- Shein reported a £74 million ($99 million) quarterly loss after US tariff changes hit sales.
- The retailer says it may raise prices to offset higher import costs in key markets.
- Fresh EU import charges could add further pressure to Shein's low-cost business model.
Shein's low-cost fashion business is facing one of its biggest tests yet after new trade rules in the US hit sales and raised questions over whether the retailer can continue offering ultra-cheap products in its biggest markets.
In a regulatory filing ahead of its planned Hong Kong stock market listing, the fast-fashion company reported a net loss of $99 million (£74 million) for the three months to the end of March, compared with a $395 million (£296 million) profit a year earlier. Revenue rose just 1.1 per cent to $9.05 billion (£6.78 billion), signalling a sharp slowdown in growth.
Shein attributed much of the pressure to changes in US trade policy, after President Donald Trump ended the de minimis exemption, a rule that had allowed low-value parcels worth up to $800 to enter the US without import duties.
The end of a tax advantage
For years, the exemption helped companies such as Shein ship products directly from China to US consumers while avoiding tariffs.
That changed after the US expanded the removal of the exemption, forcing companies importing low-value goods to pay duties that had previously been avoided.
"The removal of the US de minimis exemption has had an adverse impact on our sales in the US and the overall growth of our net revenues," Shein reportedly said in its filing.
The company added that it is considering several measures to offset the higher costs, including increasing prices in the US.
The filing also revealed that disruption linked to the conflict involving Iran affected consumer demand, increased operating costs and delayed deliveries in some markets during the quarter.
Part of the reported quarterly loss also reflected a $328 million (£246 million) accounting adjustment linked to special investor shares rather than day-to-day trading.
Europe could become the next challenge
The pressure on Shein is no longer limited to the US.
Earlier in July, the European Union introduced a €3 (£2.56) charge on low-value e-commerce imports, a move designed to tackle what it describes as unfair competition from overseas online retailers.
Shein warned the new EU measures could have an even greater financial impact than the US changes because Europe accounted for around one-third of the company's sales last year.
The retailer reportedly said it expects some short-term pressure on sales as it considers raising prices in Europe, although it believes it is too early to judge the long-term impact.
The latest figures come as Shein prepares for a Hong Kong initial public offering, after receiving approval from China's securities regulator on July 10, following unsuccessful attempts to list in New York and London.
Despite the challenging quarter, the company continued to expand its customer base. Shein reported 281 million active customers at the end of March, up more than 16 per cent from a year earlier, with shoppers placing more than one billion orders over the previous 12 months.
