After working on its London IPO for over a year, fast fashion giant SHEIN is reportedly abandoning these plans and instead setting its eyes on Hong Kong. The move, which was made after Chinese regulators declined it, also follows a multitude of plans the brand has taken to save this IPO from crumbling–including redundancies and ad spending slashes.
From London to Hong Kong
Despite receiving the green light from the UK's Financial Conduct Authority, SHEIN encountered delays with the China Securities Regulatory Commission, prompting the move to scrap its London IPO.
The company will file a draft prospectus with the Hong Kong Stock Exchange in the coming weeks, targeting a public listing within the year. This decision follows previous attempts to list in New York, which were abandoned amid scrutiny over labour practices and geopolitical tensions.
Analysts note that a Hong Kong listing may offer SHEIN a more favourable regulatory environment, although it could impact its global valuation and investor base.
A Pragmatic Response?
Market analysts have mixed reactions to SHEIN's decision to abandon its London IPO in favour of a Hong Kong listing. Some view the move as a pragmatic response to regulatory hurdles, while others see it as a missed opportunity for London's financial market.
Jamie Constable, market strategist at Singer Capital Markets, downplayed the impact on London, stating, 'The London IPO market is not dependent on an IPO of SHEIN'.
Conversely, AJ Bell's investment director Russ Mould highlighted SHEIN's challenges, noting that 'the current market environment could render it moot and makes the targeted timetable of the first half of this year a big ask'.
Continued Decline of Valuation
SHEIN's valuation has declined sharply, dropping from a peak of $100 billion (£74.21 billion) in 2022 to an estimated $45 billion (£33.39 billion) in 2024. This downturn reflects a 40% drop in net profit to $1 billion (£740 million) in 2024, despite a 19% increase in revenue to $38 billion (£28.20 billion).
Contributing factors include the end of US duty-free import exemptions and new EU import fees, which have eroded SHEIN's cost advantages. Additionally, the company faces mounting competition from rivals like Temu and increased scrutiny over labour practices.
These challenges have led investors to pressure SHEIN to consider further valuation cuts, potentially as low as $30 billion (£22.26 billion).
SHEIN's 2024 Results Were a Warning Sign
SHEIN reported mixed financial results for 2024, highlighting both growth and challenges. The company's revenue increased by 19% year-over-year, reaching $38 billion (£28.20 billion). However, net profit declined nearly 40%, falling short of earlier projections of $4.8 billion (£3.56 billion) in profit on $45 billion (£33.39 billion) in sales.
This profit decline is attributed to rising operational costs, intensified competition from rivals like Temu, and regulatory changes such as the US ending duty-free import exemptions and the EU imposing new import fees.
Fast Fashion's Continued Competition
The fast fashion industry is experiencing intense competition, with players like SHEIN, Temu, and Zara battling for global dominance. SHEIN, known for its ultra-low prices and rapid production cycles, has seen its growth challenged by Temu, a rising e-commerce platform backed by PDD Holdings.
Temu's aggressive pricing and marketing strategies have cut into SHEIN's market share, especially in the US and Europe. Meanwhile, established brands like Zara and H&M are adapting by enhancing their digital presence and accelerating supply chains.
This competitive pressure has contributed to SHEIN's declining profit margins and valuation, forcing it to reassess its strategies. Analysts note that brand loyalty, ethical sourcing, and logistical efficiency are becoming key differentiators.
As the sector evolves, only those brands able to scale responsibly and innovate quickly are expected to thrive–and SHEIN hopes to solve its issues by regaining investor trust with their Hong Kong IPO.
Originally published on IBTimes UK
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