Shein, the fast-fashion e-commerce platform, disclosed that its U.S. operations are under investigation by the Federal Trade Commission (FTC) as it prepares for a Hong Kong initial public offering (IPO). The company revealed the probe in documents filed with Hong Kong’s stock exchange, stating that the outcome could require significant monetary payments, potentially impacting its financial condition.
FTC Investigation and Financial Impact
The FTC investigation focuses on Shein’s U.S. business operations, though the specific subject of the probe has not been disclosed. Shein emphasized that the investigation’s outcome, whether through settlement or otherwise, may necessitate substantial payments that could adversely affect its financial performance. The company is cooperating with the FTC but cannot predict the investigation’s timeline or result.
Financial Challenges and Legal Pressures
Shein reported a 14.3% decline in U.S. sales, from $2.4 billion to $2 billion, during the first three months of 2026. The company also posted a quarterly net loss of $99 million, a sharp contrast to the $395 million profit recorded a year earlier. Operating income fell by more than a quarter, while fulfillment and marketing costs increased. The company attributed part of the sales decline to U.S. tariff changes that took effect in late 2025.
Global Legal and Regulatory Scrutiny
Beyond the FTC investigation, Shein faces legal challenges in the U.S. and Europe. Texas has sued the company over alleged toxic products and data privacy practices, while a proposed California class action accuses Shein of deceptive reference pricing. In Europe, investigations involve illegal products, online design practices, and the transfer of customer data to China. Shein has set aside approximately $80 million to cover ongoing legal and regulatory proceedings but did not specify whether this provision includes the FTC probe or U.S. lawsuits.
Shift to Hong Kong IPO
Shein’s decision to pursue a Hong Kong IPO follows stalled plans in the U.S. and London. The company’s draft listing document highlights mounting legal and regulatory pressures, offering a rare glimpse into its operations. The shift to Hong Kong comes amid concerns over supply chain risks, including allegations of forced labor in China’s Xinjiang region, which had previously complicated its IPO efforts in Western markets.
The FTC declined to comment on the investigation, and Shein did not provide additional details beyond its regulatory filings.