Direct-from-China e-commerce firm sees profits plummet 70 percent in first half of 2024 amidst stiff competition from Temu, as it plans IPO

Profits at direct-from-China fashion e-commerce firm Shein plummeted 70 percent in the first half of 2024, largely due to increasing competition from competitors such as PDD Holdings’ Temu, The Information reported, citing two unnamed sources.

Revenue growth for the Singapore-based company fell to 23 percent during the period, down from 40 percent for the full year of 2023, while profits fell below $400 million (£308m) on revenues of $18bn, the report said.

The figures are a sharp contrast to last year, when Shein doubled its profits to a record of more than $2bn, the Financial Times reported in March.

The shift in the company’s fortunes, if accurate, comes on top of increased regulatory scrutiny in several major markets and complicates Shein’s bid for a highly anticipated initial public offering (IPO) that it is preparing in London.

IPO plans

The privately held firm, which was founded in China and has extensive operations with manufacturers there, does not publicly disclose financial data.

Shein had initially intended to go public in New York, but abandoned the plan amidst pressure from US lawmakers.

The company has held recent meetings with shareholders where company executives projected Shein’s sales growth would eventually stabilise at between 20 and 30 percent, with net profit margin in the high single digits, The Information report said.

Shein’s business model of selling $5 tops and $20 jeans direct from factories in China has proven popular in markets around the world, but rival Temu has had increasing success in markets including the US.

A funding round last year valued Shein at $66bn. Reports said the firm has held informal investor meetings this month for its planned London IPO.

A filing earlier in October showed Shein’s UK business generated £1.55bn in revenue last year.

Frustration

Some existing shareholders have become frustrated with the mounting obstacles to Shein’s IPO and have asked the firm to consider repurchasing their shares, the South China Morning Post reported in June.

Shein’s backers include Singapore-based Jafco Asia, IDG Capital, Greenwoods Asset Management, Abu Dhabi’s sovereign wealth fund Mubadala Investment Company, HongShan (formerly the Chinese arm of Sequoia Capital), Tiger Global Management and General Atlantic, according to CrunchBase.

A London flotation would raise less than in the US, but its corporate structure is facing scrutiny in the UK as well.

The company’s local entity, Shein Distribution UK, breached the law by failing to list a human as its “person with significant control (PSC)” in its filing to Companies House, The Guardian reported in March.

Shein later changed its filing to say it believes “there is no registrable person or registrable relevant legal entity in relation to the company”.