How Shein could wear a $50 bln valuation

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03/08/2026 05:16

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.
By Katrina Hamlin
HONG KONG, Aug 3 (Reuters Breakingviews) - Fast-fashion retailer Shein will have to dress up to pull off the up to $50 billion valuation it is seeking in its Hong Kong IPO. The numbers only hang together if founder Sky Xu can persuade investors to both try on generous earnings forecasts and apply the kinds of multiples sported by faster-growing fashionistas like Zara owner Inditex  ITX.MC. That's a big ask at a time the China-founded company is grappling with heftier import duties in its top markets.
What would it take for Shein to fulfil its expectations? Assume it can generate net revenue of $36 billion in 2026, based on annualising its first-quarter top line. The next step is to determine what net profit margin it can sustain. This slipped to 2.5% in the first quarter, down from as much as 4.9% in 2023, after adjusting for one-off accounting charges.
Restoring net profit to its past highs would require the company to respond to the recent introduction of higher import fees for low-value parcels in the U.S. and Europe, two regions which make up more than half of its sales. If Shein can pass on the full costs to its shoppers or build its network of local warehouses to avoid fees on cross-border parcels, achieving net profit of $2 billion may be realistic. 
Investors would then need to throw out e-commerce comparisons in favour of fashion-focused names. Shares in five such companies, including Inditex, Next NXT.L, Zalando ZALG.DE, H&M HMb.ST, and Uniqlo-owner Fast Retail 9983.T are on average priced at 29 times estimated earnings for 2026, according to Visible Alpha, versus 11 times for a basket of Alibaba 9988.HK, JD.com  9618.HK, Temu-owner PDD PDD.O and Vipshop VIPS.N. Apply the fashion multiple to net profit of $2 billion, and it could bag a $50-billion-plus price tag. 
However, Shein looks awkwardly out of place mixing with these fashionistas. The five peers' average net margin hovers at around 10%, per Visible Alpha, and their mean sales growth was 13% in the first three months of the year. After excluding one-off gains from changes in the value of preferred shares, Shein's average net margin was 3.8% between 2023 and 2025, and in the first quarter of 2026, the top line grew just 1% year-on-year. 
If Shein is unable to slip back into its old numbers, even a $10 billion valuation – one-tenth of its peak value achieved in a 2022 private fundraising – could be a stretch, Breakingviews calculations show. Much depends on whether Xu and the bankers at Goldman Sachs, Morgan Stanley and JPMorgan can convince investors that his company can retain customers whose loyalty is rooted in cheap, cheerful bargains.
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CONTEXT NEWS
Fast-fashion retailer Shein Global is seeking a valuation of between $40 billion and $50 billion in its Hong Kong IPO, Reuters reported on July 16, citing sources.
The company logged a $99 million net loss in the first three months of the year, compared with a $395 million net profit in the same period of 2025, according to a draft prospectus published on July 26. The ⁠loss partly ​reflected an accounting change under which it took a $328 million fair-value charge on ​convertible redeemable preferred shares. Shein's revenue during the first quarter grew 1.1% to $9.1 billion.

(Editing by Una Galani; Production by Ujjaini Dutta)
((For previous columns by the author, Reuters customers can click on HAMLIN/katrina.hamlin@thomsonreuters.com; Reuters Messaging: katrina.hamlin.thomsonreuters.com@reuters.net))