SHEIN IPO: Investing in SHEIN

Shein has quickly become one of the most popular fashion brands in the world. It has completely upended the industry by offering trendy clothing at affordable prices. Its fast-fashion style enables consumers to stay up to date with the latest fashion trends -- without breaking the bank.

The company has grown tremendously since its founding in 2008. Sales surged to $23 billion in 2022, pushing it past several leading fashion retailers. Shein is still looking at a long growth runway ahead as it continues to take share in the fast-growing, fast-fashion market.

At over $60 billion, Shein's growth potential has made it one of the world's most valuable start-ups. And given its growing popularity, it could be worth even more in the public markets. Investors are eagerly awaiting its initial public offering (IPO), which could come as soon as 2024.

Here's a look at what you need to know about Shein, how to invest in its stock if it completes an IPO next year, and some alternatives to investing in the fast-fashion retailer.

Is Shein publicly traded?

Is Shein publicly traded?

Shein wasn't a publicly traded company as of late 2023. The fast-fashion group remained a privately held company owned by investors and its founder, Chinese billionaire Sky Xu.

When will Shein IPO?

When will Shein IPO?

Shein didn't have an IPO on the calendar as of late 2023. However, the company hired investment banks Goldman Sachs (GS 1.79%), JPMorgan Chase (JPM 0.06%), and Morgan Stanley (MS 0.29%) to lead its IPO in late 2023. The fast-fashion retail group reportedly seeks to go public sometime in 2024 and list on a major U.S. stock exchange.

It could be one of the biggest IPOs of the year. The company had a private market valuation of over $60 billion based on its latest funding round in May 2023. However, Bloomberg reported that the company would seek to go public at a target value of as much as $90 billion. That would make it one of the highest-valued Chinese companies to go public in the U.S.

How to buy

How to buy Shein stock

You can't buy Shein stock yet because it hasn't completed its IPO. However, you can gain exposure to the fast-fashion trends driving its growth while you await its IPO. Here's a look at some Shein alternatives and how to buy these retail stocks to bide your time while Shein prepares its IPO.

Industria De Diseno Textil Inditex

Industria De Diseno Textil Inditex (IDEXY 0.46%), or Inditex, is a Spanish clothing company. It's one of the world's biggest fast-fashion groups. It was second to Shein in 2022, controlling more than 17% of the fast-fashion market.

Notable Inditex brands include Zara, Massimo Dutti, and Pull & Bear. The company operated in 213 markets, with a relatively low share in a highly fragmented sector. That drove its belief that it has tremendously strong growth prospects.

Hennes Mauritz

Hennes Mauritz (HNNMY 0.53%), or H&M Group, had the third-highest share of the fast-fashion market in 2022, at a little under 5%. The Swedish company owns several brands, including H&M, COS, Monki, Weekday, & Other Stories, H&M HOME, ARKET, Afound, and Sellpy. The company is continuing its steady global expansion, with plans to open its first physical and online stores in Brazil in 2025.

Simon Property Trust

Simon Property (SPG -0.26%) is a real estate investment trust (REIT) that owns shopping malls. It also owns a stake in SPARC Group, a joint venture (JV) with Authentic Brands, which owns Forever 21, a brand with a small share of the fast-fashion market. Shein partnered with SPARC Group in 2023 to expand its market reach by selling in Forever 21's brick-and-mortar stores.

Investors who want to buy one of these Shein alternatives can purchase shares in most brokerage accounts. Here's a step-by-step guide on how to invest in stocks like Shein.

Step 1: Open a brokerage account

You'll have to open and fund a brokerage account before buying shares of any company. If you still need to open one, here are some of the best-rated brokers and trading platforms. Take your time to research the brokers to find the best one for you.

Step 2: Figure out your budget

Before making your first trade, you'll need to determine a budget for how much money you want to invest. You'll then want to decide how to allocate that money. The Motley Fool's investing philosophy recommends building a diversified portfolio of 25 or more stocks you plan to hold for at least five years.

You don't have to get there on the first day. For example, if you have $1,000 available to start investing, you might want to begin by allocating that money equally across at least 10 stocks and then grow from there.

