Shein swung to a US$99 million quarterly loss due to slowing sales after the US removed an import duty exemption on small packages and a hefty one-time accounting charge, the online retailer’s pre-IPO financial filings showed on Sunday.
The filing, which lays the groundwork for investor roadshows and official bookbuilding of its much-awaited Hong Kong IPO, showed that Shein posted a loss in the first quarter of 2026 compared with a net income of US$395 million a year earlier.
The EU, a key market for Shein, also this month imposed a €3 fee on low-value e-commerce imports, to curb what the EU calls unfair competition from China.
The Singapore-headquartered company, which was founded in China, did not disclose the size of the Hong Kong share sale, the offer price, the listing timetable, or expected proceeds from the offering in the draft prospectus.
Shein won approval from the China Securities Regulatory Commission (CSRC) for its Hong Kong listing on July 10, clearing the way for a listing after failed attempts in New York and London.
Under pressure
The financial details give investors a sharper look at the pressure facing Shein as it seeks new funds amid higher costs, slower growth, and growing regulatory scrutiny in key markets.
The first-quarter loss partly reflected an accounting change under which it took a $328 million fair-value charge on convertible redeemable preferred shares. These are investor shares that can later convert into ordinary shares, and their accounting value can change before a listing.
The accounting loss comes as Shein, which sells US$5 dresses and US$10 jeans in around 160 countries, saw a sharp drop in its valuation in recent years as a pandemic-driven online shopping boom faded and the US closed the “de minimis” duty loophole.
Shein was seeking a valuation of US$40 to US$50 billion in its IPO, Reuters reported this month, citing a source with knowledge of the matter. That’s a far cry from the US$100 billion value that media reported it was given in a funding round in 2022.
‘De minimis’ removal
Since May 2025, the removal of the de minimis exemption has had an “adverse impact” on sales in the US, Shein’s biggest market, and on overall growth, and has contributed to an increase in expenses, the company said in the filing.
The de minimis rule had allowed packages worth less than US$800 to enter the US without duties. Shein said Chinese-origin products sold by it or through its marketplace and shipped to the US are now subject to tax rates ranging from 10% to 87.5%.
“In response to the increased duties and taxes, we are pursuing a wide range of options, including increasing our prices in the US market to offset a portion of the increased costs,” it said.
Shein’s US revenue fell 14.3% to US$2.04 billion in the first quarter from US$2.38 billion a year earlier. The US accounted for 22.5% of quarterly revenue, down from 29.4% of annual revenue in 2023.
Europe accounted for about one-third of Shein’s revenues in 2025 and could also be affected this year by the EU duty.
“Although it remains too early to fully assess, it is possible that trends in the EU could be generally in line with or exceed the impact observed in the US after the removal of the US de minimis exemption,” Shein warned in the prospectus.
For the entire business, the company’s 2025 net income fell 38.7% to US$2.06 billion from the preceding year, while revenues grew 8% to US$41.85 billion, slowing from 20.7% growth in 2024, the filing showed.
Its operating margin dropped to 2.9% in the first quarter from 3.9% in the year-ago period.
Regulatory challenges
Founded in Nanjing, Shein has found itself at the centre of growing trade tensions between the US and China.
It has faced criticism from rivals, regulators and advocacy groups over issues including working conditions in supplier factories, allegedly addictive features of its shopping app, and the environmental impact of shipping large volumes by air.
Shein has said it has a zero-tolerance policy on labour abuses, and has invested in risk assessments and mitigation frameworks to safeguard users.
In the prospectus, Shein said the majority of products manufactured by its supply chain partners are stored in central warehouses in China before shipping. In 2025, products stored in Chinese central warehouses accounted for more than 90% of net revenue.
The company said its IPO proceeds would be used to improve technology, raise brand awareness, expand its global presence, promote corporate responsibility and for general corporate purposes.
Shein’s pre-IPO investors included IDG, Sequoia Capital, HongShan, Tiger Global, Boyu, Brookfield and General Atlantic, among others, the draft prospectus showed.
The filing listed founder Sky Yangtian Xu, who founded the company in 2012, as chairman and chief executive. Donald Tang, who had served as executive chairman, was not listed among Shein’s directors or senior management.
Goldman Sachs, Morgan Stanley and JPMorgan are joint sponsors of the listing, the filing showed.
