Shein’s IPO pitch should be more Meta than H&M

{"text":[[{"start":3.78,"text":"From fast fashion to flat fashion: Shein’s $27bn valuation in an upcoming Hong Kong public offering is a big blow to a company investors appraised at $100bn back in 2022. View Shein as an ultra-speedy clothing merchant plagued by counterfeiting issues and the price cut is deserved. But consider it as something else — a gamified doomscrolling app — and it’s a different story."}],[{"start":28.5,"text":"Investors like are growth and profitability, and at Shein, both are going in the wrong direction. Revenue expanded by just 8 per cent last year, compared with 20 per cent in 2024. Just 4.9 per cent of sales dropped through to earnings, almost half the portion from the year before. The US and EU have tightened so-called de minimis rules that let low-value packages skirt import taxes."}],[{"start":51.98,"text":"Compared to fashion peers, it still looks dear. The company says the “online fashion market” will grow at an annual rate of roughly 5.5 per cent until 2030. If it keeps up with that, and can turn 2.5 per cent of its sales into earnings, as it did in the latest quarter after adjusting for some one-off factors, then this year the company should make $1.1bn in profit."}],[{"start":75.98,"text":"Seen that way, a $27bn valuation represents about 25 times forward earnings. Zara owner Inditex trades at 26 times, while H&M trades at 22 times. Both are growing their earnings faster than the Singapore-domiciled company. No wonder the former online wunderkind has lost its shine."}],[{"start":null,"text":"

"}],[{"start":94.96,"text":"What if those aren’t the right comparisons? After all, Shein differs from H&M and Inditex in some important ways. It lacks their physical store networks, and its community of small suppliers, who make products in small batches to gauge demand, means it can offer a nearly limitless range with negligible inventory. Prices are low enough, and its online engine sophisticated enough, that customers can easily scroll for hours and buy multiple items on a whim."}],[{"start":120.66,"text":"Arguably, Shein’s peers aren’t just clothes retailers, but any business that provides screen-bound users with a dopamine hit. Take gaming, a business model that relies on squeezing in-app purchases out of users with eyes glued to their screens: Take-Two Interactive trades at around 30 times forward earnings, with profits expected to grow 50 per cent a year for the next five years."}],[{"start":142.26,"text":"Gambling, too, tries to monetise a similar impetus. DraftKings, the US sports and gaming company that is branching out into predictions markets, trades at roughly 47 times forward earnings. As a big beneficiary of the spending-from-the-sofa economy, DraftKings’ net income is expected to grow at an average annual rate of more than 110 per cent over the next five years, analysts polled by Visible Alpha reckon."}],[{"start":167.66,"text":"The ultimate doomscrolling machine is probably Meta Platforms, owner of Instagram and Facebook, whose ad-driven revenue is growing at nearly 30 per cent a year. Of course, the differences are vast — and Meta’s shares are suppressed by its enormous AI investments. But its $1.4tn market capitalisation speaks to the considerable value of furnishing consumers with dopamine. By pitching itself as a mere fashion retailer, Shein may be missing a trick."}],[{"start":197.66,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1787619675_3746.mp3"}