Shein's Big IPO - and a Smaller Valuation

**Bisi Adebayo** (0:01)
Shein finally gets its big stock market moment, but was it worth the wait? It's World Business Express from the BBC World Service, I am Bisi Adebayo.
Also, Beijing has a warning for Chinese car makers expanding overseas, and the female astronauts on repair duty outside the International Space Station.
That's the sound of Shein, one of the biggest names in fast fashion making, its stock market debut in Hong Kong. But it hasn't all gone to pan. Shares fell around 10% in early trading before recovering to around the offer price. It's been a long road to the stock market for Shein after attempts to list in New York and London ran into regulatory concerns. And the company is now valued at around a quarter of its 2022 peak. Well, let's go first to Fiona Sincorta, Senior Market Analyst at Stonex, who joins us now. Fiona, what have you made of the reaction to Shein's debut in Hong Kong today?

**Fiona Sincota** (1:08)
Well, I think it's been quite a bruising experience for sort of this IPO, which has been so long awaited and anticipated.
You know, as you pointed out, this was a company which was previously valued at around $100 billion and floated at a value of $26 billion, only for the share prices then to fall 10% before recovering. Now, it's not known whether Goldman Sachs, the IPO's stabilization managers, stepped in to support the price. But either way, this isn't exactly the ideal start for such a highly anticipated IPO.

**Bisi Adebayo** (1:39)
Well, stick around Fiona, because we're about to hear more about Shein and how important they are in the fashion world. Nicholas Foun is head of commercial content at Retail Economics.

**Nicholas Foun** (1:50)
They remain a major force in global fashion. That can't be denied. But they are entering a much tougher phase. Their growth is slowing, their profitability is under pressure, and regulatory changes are making its ultra low cost model much more expensive to operate. So none of that is new and none of that is a surprise. But what is changing is the geopolitical backdrop and the trade environment for Shein. So action by the EU, the US and other key markets has really changed that backdrop for trade. So in May last year, the US removed regulations which allowed low value parcels entering the US from China to be duty free. Now low value parcels entering the US from China attract anything from around 10% to 87.5% tariffs. The EU as well has removed custom duty exemptions for consignments worth 150 euros or less last month. So those types of parcels that Shein is now sending through the EU come with a 3 euro fee attached to them. And the UK as well has also confirmed that its customs duty relief for consignments valued at 135 pounds or less will be removed by October 2028 So that will see normal tariffs being applied to those types of products that Shein is sending.
And when you take those factors together, those key markets for Shein is basically turning its strong growth story where it was having sales growth of about 40% in 2023 to a reported 1% growth by the first quarter of this year and sales in its key market, which is the US, fell by almost 15%.
So in that effect, Shein can no longer be credibly priced with such a strong future earnings growth in mind.

**Bisi Adebayo** (3:36)
Nicholas found head of commercial content at Retail Economics. Back to you, Fiona, what do you think about the future valuation of Shein?

**Fiona Sincota** (3:45)
So, I mean, there are headwinds to this business model, which your previous guests pointed out, and I think which are being reflected in the share price at the IPO. But I think it's also worth noting that there's sort of a change in consumer preferences for quality, making sort of fast fashion less attractive. And when you tie all this together, I think it doesn't bode particularly well for the outlook of the valuation of this company.

**Bisi Adebayo** (4:10)
Now let's turn to Europe, because inflation in the Eurozone has jumped to over 3%.

**Fiona Sincota** (4:16)
Yes, so accelerated to 3.3%, that's up from 2.9%.
And this is basically due to rising energy prices. Energy inflation jumped from around 10% to 14.3% in the month, and that's the highest level since 2023 And this creates a very sort of difficult backdrop for the European Central Bank, who are expected to hike rates this month, and then potentially could hike rates a second time before the end of the year. But obviously, rising interest rates does threaten growth, which could come under pressure if that happens.