Shein earnings: second quarter adjusted profit falls 67% in first report since its IPO

Shein's first earnings report since its Hong Kong listing showed a business that is still growing on paper and shrinking where it counts. Second quarter adjusted net profit fell 66.6 percent to $228 million on revenue of $11.08 billion, up 0.9 percent, according to the results Shein released on September 28, 2026. Shares fell 10.9 percent in Hong Kong the next day.

The numbers, in order

For the six months to June 30, Shein reported net revenue of $20.134 billion, up 1 percent. Adjusted net profit fell 55.6 percent to $499 million. The second quarter was worse: adjusted net profit was 2.1 percent of revenue, against 6.2 percent a year earlier, per Retail News Asia's reading of the results. Operating profit more than halved to $493 million, the same outlet reports.

One figure points the other way. Reported net profit rose 111.7 percent to $2.299 billion, which Shein attributes to equity incentive costs and investment losses that its adjusted measure strips out, as summarized by GuruFocus from the company announcement. Reported and adjusted profit moving in opposite directions is the reason to read the adjusted line with care: it is the company's own measure.

Shein also reported $15.2 billion in cash and 291 million active customers.

Where sales fell

Europe took the hardest hit. Second quarter revenue there fell 13.9 percent to about $3.77 billion, Retail News Asia reports. Shein's own explanation, quoted by Hong Kong Free Press: "a decline in sales volume as we raised prices and lowered online advertising spending," ahead of the European Union's customs changes. The EU introduced a 3 euro charge on low value parcels on July 1.

In the United States, revenue fell 6 percent to about $2.5 billion in the April to June quarter after the end of the duty exemption on low value packages. Fulfillment costs rose 18.1 percent, the largest single cost line the reports cite.

Why the model is under pressure

Shein ships many small parcels by air from contract factories in southern China straight to customers. That is cheap while air cargo is cheap and parcels enter duty free. In 2026 neither holds. Shein said rising oil prices and shipping costs hit margins, and that it chose to absorb them rather than raise prices for shoppers.

Deanna Andersen, co-founder of the advisory firm Wade, told Inside Retail: "The rules changed faster than Shein's model could." Her point, per the same report, is that cheap air freight and duty free parcels were the advantage, and the customs changes in the US and the EU look permanent. Our reading is that the shock is structural, not seasonal.

Shein's answer is to hold local inventory and to add higher priced brands. Retail News Asia reports a 740,000 square meter distribution center in Poland. That puts Shein in direct competition with retailers such as Inditex and H&M, which have brand equity and store networks Shein lacks. Inside Retail quotes experts doubting it can beat Amazon and Zara in those segments.

The rule changes behind the margin

Two customs changes sit under the numbers. Inside Retail's expert says the United States ended its duty exemption on low value parcels last year, and the European Union began charging 3 euros on such parcels on July 1. Shein told investors it raised prices and cut online advertising in Europe ahead of that date, which is the likeliest reason European revenue fell nearly 14 percent before the charge took effect. In other words, the quarter captures the cost of preparing for the new rule, and the third quarter will be the first to show how shoppers respond once the charge is live.

Retail News Asia adds that Shein's margin is unusually exposed to aviation fuel and commercial cargo prices because it ships direct from contract factories to customers. A retailer that stocks goods in local warehouses, like the ones Inditex and H&M run, is cushioned from that swing. That is the gap Shein is now trying to close with local inventory.

The valuation backdrop

Hong Kong Free Press reports the September IPO valued Shein at about $26.3 billion, against nearly $100 billion in 2022 private rounds. The shares traded at HK$31.44 at midday on September 29, down 10.9 percent. Analyst Catherine Lim told the outlet that the decline in operating profit "clouds the extent of a 2027 recovery."

What this does and does not show

It shows that the loss of the duty exemption and a more expensive air freight market took a measurable bite out of the most aggressive low price model in fashion. It does not show that Shein is in trouble as a business: it has $15.2 billion in cash, 291 million active customers and still grew revenue.

It also does not show that the pivot to higher priced brands will work. Shein's management says it will lift the platform's average selling price, but no results yet test that claim. For shoppers who think of the label in the terms we laid out in what is fast fashion, the practical read is that prices and delivery times at Shein are now being shaped by customs rules as much as by factory costs.

Our take

Watch the third quarter. Three numbers will tell us whether the cost shock is passing or lasting: fulfillment cost growth, European revenue and the operating margin. Treat the adjusted profit figure as the company's framing and look at the operating line. We would not read the first report as a verdict on the company, but it is a clear verdict on a freight and duty model that the rules have changed.