Shein Profit Dropped Last Year, Further Challenging IPO, FT Says

Shein, the fast-fashion e-commerce giant, reported a significant drop in profits last year, raising questions about its upcoming initial public offering (IPO) and its ability to maintain growth in the face of intense competition. According to a report by the Financial Times (FT), Shein's profits fell by 70% in the first half of 2024 compared to the same period last year, with revenue growth slowing to 23% from 40% in 2023.

The FT attributed the profit decline to Shein's expansion into the platform model, which has led to increased competition and lower profit margins. Shein's revenue for the first half of 2024 was around $180 billion, with a growth rate of 23%, compared to the 40% growth rate in the previous year. Additionally, Shein's profit for the same period was around $4 billion, which is a 70% decrease from the previous year.

Shein's expansion into the platform model has allowed it to tap into new revenue streams, but it has also increased competition in the market. The FT reported that Shein's platform model has attracted more than 20,000 third-party sellers, contributing to a significant increase in the number of products available on its platform. However, this has also led to increased competition among sellers, driving down profit margins.

The intense competition in the fast-fashion e-commerce market, particularly from rivals like Temu, has also put pressure on Shein's profitability and growth prospects. According to a report by Bespoke Intel, 60% of consumers believe Temu offers better prices than Shein, and 70% of consumers think Temu's product quality is better. Additionally, Temu's aggressive marketing strategies, such as offering cashback and discounts, have attracted a significant number of Shein's customers.

Shein's IPO plans have been a topic of speculation for some time, with reports suggesting that the company was considering a listing in London or Hong Kong. However, the recent profit decline and increased competition may make an IPO more challenging. The FT reported that Shein's valuation has fallen from a peak of $64 billion in 2023 to around $45 billion in 2024, reflecting investors' concerns about the company's growth prospects and profitability.

In conclusion, Shein's profit decline in 2024 and the intense competition in the fast-fashion e-commerce market have raised questions about the company's ability to maintain growth and profitability. While Shein's expansion into the platform model has opened up new revenue streams, it has also increased competition and driven down profit margins. The company's upcoming IPO may face challenges due to these factors, and investors will be watching closely to see how Shein addresses these issues in the coming months.