Shein’s loophole is gone. Now the losses are here

Shein posted a $99 million net loss in the first quarter of 2026, swinging from a $395 million profit in the same period a year earlier, as the elimination of a U.S. duty exemption weighed on its largest market and a one-time accounting charge added to the damage.

Documents submitted ahead of the company's planned Hong Kong initial public offering showed U.S. revenue declined 14.

3% to $2.04 billion from $2.38 billion in the same quarter of 2025.

The U.S. accounted for 22.

5% of quarterly revenue, down from 29.4% of annual revenue in 2023. "The removal of the U.

S. de minimis exemption has had an adverse impact on our sales in the U.S.

and the overall growth of our net revenues," Shein said in the filing. Under the former de minimis rule, shipments valued below $800 entered the U.S.

duty-free. Goods of Chinese origin that Shein sells and sends to American customers now face tariff rates between 10% and 87.5%, according to the filing.

Also weighing on the first-quarter result was a $328 million fair-value charge tied to convertible redeemable preferred shares, a class of instrument held by early investors that may eventually become ordinary stock and that carries a balance-sheet value subject to revision until the company lists. The company's operating margin compressed to 2.9% in the first quarter, compared with 3.

9% in the same period a year before. Shein said it is raising prices in the U.S.

to offset a portion of the increased costs. Over the full year 2025, the company's profit declined 38.7% to $2.

06 billion, and total revenues reached $41.85 billion — an 8% rise that marks a significant deceleration from the 20.7% growth recorded in 2024.

The filing also noted that the Iran war had hurt demand, raised costs, and caused delivery delays in some markets. The filing also noted that the European Union began levying a 3 euro charge on low-value e-commerce shipments this month. Europe represented close to a third of Shein's 2025 revenue, and Shein cautioned in the prospectus that the E.

U. measure's effect on its business "could be generally in line with or exceed the impact observed in the U.S."

Shein, which was founded by Sky Yangtian Xu in Nanjing in 2012 and is now headquartered in Singapore, received approval from China's securities regulator for a Hong Kong listing on July 10, after failed attempts to list in New York and London. The company is targeting a valuation of $40 billion to $50 billion for the offering, according to CNBC. Goldman Sachs $GS, Morgan Stanley $MS, and JPMorgan $JPM Chase are joint sponsors of the listing.

The draft prospectus omitted details on how many shares will be sold, at what price, on what schedule, or how much the offering is expected to raise. Shein stated that funds raised through the IPO will go toward technology investment, marketing, international expansion, and broader corporate needs.