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Online fast fashion giant Shein has more than doubled its profits as it awaits regulatory approval from Beijing to continue its blockbuster listing in New York or London.
Shein made record profits of more than $2 billion in 2023 and recorded a gross merchandise value of about $45 billion, the total value of goods sold on its website, said four people close to the company, which was founded in China but relocated its headquarters to Singapore.
The group's profits last year exceeded net revenues of $700 million in 2022 and $1.1 billion in 2021, according to a financing document seen by the Financial Times.
Rivals H&M and Zara owner Inditex reported net profits of 8.7 billion crowns ($820 million) and 5.4 billion euros ($5.8 billion) in their most recent fiscal years.
Shein, whose clothing is popular with Gen Z shoppers, is awaiting approval from regulators in Beijing and Washington for its listing, expected to be the biggest initial public offering of the year. The group was valued at more than $60 billion in a recent funding round. Shein declined to comment on financial figures.
The IPO is seen as a sign of Beijing's stance on companies founded in China but re-incorporated abroad to avoid geopolitical tensions. It is also a test of Beijing's willingness to allow Chinese companies to raise billions of dollars on Wall Street after the country's crackdown on the tech sector.
Two people familiar with the progress of Shein's application said they expected the China Securities Regulatory Commission and the Cyberspace Administration of China to approve the share sale in the coming weeks.
Although Shein has moved its headquarters to Singapore and makes all of its sales outside of China, the company was founded in the Chinese city of Nanjing and continues to conduct the majority of its business from the country, which led the group to seek approval from local regulators .
According to data provider Tianyancha, at the end of 2022, Shein had 10,382 employees in mainland China, working for more than a dozen subsidiaries, handling everything from logistics to writing code. In contrast, LinkedIn shows that the company employs around 200 people in Singapore.
Xu Yangtian, the 40-year-old founder, also known as Sky Xu, was born in China but followed his company to Singapore. According to lobbying disclosures filed in the US, he owns 37 percent of Shein. Other major shareholders include Sequoia China, now known as HongShan, General Atlantic and the Abu Dhabi sovereign wealth fund Mubadala.
Shein has invested heavily in lobbying Washington during the IPO and amid growing criticism of the company's model of air-shipping Chinese goods directly to U.S. buyers to avoid import tariffs. Public records in the U.S. show Shein spent nearly $2 million on lobbying over nine months last year.
The company's significant presence in China has been criticized by lawmakers in Washington. Senator Marco Rubio called on Securities and Exchange Commission head Gary Gensler in an open letter in February to “demand extraordinary disclosures from Shein about its structure, its interactions with the Chinese government and the Chinese Communist Party.”
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The group filed confidential documents for a U.S. listing in November, but a person close to Shein said the company has heard little from the SEC since then. Shein is therefore considering London as a replacement option, another person close to the company said.
Since the disastrous 2021 IPO of ride-hailing company Didi, which was forced to delist by Beijing over data security concerns, the pipeline of Chinese companies seeking major listings in New York has been limited.
A sharp market downturn in Hong Kong has made it harder for Chinese companies to raise money closer to home. Alibaba's logistics arm Cainiao last week became the latest group to abandon plans to sell market share, suspending an initial public offering that some had hoped would value the company as much as $20 billion.
Chairman Joe Tsai blamed the pullout on poor market conditions in the city. “The markets are pretty depressed [and] There is also a lack of liquidity,” he said.
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