaningful evidence will come from Shein’s third-quarter results. Investors will be able to see for the first time how European order volumes, revenue and margins perform through a full quarter under the EU’s €3-per-item customs duty, and whether growth elsewhere can continue compensating for weaker sales in Europe and the United States. For a company whose shares have already lost more than a quarter of their value since listing, stabilizing revenue alone may not be enough; the larger test is whether Shein can absorb a permanently higher cost structure without sacrificing either customer demand or already-compressed margins.