Rising tariffs and import fees weigh on Shein Hong Kong flotation

Shein is seeking to raise up to $1.77 billion in Hong Kong at a valuation of just $27bn, barely a quarter of its 2022 price tag, as tariffs in the US and Europe put its low-cost business model under growing pressure. The fast-fashion group began taking orders on Monday for 280 million shares priced between HK$47.60 and HK$49.50. At the top of the range, the sale would raise HK$13.86bn and value the company almost 70 per cent below the $98.2bn reached four years ago. Shein was subsequently valued at $64bn in 2023 and April 2024. Even earlier this month, it had been seeking between $30bn and $40bn, before investor discussions pushed the figure towards the $25bn range. The decline reflects a sharp change in the economics behind a company that built its global reach by sending inexpensive clothing directly from Chinese suppliers to shoppers in about 160 countries. That model worked particularly well when low-value parcels could cross major markets without customs duties. Those exemptions are now disappearing, adding costs to the $5 dresses and $10 jeans that helped Shein grow into one of the world’s largest online fashion retailers. Cyprus has already provided a clear measure of the change. The EU’s €3 customs duty, introduced on July 1, applies to different product categories inside consignments worth less than €150 arriving directly from outside the bloc. During its first month, Cyprus Customs processed 650,000 chargeable categories inside 160,000 parcels, collecting almost €2m. The amount was equal to about 13 per cent of the department’s initial €15m annual revenue estimate. The figures also show why the European change matters to Shein. The average charge in Cyprus exceeded €12 per parcel, even though low-value goods entering the EU during 2025 had an average declared value of just €8.82. The duty followed the EU’s decision to end the exemption for imports below €150, which had allowed platforms shipping individual orders from outside Europe to compete with retailers importing goods in bulk and paying normal tariffs. Almost 5.9bn low-value items entered the EU during 2025, up 26 per cent from the previous year. They represented nearly 98 per cent of all items handled by EU customs authorities, with China accounting for the overwhelming majority. Shein said its first-half revenue growth would remain broadly in line with the 1.1 per cent recorded during the first quarter, with its operating profit margin expected to weaken slightly. The company blamed the slowdown on European import charges, pressure on prices and lower Middle East demand linked to the Iran war. The damage has been greater in the US, where the removal of the duty-free exemption for Chinese parcels worth less than $800 contributed to a $99m quarterly loss. Chinese-origin goods sold through Shein now face US tariff rates ranging from 10 per cent to 87.5 per cent, according to the company. Shein said the higher duties and taxes led directly to a 14.3 per cent fall in US revenue during the first quarter. Its results were also hit by a $328m accounting charge linked to redeemable convertible preferred shares. “Public investors are no longer paying for hyper-growth,” Winston Ma, an adjunct professor at New York University School of Law, said, adding that Shein was now being valued as a mature cross-border platform facing higher tariffs, compliance costs and regulatory scrutiny. At $27bn, Shein is priced at about 0.7 times forecast sales. That remains above Zalando’s multiple of 0.4, though it is below H&M at about 1.1 and Zara owner Inditex at roughly four times sales. The company’s obligations to previous investors add another strain. Shein has agreed to make payments worth up to $3.5bn to selected shareholders protected against a lower-priced flotation, almost twice the fresh capital it is seeking from the IPO. Boyu Capital, Tiger Global and General Atlantic are nevertheless returning as cornerstone investors, with the wider group subscribing for about $383m of shares. Tencent, Greenwoods, Taikang Life and UBS Asset Management will also participate. Shein plans to spend about 80 per cent of the proceeds on technology, its brand and its international presence. However, new investors will receive shares carrying one-tenth of the voting rights held by the founders, who will retain 90 per cent of the company’s voting control. The final price will be announced on August 31, with trading scheduled to begin on September 1. The deal is set to become Hong Kong’s largest IPO of 2026 after Shein’s earlier attempts to list in New York and London failed to reach the market.