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Shein gives investors high sales forecasts as they prepare for the IPO

Shein gives investors high sales forecasts as they prepare for the IPO

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Online fashion giant Shein is forecasting that its revenue will more than double to nearly $60 billion by 2025 as the Chinese company tries to convince investors it’s on course for a blockbuster IPO this year .

In a “management presentation” recently shown to investors and seen by the Financial Times, Shein said the company is targeting annual sales of $58.5 billion by 2025, up from $22.7 billion last year Previous year. That would exceed the existing combined annual sales of retail giants H&M and Zara.

The company also forecasts that Gross Merchandise Value — the total value of goods sold on its platform — will rise to $80.6 billion in 2025, a 174 percent increase from the previous year.

The lofty goals come as the company plans to launch one of the largest listings of Chinese companies in the US this year after becoming the shopping destination of choice for Gen Z consumers in the West.

Two investors confirmed the content of the presentation, which shows that Shein needs to significantly change sales patterns to meet its sales goals, particularly by attracting more repeat customers and beginning to sell more diverse and expensive clothing lines.

Analysts warn that this will be a challenge for Shein, which is now headquartered in Singapore, as its target audience is younger shoppers who have previously shown little brand loyalty.

Column chart of revenue ($Bn) showing Shein's goal to more than double revenue by 2025

The targets are proposed at a time when global investors are reassessing tech startups’ high valuations amid a broader market downturn.

Shein said that “as a private company, we don’t comment on market speculation.”

The FT reported last month that Shein, led by founder and CEO Xu Yangtian, was in talks to raise $3 billion at a heavily discounted valuation of $64 billion. It was valued at just over $100 billion in its most recent funding round in April 2022, making it the third most valuable private company in the world at the time.

Management’s recent presentation provides the latest snapshot of Shein’s current financials. According to the document, the company turned a profit for four consecutive years, reaching $700 million in 2022. However, that represents a decline from $1.1 billion in 2021 as high air freight costs and rising production costs weighed on the bottom line.

Gross Merchandise Value ($Bn) column chart showing Shein's Gross Merchandise Value, which is expected to increase to $80 billion

The company also forecasts that its profits will grow to $7.5 billion in 2025 by targeting higher-spending consumers with new premium product lines while trying to reduce its storage and shipping costs.

“Shein has had a phenomenal history of growth so far, and the fact that it’s been made profitable has been impressive,” said an investor who was briefed on the presentation but declined to be named.

In order to achieve his sales goals, Shein wants to convert new customers into regular buyers. In 2022, around 60 percent of the total of 142 million customers made purchases on the platform for the first time, according to the management’s presentation. By 2025, the company aims to convert most of its shoppers into loyal customers and estimates that 60 percent of its estimated 261 million shoppers have shopped with them before.

Analysts warn that young women’s enthusiasm for Shein could be waning. The percentage of US Gen Z women — or those born between 1997 and 2013 — who are considering a Shein purchase has fallen from a peak of 54 percent in May 2022 to 39 percent in September, according to a Morning Consult study Brand Intelligence.

“Shein’s popularity with Gen Z is a double-edged sword,” said Claire Tassin, retail and e-commerce analyst at Morning Consult. “Gen Z is more open to new clothing brands than any other generation, which means it’s easier to get their attention but harder to keep their loyalty.”

Shein has also told investors that it will open a global marketplace where it will sell third-party products on its website and app, putting it in competition with established online marketplaces Asos and Amazon.

News that Shein is planning to open an online marketplace was first reported by the Wall Street Journal.

Shein’s explosive growth has spawned a slew of imitators who could undermine its growth trajectory. In September, Chinese e-commerce group Pinduoduo Temu launched a marketplace selling cheap clothes to Gen Z women in the United States. Pinduoduo used US influencers to promote the brand and ran TV ads during the Super Bowl in February.

“The same factors that made Shein popular with Gen Z will also make it easier for the next trending brand to grab their attention,” said Tassin.

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