Fast fashion retailer Shein slides as Europe sales and profit suffer

Shein (SHEIN) shares fell more than 10% Tuesday in Hong Kong after the fast-fashion retailer reported a 67% Y/Y drop in Q2 adjusted net profit, raising concerns over margins and slowing growth.

Adjusted net profit fell to $228M, while the profit margin narrowed to 2.1% from 6.2% a year earlier. Higher jet fuel and freight costs weighed on profitability, with fulfillment costs rising 18.1%.

Revenue rose just 0.9% Y/Y to $11.08B. Europe sales fell 13.9% to $3.77B, while U.S. revenue declined 6% to $2.5B.

The European decline came after the company raised prices and reduced online advertising ahead of new EU fees on low-value e-commerce parcels that took effect July 1. Shein expects the impact of the fees to become more visible in Q3.

The company also plans to increase inventory in Europe and expand into higher-priced apparel and a broader portfolio of brands to improve profitability, CEO and Chairman Yangtian Xu said.

The shares closed at HK$35.28 Monday, about 27% below the HK$48.56 IPO price after debuting at the same level on September 1.