Jefferies' research report indicates that Shein's revenue for the first half of 2026 is in line with expectations, but the regional mix has deteriorated, with margin pressure remaining a key concern. Second-quarter non-GAAP operating profit and net profit declined 64% and 67% year-on-year respectively, cash flow weakened, and the adverse EU parcel policy has not yet taken effect during the period.
The report notes that fulfillment costs in the second quarter were higher than the firm's expectations, and this situation emerged even before the EU parcel policy changes in July. Therefore, the second half of the year will face both a higher cost base and additional policy impacts. Additionally, while a recovery in the U.S. market was previously expected, U.S. revenue declined by 6% in the second quarter instead, weakening the recovery thesis for the second half of the year.
Meanwhile, the firm's data shows that monthly active users (MAU) across five EU countries deteriorated from a year-on-year decline of 9.3% in the second quarter to a decline of 29.2% in July-August; download volume declines also widened from 31.3% to 46%. Other regions are also slowing down. The MAU proxy indicator across the firm's coverage markets slowed from around 15% growth in the first half of the year to 5.1% in July-August, though this data excludes Latin America, which is the company's primary growth engine.
The firm's latest forecast for non-GAAP net profit in fiscal years 2026 and 2027 is $1.155 billion and $1.432 billion respectively, over 20% below market expectations, and anticipates market forecasts for fiscal 2026 to be revised downward by 15% to 20%, and fiscal 2027 forecasts to be cut by 10% to 15%. The firm has lowered its target price from HK$26 to HK$23, maintaining a "Underperform" rating.
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