China’s fashion star has $100 bln yarn to spin

A Chinese model poses at a fashion show during the Beijing international fashion week in the Chinese capital March 28, 2005. The fashion week highlights the work of Chinese designers as Beijing attempts to push itself as a major international fashion center. REUTERS/Jason Lee ALF/JJ – RP6DRMVHPOAB

HONG KONG, April 4 (Reuters Breakingviews) – Chinese fast-fashion phenom Shein can grow into its $100 billion valuation. The secretive e-commerce company is planning to raise $1 billion in funding that could value it at more than Zara-owner Inditex (ITX.MC) and Swedish rival H&M (HMb.ST) combined, per Bloomberg. That needn’t be a stretch.

Thanks to its U.S. import-tax exemptions, founder Chris Xu’s online-marketing and data background, and proximity to Chinese garment factories, the digital-only retailer overtook Amazon (AMZN.O) as the top U.S. shopping app last year. A dress on Shein retails for 30% less than on Zara, reckons Euromonitor.

Shein was last valued at $50 billion in early 2021; that same year, revenue surged 57% to $15.7 billion, Reuters reported read more . Assuming it can keep up the same pace this year, then the 12-digit price tag implies an enterprise value of 4 times sales. That’s above Uniqlo’s Japanese owner, Fast Retailing (9983.T), which trades on just 2.5 times. But the latter’s top line is expected to increase roughly 6% in the fiscal year to August, per Refinitiv forecasts. Shein’s sizable premium hangs on convincing investors of its growth prospects. (By Robyn Mak)

(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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