Shein Shares Tumble Over 6% as Quarterly Profit Plunges 67%
Shein's shares fell more than 6% after quarterly profit dropped 67%, with margins squeezed to 2.1% amid higher jet fuel and freight costs.
Shares of fast-fashion retailer Shein fell more than 6% on Tuesday after the company reported a 67% decline in quarterly profit, deepening investor worries about margin pressure and slowing growth.
Adjusted net profit for the second quarter came in at $228 million, while the company's margin narrowed sharply to 2.1% from 6.2% a year earlier. The squeeze was driven by higher jet fuel and freight costs as conflict in the Middle East raised the expense of flying cheap clothing to customers worldwide.
Analysts at Jefferies estimated that earnings fell more than 10% below the lowest end of the range indicated in Shein's prospectus, underscoring the scale of the miss.
The stock has been under pressure since its September 1 debut in Hong Kong. From the offer price of HK$48.56 ($6.19) through Monday's close, the shares had lost 27.3%. On Tuesday, they were trading around HK$33.40.
Chief Executive and Chair Yangtian Xu said on Monday that a key priority is to increase inventory levels in Europe. The company also plans to move into higher-priced clothing, a shift intended to improve profitability.