US tax rate impact before the Hong Kong IPO

Shein posted a net loss of $99 million in the first quarter of 2026, up from a profit of $395 million in the same period last year, as the repeal of the U.S. tax exemption weighed on the largest market and one-time charges added to the damage.

Documents filed ahead of the company’s initial public offering in Hong Kong showed that U.S. revenue fell 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 elimination of the US de minimis exemption has a negative impact on our sales in the US and overall growth in our net income,” Shein said in the filing. Under the previous de minimis rule, shipments valued at less than $800 entered the United States duty-free. Chinese-origin goods that Shein sells and ships to American customers now face tariffs ranging from 10% to 87.5%, according to the filing.

Weighing the first quarter results was a $328 million fair value charge tied to redeemable preferred shares, a type of instrument held by early investors that may eventually become common stock and whose balance sheet value is subject to revisions until the company lists. The company’s operating margin contracted to 2.9% in the first quarter, compared to 3.9% in the same period last year.

Shein said it is raising prices in the U.S. to offset some of the increased costs. Throughout 2025, the company’s profit has decreased by 38.7% to 2.06 billion dollars, and the total revenue has reached 41.85 billion dollars – an increase of 8%, which is a significant decrease from the 20.7% growth recorded in 2024. The filing also notes that the Iran war has affected demand, increasing the cost of the market.

The document also noted that the European Union began charging a €3 fee for low-value e-commerce shipments this month. Europe represents close to a third of Shein’s 2025 revenue, and Shein warned in the prospectus that the impact of EU measures on its business “may generally be in line with or exceed the impact observed in the United States”.

Shein, which was founded by Sky Yangtian Xu in Nanjing in 2012 and is now headquartered in Singapore, received approval from the China Securities Regulatory Commission for listing in Hong Kong on July 10, after unsuccessful attempts 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, Morgan Stanley, and JPMorgan Chase are joint sponsors of the listing.

The draft notice omitted details about how many shares will be sold, at what price, in what time table, or how much it is expected to increase. Shein said the funds raised through the IPO will go toward investing in technology, marketing, international expansion, and broader company needs.