Shein’s long-awaited market debut in Hong Kong disappoints as headwinds mount

Shein was the ultimate disruptor in fashion. By turning online trends into $11 jeans or $3 crop tops in a matter of days, the ultrafast fashion retailer overtook established companies such as Zara and H&M, prompting it to eye an initial public offering that would value the company at nearly $100 billion.

But after years of delay amid failed attempts to go public in New York and London, the Chinese-founded company is staring down a starkly different reality as its stock finally started trading publicly in Hong Kong.

On Tuesday, Shein's shares tumbled nearly 10% at the open, reinforcing lackluster demand as the company's struggles have mounted. In the IPO last week, Shein raised $1.7 billion, valuing the company at $26.5 billion – down more than 70% from its peak valuation of $98.2 billion in 2022.

The sharply lower valuation and meagre interest underscore investors' concerns about its business prospects amid increased competition, geopolitical pressure, and questions surrounding its sustainability and labor practices.

Last year, Shein saw its net income plunge 39% from a year ago, despite a growth in revenue, according to its prospectus released in July. But in the first quarter this year, its losses swelled to $99 million.

The slump followed the removal of the de minimis exemption in the US, Shein's second largest market after Europe. The exemption had allowed the company to ship small parcels directly to its customers tariff free, a model that, combined with its Chinese supply chain, contributed to its rapid ascent.

Adding pressure to Shein's sales and already thin margins, the European Union scrapped a similar exemption in July.

The changing market conditions, coupled with slowing growth, have weighed on the company's valuation.

"It has absolutely missed the best timing for an IPO," said Jin Lu, senior vice president of The Asia Group consultancy. "Everyone is watching to see whether there's still room for growth, and how much room there is. And competition, if anything, has intensified," he said.

Founded in China in 2012, Shein leveraged its Chinese production base and aggressive social media campaigns to build up a loyal following, particularly among teenagers and young adults.

"Shein took the fast fashion model, which is frequent release of new products, and just put it on steroids," said Louise Deglise-Favre, lead apparel analyst at market intelligence firm GlobalData.

"The way that they've been really disruptive is because they're so fast – Any small trend that popped up on social media, like TikTok or Instagram, they were able to supply a demand instantly," she said.