Shein shares drop 11% in Hong Kong as quarterly operating profit falls 66%

First earnings report after market debut

Shares of Shein dropped between 10% and 12% in Hong Kong trading on 29 September 2026 following the release of its first financial report since going public. The retailer made its stock market debut on 1 September 2026 after raising $1.7 billion, achieving an initial valuation of $26.3 billion. That figure stood below the nearly $100 billion valuation reached during private funding rounds in 2022. Tuesday's decline brought the stock's cumulative losses to roughly 35% from its debut, with shares closing down 10.7% at HK$31.20 to HK$31.50 after falling as much as 14% intraday. For the second quarter ending 30 June 2026, Shein posted an operating profit of $235 million, representing a 66% decrease compared to the same period in 2025. While reported net profit rose to $2.398 billion from $845 million a year earlier, the company noted that the increase resulted primarily from accounting adjustments in the fair value of convertible redeemable preferred shares tied to the initial public offering.

Tariff changes and European regulatory pressure

The earnings release showed that regulatory changes in key Western markets have begun to weigh on the company's low-cost business model. In the first half of 2026, total revenue reached $20.1 billion, representing a 1% year-on-year increase, while overall first-half operating profit fell by approximately 50.4%. Shein attributed the operating contraction to higher logistics expenses and price increases enacted before the closure of customs exemptions. In the European Union, where monthly active users fell by 28 million to 128 million in June 2026, the European Commission is preparing to introduce a handling fee on low-value imports starting 1 November 2026. Chief executive Sky Xu addressed the market conditions in the financial filing.

“We anticipate that the external environment will remain uncertain in the second half of 2026, and tariff headwinds and logistic cost volatility are likely to persist.”

Regional sales breakdown and shifting competition

Second-quarter financial data demonstrated varying performances across the retailer's core geographic markets. Revenue generated in Europe fell 13.9% during the second quarter to $3.770 billion, while sales in the United States dropped 6% to $2.474 billion as customs duties increased. Markets across the rest of the world generated $4.838 billion, representing the company's largest regional revenue stream for the quarter. Total product revenue across all regions dropped 3% to $9.676 billion, whereas services revenue grew 44% to $1.406 billion. In the United States, traditional and off-price apparel retailers including Old Navy, Ulta Beauty, Nordstrom Rack, and Savers Value Village attracted consumer spending during the period, according to data from Consumer Edge. In Europe, online platforms like Zalando and UK operators such as Asos, Primark, and Debenhams Group are competing for market share ahead of planned tariff adjustments.

Rest of world4,838

Europe3,770

United States2,474

Rest of world

4838 $ million

Europe

3770 $ million

United States

2474 $ million

Data from the article text

Logistics expansion and forward outlook

To counter rising shipping costs and mitigate the effect of cross-border customs regulations, Shein is adjusting its operational footprint. The company has begun establishing regional distribution hubs, including a facility opened in Birmingham, to reduce delivery times for domestic consumers. In the United Kingdom, where shoppers spend £4.7 billion annually on ultra-low-cost platforms like Shein and Temu (accounting for 5% of non-food online retail per Retail Economics), the government plans to end the de minimis import duty exemption in late 2028. Shein stated that it anticipates an increase in order volumes during the fourth quarter of 2026 driven by seasonal events such as Black Friday and Christmas shopping.