to US$20.1 billion in the six months to June 30. Operating profit, meanwhile, more than halved to US$493 million, with adjusted net profit falling at a similar rate. Shares of Shein Global Holdings Ltd. fell by as much as 14 per cent on 29 September following the report, marking the company’s largest drop since its Hong Kong debut. The fall brought its loss in market value since listing to about US$10 billion, against an initial valuation of roughly US$26 billion. Shein remains cautiously optimistic about a fourth-quarter turnaround, supported by Singles Day (November 11), Black Friday, Cyber Monday and Christmas sales. Retail experts, though, remain doubtful about its prospects for a comeback. Shein’s first earnings report Deanna Andersen, co-founder of advisory firm Wade, attributed Shein’s operational woes to its struggle to maintain its affordability advantage amid global changes. “In my view, the rules changed faster than Shein’s model could,” she said. “Shein built its edge on cheap air freight and duty-free small parcels. Its margin fell to 2.1 per cent from 6.2 per cent, mostly because of higher freight costs, and that may ease, but the customs changes will not. Especially considering the US ended its exemption last year and the EU started charging in July.” Andersen also pointed out that Shein had raised prices and cut advertising in Europe, with revenue in the region falling by nearly 14 per cent before the fees even started. Shein is shifting toward carrying more local stock and higher-priced brands, becoming more of an inventory and brand business. Andersen noted, however, that it would struggle to compete with affordable retailers such as Amazon or Zara. “Amazon cut its European seller fees on low-priced clothing last December, so it has been positioning for this moment,” said Andersen. “The competitor to watch may not be another fashion brand. It may be the marketplace customers already trust. From an operator’s seat, growth only counts if it survives a change in freight or duties, and Shein is about to find out… I would not count on a second-half rebound.” Barney Stacher, CEO of consultancy Retail OCD, agreed that shifting shipping costs had hurt Shein’s profitability and would make it difficult for the company to recover. “Shein says it absorbed higher freight and oil costs to protect its prices and order momentum. That may work for a while, but it leaves very little room for error when shipping costs rise or import rules change…again. Its speed and small-batch production remain strengths. However, its reliance on moving inexpensive goods across borders is now a more visible weakness which is unsustainable.” Shein still knows how to attract shoppers, but its main challenge is the rising cost of getting a low-priced garment into customers’ hands. There is a path to a stronger second half, especially during the holiday season, but it will not be straightforward. Shein will have to rebuild margins carefully and give consumers other reasons to shop, including a higher-priced, more elite range of products. “A holiday sales bump alone does not answer that question,” said Stacher. Shein faces a turning point as its shine fades Shein can no longer rely on its ability to ship low-cost items quickly. “Shein is still a force to be reckoned with, but the results show that it is no longer on the front foot,” said Neil Saunders, managing director at Globaldata. “A combination of factors – including increased regulation, higher costs, and a choosier consumer – has all come together to disrupt the growth story. The fast-fashion model remains relevant, but Shein knows it must create a more balanced portfolio serving middle and even higher price points if it wants to rebalance its growth.” The company has been attempting this shift for some time, but results will take time to emerge. Questions remain over whether Shein can fully move into these higher price brackets. Frankie Margotta, strategy director at consulting firm Triptk, agreed that Shein was at a crucial strategic turning point. Margotta told Inside Retail, “The concern for Shein is valid, but this really strikes me more as a moment of evolution in the face of economic and regulatory headwinds.” He explained that Shein once disrupted fashion with a model built around quick turnarounds and small production runs. This allowed it to capitalize on trends and bring new looks and aesthetics to consumers much faster than traditional competitors. Tariffs, changes to customs rules and rising fulfillment costs have now made that model considerably more expensive, leaving Shein with an important decision to make. “Shein will have to look at how emerging technologies, services and new ways of operating can at least offset, if not decrease, the rising cost of doing business,” said Margotta. “However, it’s especially critical for Shein because where other brands may have the permission to raise prices and transfer some of those costs to consumers, Shein built its entire business and, by extension, its brand around being a low-cost, extreme-value player.” Many brands stand for a more democratized, accessible world of fashion, but Shein is more closely associated with deals and hyper-low pricing. That makes price a particularly sensitive lever: any meaningful increase risks contradicting what the brand was built on and what customers around the world expect from it. “From a brand perspective, the deeper challenge is that Shein’s operational advantage never translated into a broader brand idea to give the company permission to exist beyond the value its model created,” remarked Margotta. “Speed, endless choice and extremely low prices became the brand. That’s a good reminder that brand isn’t only a multiplier for value and trust. It’s also a source of mobility, especially in moments like this, when operational agility is critical to the future of the business.” Further reading: Inside Shein’s first report card: 298 million orders, a two-thirds profit slump