Shein discloses FTC probe in US, warns of significant payments
Shein Faces FTC Investigation and Potential Financial Impact
By Jody Godoy
FTC Probe Details
NEW YORK, July 28 (Reuters) - Shein's U.S. operations are under investigation by the U.S. Federal Trade Commission and the company may face significant monetary payments as a result of the probe, the fast-fashion e-commerce platform disclosed in connection with its upcoming Hong Kong IPO.
The FTC probe relates to Shein's U.S. business operations, the company said in documents published by Hong Kong's stock exchange on Sunday.
Potential Outcomes and Company Response
"The outcome of the investigation, whether in settlement or otherwise, may require us to make significant monetary payments that could have a material adverse effect on our financial condition and results of operations," the company said in the filing.
An FTC spokesperson confirmed on Tuesday the agency is conducting a consumer protection investigation into Shein.
Reason for Investigation and Company Silence
Shein did not disclose why it was under investigation. The Chinese-founded company did not immediately respond to a request for comment.
IPO Shift and Financial Performance
The ultra fast-fashion retailer shifted to seeking an IPO in Hong Kong after its supply chain risk disclosure became a major sticking point in its attempts to IPO in New York and London, according to a source with direct knowledge, as China's regulator could not accept a filing that mentioned Uyghur forced labour as a risk.
Valuation and Recent Financial Results
Shein, which was able to attract a nearly $100 billion valuation in a 2022 fundraising round amid excitement about its lean business operating model, revealed on Sunday it had swung to a quarterly loss, partly due to slowing sales after the U.S. removed the so-called de minimis tariff exemption on small packages.
(Reporting by Sherin Sunny in Bengaluru and Jody Godoy in New York; Wirting by Lisa Jucca; Editing by Shreya Biswas and Mark Porter)
