Shein Valuation Falls to a Quarter of Peak, Bets on M&A Revival

Chinese fast-fashion company Shein is pushing ahead with an initial public offering on its third attempt, but weakening results are holding it back. As growth in its own brands hit a ceiling, revenue declined and operating margins narrowed, cutting its valuation to a quarter of its peak in four years. The 20 brands it now owns generated combined revenue of just $580 million, a fraction of the $41.8 billion in total revenue for 2025. Against that backdrop, Shein has declared it will become the "Amazon Web Services of the fashion industry" through mergers and acquisitions.

Shein Global Holdings founder and Chief Executive Sky Xu told investors at a briefing ahead of this month's IPO that the company will acquire or partner with other fashion brands and use the quick-turnaround supply chain it has built in China to lift their revenue and margins, Bloomberg reported on the 27th. Just as AWS became embedded across the internet by quietly providing the digital backbone for other companies' websites, the plan is to let established and emerging brands grow by drawing on China-based supply chain infrastructure behind the scenes. Shein's network includes more than 7,500 partners, including contract manufacturers, independent designers and merchants.

Shein is weighing acquisitions of established brands with operational problems and younger brands struggling to scale, according to people familiar with the matter. Functions such as manufacturing would move onto its own platform while design and marketing teams stay in place. One person said the company is targeting brands whose customers spend about $100 per order — roughly twice the typical Shein purchase — to broaden its reach into higher-spending consumers. Shein held about $14.8 billion in cash as of the end of March.

U.S. Security Review of Everlane Deal, Exit From Paris BHV

Behind the shift are the limits of the globalization strategy that fueled its growth. Rather than target China's vast domestic market, Shein looked abroad, drawing millions of consumers in the United States and Europe with rock-bottom prices, a flood of new products and duty exemptions for small parcels. But trade barriers in the U.S. and Europe raised costs in its core e-commerce business, and an attempt to diversify into third-party marketplaces such as Amazon and PDD Holdings' Temu was marred by quality control problems and controversial products including sex dolls. Shein disclosed falling profit and slowing revenue growth in its IPO filing.

The new strategy has already run into obstacles. Shein acquired U.S. millennial clothing brand Everlane for about $80 million earlier this year. The deal closed, but the Committee on Foreign Investment in the United States, an interagency body led by the Treasury Department, is conducting a national security review of the acquisition. A partnership with the BHV department store in central Paris, in place since 2023, has also been halted, after the arrival of a Chinese fast-fashion company at a landmark of fashion's home turf ran against public sentiment. Shein must vacate the site before Christmas this year.

Shen Bin, a business professor at Donghua University in Shanghai who studies fashion supply chains, said China's supply chain is both Shein's biggest competitive advantage and its greatest strategic concentration risk. "This capability is extremely difficult to replicate elsewhere," he said, adding that such concentration also exposes Shein to tariffs, geopolitical tensions, labor issues and sustainability disputes.

Some investors are skeptical the strategic pivot can generate enough value to justify the target valuation. They questioned whether the shares can be valued on par with established rivals such as Zara parent Inditex or Sweden's H&M, and how the geopolitical risk attached to the business should be reflected. Inditex has a market capitalization of more than $200 billion and an operating margin of about 20%. Shein's operating margin in the first quarter was about 3%, according to the offering documents.

Anubhav Malhotra, a consumer equity analyst at Panmure Liberum, said Inditex and H&M have very long records of delivering for investors across economic cycles while Shein has yet to prove itself, adding that Shein's success depends a little more on regulation than that of other companies.

Existing Shein Investors Agree to Lock Up New Shares in Rare Six-Month Deal

The listing itself was hard-won. Chinese regulators determined that Shein needed domestic approval for an overseas listing even though it generates no revenue in China. Judging it difficult to win approval from the U.S. Securities and Exchange Commission, the company moved its 2024 listing plan from New York to London, but approval from Beijing did not follow.

It then shifted to a Hong Kong listing and lowered its posture. Xu made a rare public appearance earlier this year, pledging to expand investment in Guangdong province, the hub of its supply chain, and the company even weighed moving its headquarters back to mainland China. Chinese approval finally came last month — after a cost of more than $70 billion in lost value. Its private valuation, which reached $100 billion at its 2022 peak, has shrunk to as much as $27 billion in this IPO. Even that figure assumes it raises the full $1.8 billion in the Hong Kong offering.

Shein will list in Hong Kong on the 1st. Of the $1.8 billion offering, $400 million has been allocated to cornerstone investors, with remaining institutional investors taking $500 million to $600 million and retail investors about 10%. Existing investors plan to agree to a lockup barring sales of even their newly received shares for six months. That is unusual, as pre-IPO investors are typically subject to a six-month lockup only on shares held before the listing. The move is both a step to steady the stock in the market and a demonstration of investor confidence. Attention is now focused on whether Shein, which took on the global market as a fast-fashion company, can grow further through the listing.

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