Fast-fashion giant Shein Q1 loss widened in the opening quarter of 2026 after changes to US import regulations increased operating costs and weakened demand in its biggest market, even as the company moves closer to a long-awaited public listing in Hong Kong.
Financial figures released ahead of the retailer’s proposed IPO show that Shein posted a £74 million loss during the first quarter of 2026, a sharp reversal from the £295 million profit recorded in the corresponding period a year earlier.
The decline was partly linked to a one-time accounting charge of £245 million associated with convertible preferred shares. However, the company also attributed weaker performance to changes in US customs regulations that have significantly increased the cost of shipping low-value products into the American market.
End of de minimis exemption impacts US business
A major factor behind the Shein Q1 loss was the removal of the US “de minimis” import exemption, which previously allowed shipments valued below roughly £600 to enter the country without paying import duties.
The exemption for products originating from China and Hong Kong was withdrawn by the Trump administration in May 2025, bringing millions of low-value ecommerce parcels under new tariff and customs requirements.
The policy shift has substantially altered Shein’s cross-border business model, which relied heavily on direct shipments from Chinese suppliers to US consumers.
US sales decline as tariffs increase costs
The retailer’s US business recorded a notable slowdown during the quarter.
Revenue generated in the United States fell 14.3% year on year to around £1.53 billion, compared with approximately £1.78 billion during the same period in 2025.
Products shipped from China into the US are now reportedly subject to import taxes ranging between 10% and 87.5%, significantly increasing the landed cost of merchandise.
To offset these additional expenses, Shein is evaluating further price increases in the American market. Analysts suggest that higher retail prices could reduce one of the company’s strongest competitive advantages—its ability to offer ultra-low-cost fashion products.
The United States contributed 22.5% of total quarterly revenue, down from 29.4% of annual sales recorded in 2023, highlighting the market’s declining share of the company’s overall business.
Meanwhile, Shein’s operating margin narrowed to 2.9%, compared with 3.9% a year earlier.
Europe could become the next challenge
The company also warned that Europe may experience similar pressures as policymakers tighten regulations governing cross-border ecommerce.
The European Union recently introduced a handling charge of around £2.60 on low-value parcels entering the bloc, aiming to create a more level competitive environment between overseas online marketplaces and domestic retailers.
Since Europe generated roughly one-third of Shein’s revenue last year, management believes the financial impact of these new measures could eventually equal or even exceed the disruption already experienced in the United States.
Profit growth slows despite higher annual revenue
Although annual revenue continued to increase, profitability weakened considerably.
For the full year 2025, Shein’s net profit fell 38.7% to approximately £1.54 billion, while revenue grew 8% to about £31.28 billion.
The latest figures also indicate a significant slowdown in sales momentum compared with 2024, when revenue expanded by more than 20%.
Hong Kong IPO moves closer
Despite the weaker financial performance, Shein continues to advance plans for its stock market debut in Hong Kong after previously abandoning listing attempts in both New York and London.
The company reportedly secured approval from China’s securities regulator on 10 July to proceed with the proposed offering. Details regarding the timing, pricing and final size of the IPO have yet to be announced.
Shein is understood to be targeting a market valuation between £30 billion and £37 billion, substantially below the approximately £75 billion valuation achieved during its 2022 fundraising round.
Funds raised through the listing are expected to support investments in technology, international expansion, brand development and corporate responsibility initiatives.
However, the Shein Q1 loss, combined with rising import costs, tighter global trade regulations and increasing regulatory scrutiny, is likely to remain a key area of focus for investors as the company prepares to enter public markets.
