Shein's first public numbers before its Hong Kong IPO show the problem clearly: the retailer is still huge, but the tariff break that helped make its prices work is being taken away in the US and Europe at the same time.
The numbers are stark. Shein lost $99 million in the first quarter of 2026, compared with $395 million in net income a year earlier, Reuters reported from the company's draft Hong Kong prospectus published on July 26. Revenue rose only 1.1% to $9.05 billion. That is not collapse. It is pressure.
The cause is not hard to find. Since May 2025, the US removal of the de minimis exemption has hurt Shein's American sales and overall growth, the company said in its filing, according to Reuters. The rule had allowed packages worth less than $800 to enter the US without import duties. China-origin products sold by Shein or through its marketplace and shipped to US customers are now subject to import tariff rates ranging from 10% to 87.5%.
There was also a $328 million fair-value loss on convertible redeemable preferred shares. That is an accounting charge tied to investor shares before a listing, not a warehouse fire or a sudden collapse in customer demand. But don't let the accounting detail soften the story too much. Shein's model was built around low-cost, direct-to-consumer cross-border shipping, and the tax treatment around that model is now changing fast.
Europe is the next tariff test
Europe is the part you should watch now. From July 1, 2026, the European Commission says the EU applies a temporary €3 customs duty per item on low-value consignments up to €150 imported from outside the bloc. The duty is calculated by tariff classification, not by the number of identical units. Five T-shirts mean €3. A T-shirt and a watch mean €6. That detail matters when you are talking about the small, mixed baskets that made Shein feel cheap to consumers.
Reuters reported earlier in July that Europe accounts for about a third of Shein's revenue, citing Euromonitor. This is not a small regional nuisance. It hits one of the company's core markets at the exact moment it is trying to persuade public investors that the US tariff shock is manageable.
The timing is rough. Shein recorded $41.8 billion in revenue in 2025, up from $38.7 billion in 2024 and $32.1 billion in 2023, Reuters reported from the filing. Net income fell to $2.064 billion in 2025 from $3.365 billion a year earlier. Growth is still there. The margin story is weaker.
That gap matters because investors are not buying Shein as a normal retailer with normal retail economics. They are being asked to buy a company that scaled on speed, supplier density and tiny parcels moving across borders with unusually favorable duty treatment. Take that away and you do not get the same business at the same valuation. You get a harder one.
The valuation has already been cut
Shein won approval from the China Securities Regulatory Commission on July 10 to issue up to 341.6 million overseas-listed ordinary shares and list in Hong Kong, according to the CSRC notice. Reuters also reported that the company is targeting a Hong Kong IPO valuation of $40 billion to $50 billion, well below the $100 billion valuation attached to a 2022 funding round.
That is a brutal reset for late-stage investors. It isn't the sort of repricing that gets fixed with a sharper roadshow deck. Anyone who came in near the top is looking at a very different exit from the one they expected, and the public market will now get to ask the question private investors delayed: what is Shein worth when the regulatory conditions that helped create its price advantage are no longer stable?
The company is not alone in trying to adjust. Temu shifted US sales toward locally based sellers and domestic fulfillment after the US tariff change, according to a statement reported by TechCrunch in May 2025. Amazon Haul, which Amazon launched in November 2024 to compete with Shein and Temu on low-priced goods, also sits inside the same tariff conversation because much of the appeal came from cheap products shipped from China.
Frankly, none of these companies has found a clean answer. Local warehousing protects delivery and customs exposure, but it adds inventory risk and cost. Marketplace models push some pain onto sellers, but they don't magically recreate the old duty-free advantage. The easy days are over.
The IPO still makes sense for Shein. After failed attempts to list in New York and London stalled amid regulatory scrutiny, Hong Kong is the most realistic venue available, and CSRC approval gives the deal political backing in China. A $40 billion listing would still make Shein one of the most valuable retail names to come to market in years.
But it won't be a victory lap. It will be a test of how much public investors are willing to pay for a retailer whose growth is real, whose scale is real, and whose cost model has just lost one of its most useful supports. The question is not whether Shein survives. It almost certainly does. The question is what kind of retailer it becomes when every cheap parcel has to carry more of its true cost.
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