Shein profits more than double to $2bn before planned listing

Shein, an online fast-fashion company, has seen its profit more than double as it waits for Beijing’s approval to list its blockbuster in New York or London.

Shein has recorded a record profit of over $2bn for 2023. The company’s website sold products worth $45bn. Four people who are close to the firm confirmed this.

According to a financial document, the group’s profits in 2018 exceeded the $700mn net income generated in 2022 as well as $1.1bn for 2021.

Inditex, the owner of Zara and H&M, reported net profits in their last fiscal year of €5.4bn and 8.7bn (820mn), respectively.

Shein, the clothing company whose clothes are very popular with Gen Z, is waiting on regulators to approve the listing. It is expected to become the largest IPO of the year. In a recent round of financing, the group was valued at over $60bn. Shein refused to comment on financial figures.

The IPO can be viewed as a barometer of Beijing’s attitudes towards companies founded in China, but reincorporated abroad to avoid geopolitical conflict. The IPO is also a test to see if Beijing will allow Chinese companies to raise billions on Wall Street following its crackdown on technology.

Two people who are familiar with Shein’s progress said that they expect the China Securities Regulatory Commission (CSRC) and the Cyberspace Administration of China (CAC) to approve the sale of shares in the next few weeks.

The company, Shein, was founded in Nanjing, a Chinese city, and still runs most of its operations from there.

Tianyancha, a data provider, estimates that Shein will have 10,382 mainland Chinese employees at the end of 2022. They work for over a dozen subsidiary companies and do everything from handling logistics to writing codes. LinkedIn, on the other hand, shows that Shein has about 200 employees in Singapore.

Xu Yangtian (also known as Sky Xu), the 40-year old founder, was born and raised in China, but has moved to Singapore with his company. According to US lobbying disclosures, he holds 37 percent of Shein. Sequoia China (now known as HongShan), General Atlantic, and Abu Dhabi sovereign fund Mubadala are also major shareholders.

Shein spent a lot of money lobbying Washington for the IPO and to counter the growing scrutiny over the company’s business model, which involves air-shipping Chinese products directly to US consumers to avoid import duties. US public records reveal that Shein spent almost $2mn in lobbying during the nine-month period of last year.

Washington lawmakers have criticised the company’s significant China presence. In an open letter, Senator Marco Rubio urged Gary Gensler of the US Securities and Exchange Commission to “require Shein to disclose extraordinary information regarding its structure and interactions with Chinese government and Chinese Communist Party” in February.

A person close to Shein stated that the group had filed confidential paperwork in November for a US listing, but the company has heard very little since then from the SEC. Shein, according to a person close with the company, is considering London as an alternative.

Since the disastrous IPO in 2021 of Didi, a ride-hailing company that Beijing forced to delist due to data security concerns, there has been a limited number of Chinese companies seeking large New York listings.

The market slump in Hong Kong is making it harder for Chinese companies at home to raise funds. Alibaba’s Cainiao logistics arm became the latest group to abandon plans to sell stocks on the market last Thursday, suspending an IPO which some had hoped could value the company up to $20bn.

Joe Tsai, the chairperson of the board, blamed the retreat on the poor market conditions that exist in the city. He said: “Markets [are] pretty depressed and there is also a lack of liquidity.”