Shein’s adjusted EBIT fell 50.4% to $538 million in the first half, even as net revenue rose 1% to $20.1 billion, according to its first interim report since its Hong Kong listing last month. The company blamed higher oil prices and freight rates amid Middle East tensions for much of the margin pressure in the second quarter.
Shein chose to absorb those costs rather than raise prices. “We made a deliberate decision to absorb these costs – which we view as transitory – rather than pass them through to consumers,” Chairman and CEO Sky Xu wrote in the report. Second-quarter orders rose 7.6% to 298 million.
Fulfilment expenses rose 18.1% to $5.59 billion in the second quarter, reaching 50.4% of net revenue versus 43.1% a year earlier. Shein attributed the increase to higher order volume and “the elevated oil prices and freight costs arising from the Iran conflict.” For the first half, fulfilment expenses reached $9.9 billion, or 49.2% of net revenue, up from 45.4%.
Operating income fell 52.9% to $493 million. Adjusted net income dropped 55.6% to $499 million. Reported net income more than doubled to $2.3 billion, largely because of fair value gains on convertible redeemable preferred shares. Adjusted net income in the second quarter was 2.1% of net revenue, down from 6.2% a year earlier.
Other consumer companies have also flagged freight, fuel and oil costs:
Kimberly-Clark: Expects $30 million to $40 million in additional costs this quarter, partly from elevated freight and logistics costs in North America
Colgate-Palmolive: Expects higher oil prices to raise material costs late in the fourth quarter.
General Mills: Cited freight and fuel among its rising input costs. CFO Kofi Bruce expects inflation to reach about 6% in the fiscal fourth quarter.
RH: Plans to spend $50 million of a $69 million IEEPA tariff refund on supply chain costs from "the significant and sustained spike in oil prices."
McCormick: Spent a $28 million tariff refund on ocean freight and ingredient costs this summer.
H&M provides a contrast. Higher transportation costs had a slightly negative effect on purchasing costs last quarter, but operating profit still rose 23%, helped in part by a one-time tariff-related benefit. H&M also said it ships a low share of its goods by air.
Xu expects the second half to remain uncertain, with “tariff headwinds and logistics cost volatility” likely to persist. He said Q4 remains Shein’s most important promotional window.
