(Yicai) Sept. 29 -- Shares in SHEIN Global Holdings plunged today after the Chinese online fast-fashion and lifestyle retailer reported a more than 50 percent drop in profit in the first six months from a year earlier, despite an increase in total orders, as higher oil prices and freight costs weighed on earnings.

SHEIN’s share price [HKG: 0625] sank 10.4 percent to end the day at HKD31.58 (USD4).

The firm’s operating profit plummeted 52.9 percent in the six months ended June 30 from a year ago to USD493 million, while adjusted net profit dived 55.6 percent to USD499 million, according to the interim report released by the Singapore-based firm yesterday. Net revenue climbed 1 percent to USD20.1 billion.

Profitability was affected by higher oil prices and freight costs, which SHEIN absorbed to maintain a consistent pricing experience and order momentum, it said.

In the second quarter, adjusted net profit plunged 66.6 percent year on year to USD228 million, while net revenue edged up 0.9 percent to USD11.1 billion.

Second-quarter revenue growth was partly moderated by a higher marketplace mix, under which it recognizes service revenue rather than the full value of products sold, the firm said.

Despite the drop in profitability, SHEIN's total orders gained 6.4 percent in the first six months from the same period last year to 549 million, including a 7.6 percent increase to 298 million in the second quarter. Active customers soared 14.5 percent in the 12 months ended June 30 from a year earlier to 291 million.

Looking ahead, SHEIN's management team has identified three priorities for the next one to two years, namely expanding its price range, increasing investment in quality and compliance, and strengthening communication with consumers.

SHEIN sees an opportunity to broaden consumer choice by expanding its product mix to include brands at higher price points, it said. As the product mix shifts toward higher-priced brands, the platform's average selling price is expected to rise and improve profitability, while the firm will continue to maintain and optimize products across existing price ranges.

SHEIN expects its overall average selling price to rise as its product mix expands toward brands at higher price points, founder and Chairman Sky Xu said. The company will continue to maintain its value-for-money positioning across existing price ranges, he added.

SHEIN said it plans to increase investment in product quality, compliance and corporate transparency. These efforts will strengthen consumer confidence and provide greater clarity on the efficiency gains underpinning its business model, it added. The firm will also step up communication with consumers through improvements to its app and a more deliberate approach to brand marketing.

By region, SHEIN's second-quarter revenue in the US slumped 4 percent year on year to USD2.5 billion. The company said its US business was continuing to recover from the impact of tariffs.

Revenue in Europe tumbled 16.1 percent in the three months ended June 30 from the year before to USD3.7 billion. The firm has raised prices and cut online advertising spending in the region ahead of the European Union's planned removal of the EUR150 (USD170) low-value goods duty exemption, it said.

Editor: Kim Taylor