Ahead of IPO, Shein's Shine Has Dulled | Morningstar

Shein’s initial public offering will finally hit the market in Hong Kong on Aug. 31, but at a fraction of what investors once thought the company was worth. The fast fashion retailer’s stock is expected to list at a $27 billion valuation, down substantially from PitchBook’s 2023 post-market valuation of $66 billion. We think the decline in market perception of Shein reflects slower revenue growth amid tariffs, other geopolitical risks, and increased competition. While sales in Asia are helping offset a fall in US revenue, the company is probably looking at a period of single-digit revenue growth, and this maturing outlook will likely limit investor excitement. Data from before 2023 is not publicly available for Shein, but it appears revenue growth converged to the pace seen by the fast fashion industry at below 10% in 2025. We forecast the fast fashion industry’s leaders, Fast Retailing and Inditex, will average three-year revenue growth of 11% and 7%, respectively. Fast Retailing is benefiting from a recovery and expansion in its US and European sales from a low base. We therefore would not be surprised if Shein’s revenue growth hovers around the current 7.5% pace over the next three years, especially after changes in de minimis policies and tariffs have raised the average cost of items sold in the United States, a key market. Source: Morningstar Research, Company Reports, SHEIN Listing Prospectus. Data as of Aug. 26, 2026. Download CSV . Revenue from the US fell 3.5% in 2025, which is not surprising, given tariff uncertainties last year. As a result, the US declined as a share of Shein’s sales to 24.1% from 29.4% between 2023 and 2025. Growth outside the US and Europe is more than making up for the shortfall. But with Europe recently introducing a flat EUR 3 tax on purchases below EUR 150, we could see some pressure on European sales. We would not be surprised if US and European sales only keep pace with inflation over the next few years. If so, Shein would need to maintain its 15% revenue growth in the rest of the world to see a three-year revenue average around a 7.5% pace. Source: Morningstar Research, SHEIN Listing Prospectus. Data as of Aug. 26, 2026. Download CSV . On top of the slowing revenue growth outlook, and perhaps a little more challenging, is pressure on operating margins. While Shein’s revenue growth may track with its fast fashion peers, its operating margin is notably lower, at just 4.1% in 2025. We think this reflects the lower selling price and overall purchase value of Shein’s products. So Shein needs to pass through rising costs. This becomes more challenging with the additional tax in Europe and the removal of the de minimis exemption. It implies that if Shein wants to grow revenue and maintain operating leverage, raising prices will lag higher costs. Furthermore, we expect competition to remain intense, so customer acquisition costs are likely to remain high. There is no indication that Temu will ease back on its market share push. Source: Morningstar Research, Company Reports, SHEIN Listing Prospectus. Data as of Aug. 26, 2026. Temu is wholly owned by PDD and its financials are not disclosed separately. The negative operating margin is an estimate. Download CSV . On the bright side, Shein is financially well-positioned to weather its current hiccups. The company is in a net cash position and doesn’t really need to list, although it says it will use the capital raised from the listing for expansion. We suspect the listing enables some private equity investors to exit their investments in Shein. However, the lower IPO valuation reflects a drop-off in investor appetite for Shein’s shares. We believe this largely stems from the more pedestrian near-term growth outlook. Shein is trying to evolve its business model to include more service revenue, which it charges third-party merchants to complete sales transactions. But the company’s value will still rest on its ability to sell goods, in our view. The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies .