Shein posts $99M Q1 loss, warns on tariff hits as HK IPO valuation target slashed

By Yantoultra Ngui, Selena Li and Liz Lee SINGAPORE/BEIJING (Reuters) — Shein swung to a $99 million quarterly loss due to slowing sales after the U.S. 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, revealed that Shein posted a loss in the first quarter of 2026, compared with a net income of $395 million a year earlier.

The European Union, a key market for Shein, also this month imposed a €3 fee on low-value e-commerce imports, aiming 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 $5 dresses and $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 U.S. closed the "de minimis" duty loophole.

Shein was seeking a valuation of $40 to $50 billion in its IPO, Reuters reported this month, citing a source with knowledge of the matter. That is a far cry from the $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 U.S., 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 $800 to enter the U.S. without duties. Shein said Chinese-origin products sold by it or through its marketplace and shipped to the U.S. 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 U.S. market to offset a portion of the increased costs," Shein said.

Shein's U.S. revenue fell 14.3% to $2.04 billion in the first quarter from $2.38 billion a year earlier. The U.S. 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 U.S. after the removal of the U.S. de minimis exemption," Shein warned in the prospectus.

For the entire business, the company's 2025 net income fell 38.7% to $2.06 billion from the preceding year, while revenues grew 8% to $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 U.S. and China.

It has faced criticism from rivals, regulators and advocacy groups over issues including working conditions in supplier factories, allegedly addictive shopping features, and other concerns.