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Tag: yangtian xu

  • Shein Net Profit Drops 67 Percent to 228 Million Dollars as Air Freight Squeezes Margins

    Shein Net Profit Drops 67 Percent to 228 Million Dollars as Air Freight Squeezes Margins

    Shein reported a 66.6 per cent slump in second-quarter adjusted net profit to $228 million, hit by surging air cargo rates and falling revenue in Western markets.

    Net profit margins narrowed to 2.1 per cent from 6.2 per cent a year earlier, even as the platform fulfilled 298 million orders between April and June.

    Group revenue inched up 0.9 per cent year-on-year to $11.08 billion during the period. Active customers climbed to 291 million over the 12 months to June, up from 254 million, but shoppers spent less per order while overhead surged.

    Higher shipping costs hit the bottom line

    Fulfillment costs surged 18.1 per cent during the three-month period. Shein relies on direct air shipments from contract factories in southern China to consumers worldwide, leaving operating margins exposed to sudden swings in aviation fuel and commercial cargo pricing caused by Middle East route disruptions.

    Growth in Latin America compensated for contractions in primary markets, preventing top-line sales from shrinking outright. Total order volume increased by 21 million transactions compared with the second quarter of last year.

    Tariffs and parcel fees bite in the West

    Revenue from Europe fell 13.9 per cent to $3.77 billion as Shein pulled back on digital marketing spend and lifted retail prices ahead of regional regulatory changes. The European Union introduced a flat 3-euro customs fee on low-value e-commerce packages on July 1.

    United States revenue declined 6 per cent to $2.5 billion. Price adjustments followed the removal of de minimis duty exemptions by US authorities, which had previously allowed parcels valued under $800 to enter the country free of import tariffs.

    Warehouses and premium labels

    Cross-border operators in Asia now face the end of the frictionless air-freight model that built ultra-fast fashion. Temu and AliExpress face identical regulatory scrutiny in Brussels and Washington, but Shein carries heavier direct inventory risk as it attempts to reposition itself toward higher-priced apparel categories.

    Shifting higher up the price ladder creates direct competition with established European apparel chains such as Inditex and H&M without guaranteeing the same local store network or brand equity. Shein must absorb heavy fixed property costs across Europe while defending its low-cost apparel base against newer discount apps.

    Hong Kong stock slides

    The company listed in Hong Kong on September 1 at an offer price of HK$48.56 per share. Trading has dropped 27.3 per cent since the debut, reflecting investor concern over margin erosion and sluggish Western revenue.

    To reduce dependence on individual air parcels, the group is expanding land-based logistics hubs inside the European Union. Shein opened a 740,000-square-metre distribution facility in Wroclaw, Poland, in December and leased an additional 66,000 square metres of warehouse space from industrial developer CTP earlier this year.

    Investors now await third-quarter earnings figures in November, which will show the full impact of the European Union’s 3-euro parcel surcharge during the peak autumn trading period.

  • Shein Second Quarter Profit Plunges 67 per Cent to US$228 Million

    Shein Second Quarter Profit Plunges 67 per Cent to US$228 Million

    Shein posted an adjusted net profit of US$228 million for the second quarter, down 67 per cent from a year earlier. Freight costs surged while sales across Europe fell.

    Net margin shrank to 2.1 per cent from 6.2 per cent a year ago. Flying low-cost parcels directly from Asian factories to consumers worldwide became far more expensive. Total revenue edged up 0.9 per cent to US$11.08 billion for the three months to June 30. Gains in Latin America counterbalanced declining receipts in Western markets.

    European sales dropped 13.9 per cent to US$3.77 billion during the quarter. The retailer raised prices and trimmed marketing budgets across the region ahead of July 1, when the European Union introduced a 3-euro customs charge on low-value parcels. United States revenue declined 6 per cent to US$2.5 billion. That drop continued a slide that began after American authorities ended duty-free treatment under de minimis rules last year.

    Air Freight and Customs Squeeze Margins

    Conflict in the Middle East disrupted aviation routes and pushed up jet fuel prices. That drove an 18.1 per cent increase in quarterly fulfillment costs. Shein’s direct-to-consumer model depends entirely on affordable air cargo capacity out of southern China. When air freight rates spike, the margin on five-dollar apparel vanishes.

    Shares in Hong Kong have fallen 27.3 per cent below their HK$48.56 offer price since the company went public on September 1. Institutional investors had already priced in regulatory scrutiny. Even so, the rapid deterioration in core operating earnings caught market analysts off guard.

    European Warehouses and On-the-Ground Logistics

    Shein is shifting inventory onto European soil to insulate operations from cross-border customs fees and volatile air cargo rates. The group opened a 740,000-square-metre logistics hub in Wroclaw, Poland, in December. It secured an additional 66,000 square metres of Polish warehouse space through developer CTP earlier this year.

    Holding stock locally cuts delivery transit times and skirts per-parcel import tariffs. Yet it also creates lease liabilities and inventory holding risks the platform once avoided. For suppliers in Guangdong province, bulk sea shipments to European distribution centres require longer production planning cycles. That slows down the ultra-fast test-and-reorder batches that built the brand.

    Pivot to Higher Price Points and Brand Acquisitions

    Executive leadership plans to adjust the product catalogue toward higher price tiers to rebuild profitability. Moving beyond ultra-cheap garments requires winning market share from established mid-market apparel groups. It also means managing higher marketing and acquisition costs.

    “As the product mix shifts towards brands at higher price points, the platform’s overall average selling price will rise accordingly,” Shein chief executive and chair Yangtian Xu said in a statement.

    Potential fast-fashion acquisition targets are under review as the company seeks to build a portfolio of distinct labels across different price tiers. Buying regional brands gives the group immediate recognition in overseas territories. It avoids relying purely on paid online advertising to acquire customers.

    Next Steps on Customs and Third Quarter Results

    Second-quarter figures reflect business conditions before the European Union’s 3-euro parcel levy took effect in July. Shein cautioned that the full financial hit could exceed the disruption caused by the end of American de minimis exemptions.

    Investors will watch third-quarter trading updates to see whether European warehouse operations can restore gross margins before the peak year-end holiday shopping rush.