Shein reports sharp drop in Europe sales after price hikes

Sept 28 (Reuters) - Fast-fashion platform Shein ‌reported a sharp ​drop in ​sales in Europe in the second quarter after it hiked prices and cut online advertising in anticipation of the European Union imposing fees on low-value ‌e-commerce parcels from July 1.

Since its September 1 debut in Hong Kong, Shein's ⁠shares have dropped 27.3% from the offer price of HK$48.56 apiece as investors expect the fees to dent its ‌business in a market accounting ‌for around a third of revenue.

Shein reported $11.08 billion in sales for the second quarter, with Europe revenue down 13.9% to $3.77 billion and US revenue falling 6% to $2.5 billion. Overall ​sales were up 0.9% from a year ago as growth in Latin America offset declines in Shein's biggest markets.

Shein CEO and Chair Sky Xu said the retailer is ⁠planning to push into higher-priced clothes that will boost its profitability, and hinted at the company's strategy of expanding its family of ​brands, including through acquisitions.

"As the product mix shifts towards brands at higher price points, the platform’s overall average selling price will rise ​accordingly," he said in a statement. "Our vision is to ‌become a richly diversified brand collection that meets consumers’ varied needs across multiple price points and occasions."

Shein's net profit margin shrank to 2.1% ⁠in the second quarter from 6.2% a year ago, mostly due to the Middle East conflict pushing up oil prices and freight costs, driving Shein's fulfilment expenses up by 18.1%.

CUSTOMS FEES IMPACT ⁠STILL TO COME

Known for selling $5 dresses and $10 jeans and running permanent discounts, Shein was already forced to ​raise prices in the US last year when the Trump administration ended de minimis - duty-free access for low-value ecommerce parcels - and this year faces the same challenge in Europe.

Since July 1 the EU has ‌imposed fees on low-value parcels ordered online - 3 euros per customs code, adding up to 15 euros if a shopper buys five ‌different types of item in one order.

Shein's third-quarter results will show more of the impact, which ⁠Shein has previously said could exceed ‌that of the US removing ​de minimis last year.

(Reporting by Sneha Kumar, Shivangi Lahiri, Kumar Tanishk in Bengaluru, Helen Reid in London; Editing by Shinjini Ganguli, Jonathan Ananda and ‌Emelia Sithole-Matarise)

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