Shein's earnings take a dive prior to its planned initial public offering.
Shein, the budget-friendly fashion retailer, had its eyes set on going public in the first half of the year. However, it seems like this plan's been pushed back. The primary reason for this delay? Lesser-than-expected profits from the previous year. The company missed its targets in sales and profitability, falling short by a substantial margin.
According to a newspaper report, Shein's profits took a significant hit in 2024, with the company making a billion dollars less than expected, amounting to a near 40% decrease compared to the preceding year. Despite this setback, Shein managed to increase its revenue by 19% to reach an impressive $38 billion.
The presentation that accompanied this report showed Shein expected much higher profits and revenue in 2024. The company had projected earning $4.8 billion in profit and achieving a turnover of $45 billion. This discrepancy between expectations and reality puts a strain on Shein, which has had to revise its valuation ahead of the planned London IPO, potentially pushing it back until the second half of the year.
Shein's business model is under threat due to customs plans, some of which have been proposed by US President Donald Trump. The Chinese retailer, now based in Singapore, faces competition from Chinese rival Temu.
Recently, Shein has come under scrutiny from the EU Commission. It has requested information from the shopping portal concerning illegal goods and recommendation systems on the platform. The Brussels authority, acting on the EU Digital Services Act, sent this information request to Shein, seeking details about the measures it takes to protect consumers and safeguard personal data.
Online retailers like Shein are popular in Germany due to their low prices, although concerns around the quality of products, lack of controls, and unfair competition conditions persist. Trade representatives, politicians, and consumer advocates voice these criticisms regularly, with the portals rejecting these accusations.
- Due to the lesser-than-expected profits in 2024, shedding around a billion dollars compared to the projected figure, Shein had to revise its valuation before its planned London IPO, which might now occur in the second half of the year.
- Despite the setback in profits, Shein managed to boost its revenue by 19%, reaching an impressive $38 billion, indicating a resilience in the company's growth despite the challenges.
- The pushed-back IPO plans could influence Shein's financial prospects, as a successful IPO often brings in additional profits and resources for the company, which is crucial for its expansion plans and other operations in the future, especially in the face of competitive challenges from Chinese rival Temu and customs plans from the US.
