Clouds over Shein’s dream of landing on Wall Street?
The Chinese fast fashion giant Shein has grown exponentially, surpassing H&M and (almost) Zara in turnover, TikTok, Instagram and Twitter in downloads (even if only briefly). But his debut on Wall Street is not so obvious. All the details
Even though awareness of the damage caused by fast fashion has increased, the Chinese clothing giant Shein continues to go very strong so much so that, in addition to approaching the possibility of listing on Wall Street, it is preparing to overtake H&M and is following close behind Zara, veterans of the sector. However, there are some challenges on the horizon.
SHEIN'S EXPONENTIAL GROWTH
As Quartz reports, according to research by the US-China Economic and Security Review Commission, in March 2020, Shein held 18% of the US market share in fast fashion. This figure rose to 40% within two years.
As of November 2022, the Chinese apparel e-tailer accounted for 50% of all fast fashion sales, ahead of H&M (16%) and Zara (13%). In May 2022, its app was briefly more downloaded than TikTok, Instagram and Twitter in the United States. And in August it announced that it had reached 150 million users.
SHEIN NUMBERS…
Exploitation, intellectual property infringement and use of trade loopholes are all accusations that appear not yet to have touched the affairs of the company founded in 2008 in Nanjing, but based in Singapore.
Shein reported revenue of $23 billion last year, with net income of $800 million, the Wall Street Journal reported. Among its goals was to grow its revenue by 40% by the end of this year and, according to The Information , it rose to $24 billion in the first nine months of 2023.
…WHICH PUT ZARA AND H&M IN THE SHADOW
Before Shein, giants such as Zara and H&M arrived, but they certainly cannot compete in terms of prices: on the Chinese site it is in fact possible to buy t-shirts and clothes for just a few euros. An issue that is putting competitors in difficulty and the numbers reported by Quartz show that its turnover has already exceeded that of the Swedish H&M. In fact, in the nine-month period between December 1, 2022 and August 31, 2023, the latter recorded $16.4 billion in net revenues and $8.2 billion in gross profit.
And even for Inditex, the Spanish group that owns Zara among others, things are no better: in the six months from 1 February to 31 July this year it recorded a turnover of 18.3 billion dollars and a gross profit of 10, 6 billion dollars.
SHEIN'S AMBITIONS
But Shein is not just clothing. In addition to its recent acquisition of British brand Missguided, the value of which was not disclosed, the company has also partnered with US retailer Forever 21 to cross-sell products and use physical stores for purchases and returns. Without forgetting that it also sells other types of products, including electronic ones. For Quartz it is still far from competing with Amazon, however, the speed with which it has expanded in the US market in just three years is not irrelevant.
It is therefore not surprising that Shein is considering listing on the New York Stock Exchange as early as next year.
CLOUDS ON THE IPO?
However, despite the positive results, the road still seems uphill. Shein's latest valuation, reported in May by the Wall Street Journal , was $66 billion, a third less than last year's $100 billion.
For a potential initial public offering (IPO), the company aims to rise and reach a valuation of between 80 and 90 billion dollars, judged however by sources cited by Bloomberg as "a level that far exceeds the valuation of the fast food giant -fashion in private negotiations”.
Shares recently changed hands on the secondary market, the business daily adds, valued it at between $50 and $60 billion and “while the valuation in private trading does not necessarily reflect the company's actual valuation, the gap underlines concerns of investors over Shein's challenges, ranging from intensifying competition to allegations of copyright theft and the potential use of forced labor." To which we must add the volatility of the market.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/nuvole-sul-sogno-di-shein-di-approdare-a-wall-street/ on Wed, 22 Nov 2023 15:23:25 +0000.