HONG KONG (Reuters Breakingviews) - When it comes to makeovers, Shein stands out. The fast-fashion retailer shifted its headquarters and some key trademarks from its home base in China to Singapore in 2022 to look more international. That appeared to work, as sales in the United States and beyond boomed and its $100 billion valuation at the time pipped incumbents, including H&M.
But its long-delayed initial public offering, and other recent stumbles, show such transformations have limits.
Executive Chair Donald Tang had initially sought to list the business, known for selling cheap-as-chips bike shorts, bikinis and other items, in New York back in 2022. But that plan faced scrutiny from Washington lawmakers over its supply chain practices in the People's Republic. Shein has said it has a zero-tolerance policy on forced labour and child labour in its supply chain.
A subsequent attempt to list in London also floundered, Reuters reported, after failing to secure a green light from the China Securities Regulatory Commission. The agency requires all businesses with significant links to the People's Republic, regardless of where they are domiciled, to get approvals before listing.
Shein's third attempt, in Hong Kong, seems to be faltering too. On Tuesday, Bloomberg reported, citing sources, that in an effort to improve its chances, the group has been in discussions with a parent company in the mainland, in a full circle that would make it officially Chinese again. It's not clear why regulators in Beijing have been dragging their feet, but having Shein pay local income taxes might finally persuade authorities.
Shein's listing woes have been a costly distraction at best. The company is facing more pressing issues. Growth in its two biggest markets, the U.S. and Europe, is at risk: Washington has ended a practice of granting duty-free access to shipments worth less than $800; and Europe is planning to apply a 2-euro flat fee on low-value e-commerce packages entering the bloc. Moreover, fierce competition from Temu, owned by the $169 billion PDD, has also weighed on margins.
Earlier this year, the Financial Times reported that Shein's net profit in 2024 declined by almost 40% from the previous year to $1 billion, despite revenue rising by a fifth. Against this backdrop, Shein's valuation has come under pressure. Investors, eager for an exit, pressed the company to accept a valuation as low as $30 billion, Bloomberg reported in February.
Other Chinese groups that have reinvented themselves should take note. New York-listed, Cayman Island-incorporated PDD in 2023 moved its headquarters to tax-friendly Ireland. Similarly, ByteDance straddles various geographies, with its TikTok business based in Singapore and California. Shein demonstrates that such corporate contortions can backfire.