Shein targeting up to £20bn valuation in September stock market float

Susannah Streeter, chief investment strategist at Wealth Club, believes the pressure is already showing on Shein with the fast fashion firm set to be valued at up to 27 billion US dollars (£19.8 billion) when it makes its stock market bow in Hong Kong.

She said: “Shein is strutting towards its Hong Kong stock market debut, but after a stumble in its latest results, investors will be asking whether the fast-fashion giant can still command the fast-fashion catwalk.

“Shein is targeting a valuation of almost $27billion when it lists on September 1, but it’s a far cry from the $100bn valuation it enjoyed back in 2022.

“The IPO follows failed attempts to list in the US and London, amid regulatory scrutiny, and comes as the ultra-cheap fashion model faces a tougher runway. The pressure is already showing.

“Shein swung to a $99million loss in the first quarter, compared with a $395m profit a year earlier, as sales slowed and costs rose.

“Although the loss was also heavily affected by a $328m fair-value accounting charge on convertible preferred shares, the underlying picture is looking less flattering, with sales growth slowing and the US, its biggest market, taking a particular hit.

“The removal of the US de minimis tariff exemption, which allowed low-value parcels to enter the country without import duties, has hit Shein and rival Temu particularly hard.

“The change threatens one of the core advantages of their fast fashion model which is focused on sending huge volumes of cheap individual parcels directly to shoppers.

“And the US isn’t alone in tightening the rules. The EU is also introducing new charges on low-value parcels, while the UK is further down the road but still planning to tighten its small-parcel customs regime, including removing the current £135 customs duty relief.

“That could gradually narrow the price gap between Shein and high-street rivals such as Primark and H&M, taking some of the sparkle out of its ultra-cheap offering.

“At the same time, fast fashion is far less popular than it was a decade ago, with the rise of resale websites proving tough competition, given that shoppers can get their hands on higher-end brands, at a fraction of the price, to refresh wardrobes.

“Shein may still be one of the biggest names on the fast-fashion catwalk, but the IPO is going to be a harder sell, with plenty of investors questioning whether its low-cost formula still has the star power to deliver the growth they’re looking for.”