Shein reported a $99 million net loss for the first quarter of 2026 after US tariff changes weakened American sales and raised the cost of its direct-delivery model. The result reverses a $395 million profit a year earlier and comes as the fast-fashion retailer prepares for a Hong Kong stock market listing.
The headline loss does not tell the whole story. A $328 million non-cash accounting charge pushed Shein into the red, but slower revenue growth, shrinking margins and falling US sales show that the company also faces underlying commercial pressure.
Why did Shein lose $99 million?
First-quarter revenue increased only 1.1% to about $9 billion. Operating profit fell 26% to $258 million as marketing, shipping and order-fulfilment costs rose, while the operating margin narrowed from 3.9% to 2.9%.
The $328 million charge involved convertible redeemable preference shares held by investors. Their estimated value can change before they convert into ordinary shares during a listing. It was a paper loss rather than an equivalent cash payment, and Shein remained profitable at the operating level.
How Trump’s tariff policy affected Shein
Shein’s US business benefited from the de minimis exemption, which allowed imported packages worth $800 or less to enter without normal customs duties. This suited its model of sending individual orders directly from Chinese suppliers to American customers.
The Trump administration removed the exemption for packages from China and Hong Kong before extending the change globally in August 2025. The White House said the system was being used to evade tariffs and move illegal synthetic opioids into the country.
Shein said the removal hurt US sales and overall revenue growth. American revenue fell 14% to approximately $2 billion during the quarter, reducing the country’s contribution to total sales from 26.6% to 22.5%.
Are Shein prices going up?
Shein has not announced a universal price increase or identified affected products. It said it is considering higher US prices to recover part of the additional duties and taxes.
Absorbing those costs would put more pressure on Shein’s narrow margins, while passing them to shoppers could weaken demand for its inexpensive products. Any changes may differ by product category, origin and shipping arrangement.
The company also said the conflict involving Iran reduced demand, increased costs and delayed deliveries in some markets. Fuel and transport disruption is particularly significant for a retailer moving large numbers of small parcels internationally.
Europe creates another cost challenge
Europe overtook the United States as Shein’s largest individual market in 2024. European revenue reached $14.8 billion in 2025, or 35.4% of total sales, compared with $10.1 billion from the US.
The European Union has introduced a €3 charge on low-value e-commerce parcels arriving from outside the bloc. Britain is also planning to remove customs-duty relief for parcels below £135, although its change is not expected until late 2028.
With the US and Europe producing around 60% of its revenue, simultaneous trade barriers in both regions could weaken Shein’s price advantage.
Is Shein still growing?
Annual revenue rose from $32.1 billion in 2023 to $41.9 billion in 2025. However, net income fell about 39% to $2.1 billion last year as fulfilment and marketing costs increased.
Shein had 281 million active customers in the year to March 2026, up more than 16%, and processed over one billion orders. Product sales produced $37.1 billion in 2025, while service revenue linked partly to marketplace sellers increased to approximately $4.7 billion.
Clothing’s share of revenue declined from 68.8% in 2023 to 63.8% in 2025 as beauty, household and other products expanded. The growth of Asian digital marketplaces is also bringing greater scrutiny, illustrated by the issues behind China’s $770 million Trip.com penalty.
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What happens with Shein’s Hong Kong IPO?
The draft prospectus did not disclose the IPO’s price, fundraising target or listing date. On July 10, the China Securities Regulatory Commission approved an issue of up to 341.6 million overseas-listed shares. The approval is valid for 12 months but does not guarantee the listing.
Shein could seek a valuation of $40 billion to $50 billion, substantially below its reported $98.2 billion valuation in 2022. The reduction reflects weaker growth, tariff exposure and concerns about its supply chain, labour practices, environmental impact, alleged design copying and corporate transparency.
Previous attempts to list in New York and London did not proceed. Investor appetite for major Chinese offerings remains visible following the CXMT IPO and its sharp market debut, although Shein faces different consumer and reputational risks.
Who is Shein founder Sky Xu?
The prospectus identifies 42-year-old Sky Xu as Shein’s founder, chairman and chief executive. Xu rarely gives interviews despite remaining closely involved in the company’s operations.
Xu established the business with Maggie Gu, Molly Miao and Tony Ren after they worked in search-engine marketing for exporters. Founded in China as Sheinside in 2012, it became Shein in 2015 and moved its headquarters to Singapore in 2022. Much of its supplier network remains around Guangzhou.
Shoppers should treat price increases as possible rather than confirmed. Investors will be watching whether international growth can offset weaker US demand without further reducing Shein’s margins.
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