Step 3: Do your research

It's essential to thoroughly research a company before buying its shares. You should learn about how it makes money, its competitors, its balance sheet, and other factors to ensure you have a solid grasp on whether the company can grow value for its shareholders over the long term.

Step 4: Place an order

Once you've opened and funded a brokerage account, set your investing budget, and researched the stock, it's time to buy shares. The process is relatively straightforward. Go to your brokerage account's order page and fill in all the relevant information, including:

• The number of shares you want to buy or the amount you want to invest to purchase fractional shares.
• The stock ticker (IDEXY for Inditex, HNNMY for H&M Group, and SPG for Simon Property).
• Whether you want to place a limit order or a market order. The Motley Fool recommends using a market order since it guarantees you buy shares immediately at the current market price.

Once you complete the order page, click to submit your trade and become a shareholder in one of these retail stocks while you await Shein's IPO. Investors would follow a similar process to buy an IPO stock like Shein when it goes public. Once shares become available, fill in your brokerage account's order page with Shein's selected stock ticker and submit your trade.

Profitability

Is Shein profitable?

As a private company, Shein doesn't need to disclose its financial results. However, the company has revealed some financial data.

In the first half of 2023, the company said it generated $14.7 billion in revenue -- an impressive total. It was 10 times more revenue than the company's total sales for all of 2018. Its sales during the first half of 2023 surpassed those of rival Zara.

Shein's surging sales have enabled the company to become incredibly profitable. Its executive vice chairman, Donald Tang, told investors the company reached record profitability during the first half of 2023. It was on pace to surpass the $23 billion in revenue and $800 million in net profit it posted in 2022. The company's rapid sales growth and record profits put it in a strong position as it seeks to go public.

Should I invest?

Should I invest in Shein?

Shein has disrupted the fashion industry over the past decade, producing on-trend clothing at bargain prices, making it one of the more popular clothing brands in the world. Its sales are skyrocketing, enabling it to deliver record profits.

Analysts expect Shein to become an even more dominant player in the fast-fashion retail market in the coming years. They see it increasing its market share to almost 20% by 2027 as it takes share from rivals like Inditex's Zara.

The company is also finding new ways to expand. The online retailer bought a stake in Forever 21 to get in on the ground floor of selling in brick-and-mortar stores. It has also started to become a marketplace for third-party sellers and bought British women's fashion brand Missguided. Its expansion efforts should help drive additional sales and profit growth for the company.

However, Shein isn't the only way to play this trend. Investors could also consider buying other retail stocks benefitting from the same growth trends as Shein. They could turn out to be a better long-term investment, especially if the value-focused Shein goes public with a high price tag, as it would be harder for it to grow shareholder value from a high valuation.

ETF options

ETFs with exposure to Shein

Because Shein hasn't completed an IPO yet, you can't passively invest in its stock through an exchange-traded fund (ETF).

However, people interested in investing in the retail sector could consider an ETF focused on the space as an alternative way to gain exposure to the trends driving Shein's growth. Three top retail ETFs are:

• SPDR S&P Retail ETF (XRT 1.4%): The ETF focuses on retail stocks that trade on U.S. stock exchanges. It held 78 retail stocks in late 2023, led by Gap (NYSE:GAP), Foot Locker (FL 0.23%), and Macy's (M 0.44%). The fund has a 0.35% gross ETF expense ratio.
• Amplify Online Retail ETF (IBUY 1.81%): The ETF focuses on companies that generate most of their revenue from their online retail business. The fund held 72 stocks in late 2023, led by Affirm Holdings (NASDAQ:AFFM), Carvana (CVNA 8.79%), and Beyond Meat (BYND 0.95%). The ETF had a 0.65% expense ratio.
• VanEck Retail ETF (NYSEMKT:RTH): The fund focuses on the world's 25 largest and most traded retailers. Its top holdings in late 2023 were Amazon (AMZN 3.43%), Home Depot (HD 0.94%), and Costco (COST 1.01%). The fund had a 0.35% expense ratio.

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The bottom line on Shein

Shein has grown into one of the world's most popular fashion retailers. The company's popularity is driving surging sales and record profits. These features have investors eagerly awaiting its IPO, which could be one of the biggest listings of 2024. If its revenue and profits continue surging, Shein could richly reward investors in the coming years.

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