Trade woes temper Shein’s profits in 2024 despite revenue climb
Shoppers in the US reportedly slowed down purchasing on the platform after President Trump lifted the ‘de minimis’ rule
IN 2024, amid stalling IPO plans, Shein’s profit dropped for the first time in three years, its audited financial statements show.
Revenue of Roadget Business, the Singapore-registered entity of the fast-fashion retailer, recorded US$1.3 billion in profit before income tax in 2024. That is a 13 per cent decrease from the previous year.
Meanwhile, its revenue jumped 20 per cent year on year to US$37.1 billion, slowing from the previous year.
The Singapore-domiciled entity represents Shein’s global business, as the company transferred its headquarters from China to the city-state in 2021.
Roadget’s subsidiaries include Singapore-based Fashion Choice and Ireland-based Infinite Styles Ecommerce , which owns US-based Shein Distribution.
Shein has been trying to go public in London and the US in the last two years, but its plans have been held back. British and Chinese regulators reportedly could not agree on the language to be used in the firm’s risk disclosure.
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In July this year, Shein reportedly filed to list on the Hong Kong Stock Exchange. Its most immediate challenge now, however, is navigating the ongoing US-China trade war.
Tech in Asia reached out to Shein, but the firm declined to comment.
Marketing expenses slow down earnings
Founded in China in 2008, Shein rose to prominence during the pandemic for its cheap and trendy fashion items, some of which could go for less than US$5.
The firm designs and manufactures clothing at speeds that beat fast-fashion retailers like Zara and H&M, allowing it to respond quickly to consumer demand and trends.
It primarily works with a network of factories to manufacture products in China, though it has more recently begun working with factories in Europe and Latin America. Over the years, Shein has splashed out marketing dollars to draw customers.
In the US, marketers noted how Shein and Chinese ecommerce platform Temu contributed to the surge in the cost of paid search ads during the Black Friday sale in 2024.
Shein also sponsored various events in different markets last year, like the Women’s Football Awards in London, and music festivals in Manchester and California.
That was reflected in its latest financial statement. Between 2023 and 2024, its selling and marketing expenses – at 29.5 per cent – outpaced revenue.
As proceeds grew across the group, its cost of sales also rose 22.6 per cent in 2024 to US$30.2 billion, outpacing revenue.
Cost of inventories recognised as expense also increased by 18.6 per cent in 2024, while fulfilment expenses grew by 23.6 per cent.
Faced with trade and other regulatory challenges, Shein’s revenue growth in the US is estimated to drop to 20.1 per cent in 2025, down from 50 per cent in 2024, according to consumer insight firm Coresight Research.
Trade war woes
Shoppers in the US have reportedly slowed down purchasing on Shein after US President Donald Trump in May lifted the “de minimis” rule, which previously allowed packages from China valued below US$800 to be shipped to the country tax-free.
The US also imposed duties of 30 per cent on low-cost packages arriving from China, which it later tripled.
In the financial statement dated Dec 31, 2024, Shein acknowledged the “uncertainties in the global economy” following the US’ changes to tariff policy.
It also noted that the “ongoing evolution of trade policies continues to introduce complexities for businesses,” which could affect the company’s future financial condition and operations.
According to Sensor Tower, Shein’s monthly active users in the US dropped by 12 per cent between March and June this year to 41.4 million.
To sidestep tariffs in the US, Shein has shifted its focus to Europe instead, with ad spending targeted for the region increasing over the past year.
It is set to open its first pop-up store in the continent in Paris by November, with five more locations expected to open in France in the coming months.
But replicating its supply chain in China in other parts of the world will be a “systemic effort and a very difficult undertaking,” says Li Jianggan, CEO of insights firm Momentum Works.
How Shein’s business model could be maintained amid the trade war remains to be seen.
Dealing with competition
At US$37 billion, Shein’s revenue in 2024 puts it ahead of global fast-fashion giants like H&M and Uniqlo.
But it will have to contend with Temu.
Like Shein, Temu sources products directly from manufacturers in China and sells to customers in the US and other overseas markets. It also has a wider range of items, from home decor to gadgets.
Its parent company, PDD Holdings, has enjoyed a skyrocketing growth ever since it launched the platform in 2022.
PDD Holdings ended 2024 with US$54 billion in revenue, a 57 per cent jump from the previous year, with net income growing faster at 84 per cent with US$15.4 billion.
Though not exactly fashion-focused, Temu “does create pressure” for Shein, as both compete on supply chain and logistics, as well as for consumer wallets, Li notes.
“The current environment remains highly uncertain, with changing policies and stiff competition – notably from Temu,” he adds.
Shein ended 2024 with cash and cash equivalents of US$2.6 billion.
Hefty fines – to the tune of 190 million euros (S$287.8 million) – by the French and Italian governments in the last three months over data privacy and greenwashing concerns could put a dent on that. The company is contesting some of these fines.
As the firm makes moves to diversify its manufacturing base beyond China, cash used in investing activities have also grown.
In 2023, the company announced it was investing US$150 million in the next three years to establish a manufacturing hub in Brazil. Shein plans to start shipping products from the hub by 2026. TECH IN ASIA
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