Luring Shein From Floating On Wall Street Would Boost London's Ftse 100 - But At What Cost?
22nd May 2024
The Singapore-based fast-fashion company Shein is poised to choose between floating on the London Stock Exchange and Wall Street. As the potential £60bn IPO causes ripples on both side of the Pond, the home delivery expert Parcelhero asks what impact could it have on ASOS and Boohoo?
The fast-fashion giant Shein (founded in China in 2012 but based in Singapore since 2021) is currently deciding whether to launch an initial public offering (IPO) on the London Stock Exchange (LSE) or on Wall Street. It is looking increasingly as if Shein is targeting the likes of LSE-listed fast-fashion rivals ASOS and Boohoo. An initial public offering in London could value Shein at around £50-£60bn.
The e-commerce fulfilment expert Parcelhero says that, while rivals struggle, Shein is bucking the trend in fast fashion by continuing to register significant profits. A successful London IPO would boost the FTSE 100 but could it ultimately spell the demise of ASOS and Boohoo?
Parcelhero's Head of Consumer Research, David Jinks M.I.L.T., says: ‘The potential LSE float is far from being a mere second choice in the event that US authorities don't give the go-ahead to a New York IPO. Shein's executive chairman Donald Tang met with Chancellor Jeremy Hunt earlier this year and representatives are reportedly in talks with one of his predecessors, Sajid Javid, about becoming a board member or adviser.
‘Last year, Shein reportedly sold $45bn (£35bn) of clothing for a $2bn (£1.57bn) profit. That's in marked contrast to its two LSE-listed fast-fashion competitors. Last month, Asos revealed its losses had widened to £120m ($152m) in its half year to 3 March. Its adjusted pre-tax losses fell by almost a third and group sales were down 18%. The results followed a near-£300m loss in Asos' last full year to 3 September 2023. Its sales for the year fell 11% to £3.54bn ($4.5bn).
‘Similarly, fellow e-commerce fashion site Boohoo reported this month that its statutory pre-tax losses widened by 69.2% to £159.9m ($199.7m), from the previous year’s loss of £90.7m ($115m). For the 12 months ended 29 February 2024, Boohoo recorded revenue of £1.46bn ($1.86bn), down by 17% from £1.76bn ($2.24bn) a year previously.
‘Post-Covid, the e-commerce clothing market has been volatile and it’s not just UK-based fast-fashion "e-tailers" that are struggling. Even Amazon recently ditched all but three of its own-label clothing brands to adapt to the changing market. Heavily pushed labels such as Goodthreads, Wag and Mama Bear were binned, with only Amazon’s Essential, Collection and Aware brands left.
‘The reason Shein is thriving in the midst of all these fashion victims is also perhaps the reason why it might end up on the London rather than Wall Street stock exchange. While ASOS and Boohoo are fast fashion companies, Shein represents a new breed of ultra-fast fashion brands.
‘Shein uses algorithms to track customer interest. It can produce new items rapidly thanks to the many garment and textile makers it uses in China's Pearl River Delta, the area around the cities of Dongguan, Guangzhou and Shenzhen.
‘These workshops mean Shein can immediately order more if an item starts to sell well. This is in contrast to the traditional model, which is to place large advance orders and hope for the best. Even companies such as ASOS have recently found themselves with excessive amounts of unsold stock.
‘While Shein argues its responsive supply chain limits waste, members of the US Congress claim: "Shein has come under heavy criticism for utilising underpaid labour in its supplier factories and violating human rights."
‘That’s a concerning accusation for Shein. Fast-fashion brands are keenly aware of potential consumer backlash. For example, Boohoo even faced significant criticism for its UK sourcing, with the workshops around Leicester that supplied it being accused of low pay and poor working conditions.
‘While these accusations may be of concern to Shein, the US financial authorities and UK and US investors, there are also wider claims against Shein. It is also being accused by some members of Congress of alleged links to the Xinjiang Uyghur Autonomous Region (XUAR) of China, which has been the subject of forced labour claims for some time. Shein strongly denies these accusations, which come amid increasing anti-China sentiment from US businesses and Government.
‘Coming on top of the US Government’s demand that TikTok must be sold by its China-based owners or risk being banned, London looks to be a smoother ride for Shein. Currently ASOS is listed in the FTSE Small Cap Index (it crashed out of the FTSE 250 in 2023) and Bohoo is a FTSE AIM (alternative investment market) 100-listed company. There is speculation that Shein could be seeking a £71bn valuation, which would make it one of the top ten largest businesses in the FTSE 100. That poses the question: will UK investors feel it has significantly more to offer than ASOS and Boohoo? Ironically, these were once the market disruptors Shein now represents, but have become part of the established market. The answer to this question could have a big impact on how UK retail develops.
‘As retail settles to a new equilibrium, it will be those retailers with strong in-store and online sales that will ultimately triumph in a post-Covid world. Parcelhero’s influential report "2030: Death of the High Street" has been discussed in Parliament. It reveals that, unless retailers develop an omnichannel approach, embracing both online and physical store sales, the High Street as we know it will reach a dead-end by 2030. Read the full report at: https://www.parcelhero.com/content/downloads/pdfs/high-street/deathofthehighstreetreport.pdf
www.shein.co.uk
SHEIN IS A GLOBAL FASHION AND LIFESTYLE ONLINE RETAILER COMMITTED TO MAKING THE BEAUTY OF FASHION ACCESSIBLE TO ALL.
Headquartered in Singapore, SHEIN serves customers in 150+ countries from key centers of operation around the world, including the U.S., Brazil, Ireland, and Southern China.
SHEIN has offices in Los Angeles, São Paulo, Dublin, Guangzhou, Paris, Washington D.C., London, and Singapore.
The fashion industry has always struggled to match supply and demand. SHEIN set out to solve this problem by building a new kind of fashion business model driven by its customers. Our innovative on-demand, customer-driven model addresses customer preferences more accurately and efficiently, which means much more affordable prices—and less waste. With a global presence, SHEIN offers a full range of women’s, men’s, children’s, home, and beauty categories that are ever evolving to meet the diverse needs of our customers, from SHEIN branded apparel to products from a global network of suppliers.
