As speculation regarding its U.S. IPO gains traction, Chinese fast-fashion e-commerce giant Shein has unveiled impressive financial results for the first half of this year.
Shein's Executive Vice Chairman, Tang Wei, announced in an investor letter released on Wednesday that the company achieved a record-breaking net profit in the first half of this year, a sharp contrast to its breakeven performance in the first half of the previous year.
Tang mentioned that compared to the second half of last year, Shein has seen accelerated sales growth and improved profitability this year. He highlighted the company's sustained growth in the U.S., which has cemented its leading position in the market.
Shein Marketplace: A Platform Strategy
In the letter, Tang also discussed Shein's platform strategy, specifically the launch of Shein Marketplace in Brazil and the United States in April and May respectively. The platform features local and international third-party sellers, as well as suppliers of Shein-branded clothing. Sellers have real-time access to Shein's data, allowing them to leverage the company's on-demand production and demand measurement capabilities.
He informed investors that since the start of the year, Shein's Gross Merchandise Volume (GMV) in Brazil has nearly doubled, approaching $100 million, accounting for over a third of the local total GMV. The platform currently has 6,000 active sellers in Brazil.
Additionally, Shein is continuing to expand its platform's sales categories from fashion and clothing to other areas, including appliances and other home goods.
Speculations on Shein's IPO
The discussion of Shein's positive financial performance coincides with repeated reports of the company's plans to go public in the U.S.
Last month, some media outlets reported that Shein had confidentially submitted an IPO registration document to the U.S. Securities and Exchange Commission (SEC), hinting at a potential IPO before year-end. If the IPO proceeds smoothly, Shein could be the highest-valued Chinese company to go public in the U.S. since 2021. However, a spokesperson for Shein later labeled the reports as "rumors."
More recently, media outlets have reported that Shein is in discussions with at least three investment banks, including Goldman Sachs, Morgan Stanley, and J.P. Morgan, about a potential U.S. IPO. The company has reportedly also consulted with two stock exchanges - the New York Stock Exchange and Nasdaq - about the matter.
However, Shein hasn't yet finalized a timeline for its IPO, and it could decide not to go public in the near future. There's also no decision yet on which exchange to list on, as both NYSE and Nasdaq are vying for Shein's business.
An article by Wall Street News at the end of last month suggested that Shein, valued at $66 billion during a $2 billion fundraising round in May, could be one of the largest global IPOs this year if it successfully goes public. This valuation, however, represents a sharp decrease of more than a third compared to last year.
Shein's Success and Future Challenges
Shein's success lies in its ultra-low-price strategy and on-demand production model, coupled with successful marketing strategies riding the wave of short videos. The significant decrease in its valuation this year casts uncertainty on its IPO plans, and it faces competition from Temu, a rapidly rising subsidiary of Pinduoduo.
21st Century Business Herald quoted analysis suggesting that following the COVID-19 pandemic, Shein's growth has slowed and urgently needs to seek changes and find new growth points. Going public would significantly enhance its fundraising capabilities and benefit Shein's transformation and development. However, the company has long been under U.S. scrutiny and now faces stricter environmental regulations on imported products from the U.S. and the European Union. The specific progress remains to be seen.
