Shein posted a $99M quarterly loss and warns tariffs are squeezing sales in the US and EU, just as it heads toward a lower-valued Hong Kong IPO.
Shein has confirmed what analysts have been warning for months: the end of duty-free imports into the US is actually hurting the bottom line. In pre-IPO financial filings released Sunday, the online fast-fashion giant disclosed a $99 million loss for the first quarter of 2026 — a sharp reversal from the $395 million profit it posted in the same quarter a year earlier.
The filing arrives just as Shein prepares for investor roadshows and official bookbuilding ahead of its long-awaited Hong Kong IPO, giving the market its clearest look yet at how tariff changes in two of its biggest markets are reshaping the business.
What’s Driving the Loss
Two things pushed Shein into the red this quarter.
The first is straightforward: slowing sales. Since May 2025, the US has closed the “de minimis” loophole that previously let packages worth under $800 enter the country duty-free. Chinese-origin goods sold by Shein or through its marketplace and shipped to the US are now taxed at rates between 10% and 87.5%. The company says this has had an “adverse impact” on US sales and pushed up expenses, as it works through options including raising prices to offset some of the added cost.
The numbers show it. Shein’s US revenue fell 14.3% to $2.04 billion in Q1, down from $2.38 billion a year earlier. The US now makes up 22.5% of quarterly revenue, down from 29.4% of full-year revenue in 2023 — a meaningful shift in the company’s market mix.
The second driver is a one-time accounting charge: a $328 million fair-value hit on convertible redeemable preferred shares, a class of investor stock that converts into ordinary shares later and whose accounting value shifts as a company’s valuation moves ahead of a listing. That charge, not operating performance, accounts for a large chunk of the quarterly loss.
Operating margin tells a quieter but consistent story — it slipped to 2.9% in Q1, down from 3.9% a year earlier.
Europe Could Be Next
The US isn’t the only market tightening the screws. Earlier this month, the European Union — one of Shein’s largest markets, accounting for roughly a third of 2025 revenue — introduced a €3 fee on low-value e-commerce imports, explicitly aimed at curbing what the EU calls unfair competition from Chinese sellers.
Shein isn’t downplaying the risk. In its prospectus, the company warned that “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” — a notably direct admission that the pressure it’s feeling in America could repeat itself, or get worse, in Europe.
The Full-Year Picture
Zooming out from the quarter, 2025 wasn’t a bad year for Shein on revenue — sales grew 8% to $41.85 billion. But that’s a sharp deceleration from 20.7% growth in 2024, and it wasn’t enough to protect profitability. Net income for the full year fell 38.7% to $2.06 billion.
Growing top line, shrinking bottom line, in a business built on $5 dresses and $10 jeans sold across roughly 160 countries — that’s the tension investors will be pricing into the IPO.
A Much Smaller IPO Than Once Imagined
Shein’s draft prospectus didn’t disclose the size of the Hong Kong offering, the price range, or a listing timetable. But Reuters reported this month that the company is targeting a valuation of $40 billion to $50 billion — roughly half the $100 billion figure media reports pegged it at during a 2022 funding round.
The Hong Kong listing itself is the product of a longer, harder road: Shein secured approval from the China Securities Regulatory Commission on July 10, after earlier attempts to list in New York and London didn’t go through. Goldman Sachs, Morgan Stanley, and JPMorgan are serving as joint sponsors.
Pre-IPO backers named in the filing include IDG, Sequoia Capital, HongShan, Tiger Global, Boyu, Brookfield, and General Atlantic. Founder Sky Yangtian Xu, who started the company in Nanjing in 2012, is listed as chairman and CEO. Notably, Donald Tang — who had served as executive chairman — does not appear among the company’s listed directors or senior management.
Regulatory Pressure Beyond Tariffs
Tariffs aren’t the only headwind. Shein has drawn scrutiny over supplier factory working conditions, claims about addictive app design, and the environmental footprint of shipping large volumes by air freight. The company says it maintains a zero-tolerance policy on labour abuses and has invested in risk assessment and mitigation frameworks.
The filing also underscores how concentrated Shein’s supply chain remains: more than 90% of 2025 net revenue came from products stored in central warehouses in China before international shipping — a structure that keeps the company closely tied to the trade dynamics now working against it.
What the IPO Money Is For
Shein said proceeds from the offering would go toward improving technology, building brand awareness, expanding its global footprint, supporting corporate responsibility initiatives, and general corporate purposes — fairly standard language, but notable given how much of the current narrative is about defending existing markets rather than expanding into new ones.
For now, the filing leaves investors with a clear-eyed view of the trade-off: a company still growing revenue at scale, but one whose margins are now directly exposed to trade policy in its two largest markets, heading into a listing priced at roughly half of what it was once worth.