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Temu takes edge, and shine, off Shein



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The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Refiles to fix syntax in paragraph six.

By Anshuman Daga

SINGAPORE, Nov 29 (Reuters Breakingviews) -Chinese-linked fast fashion is entering the American spotlight. The runaway popularity of bargain-shopping app Temu helped its parent PDD PDD.O nearly double its quarterly revenue, pushing its New York shares up 18% on Tuesday. That puts the planned U.S. debut of its rival Shein, valued at $60 billion in its May funding round, into sharper perspective. Its large offering will test global appetite for hot deals by names associated with the People’s Republic, but the company is not exceptional.

Shein’s debut, expected in 2024 after it filed confidentially for a listing, will stand out in some obvious ways. Firms from China have raised just $529 million from initial and secondary stock offerings in the U.S. in the year to mid-October, Dealogic data shows. That’s far below the $29 billion peak in 2014 when e-commerce giant Alibaba BABA.N 9988.HK listed stateside. Unlike the company Jack Ma founded, Shein is a much more global giant – with supply chains and operations spanning India to Saudi Arabia to the Americas – and it faces plenty of competition.

Temu is Exhibit A. It is enjoying heady growth in international markets, replicating the playbook of $180 billion PDD’s Pinduoduo discount retailer in the People’s Republic. It overtook the more established Shein in the U.S. in terms of online traffic and spending in May this year. Temu’s generous discounts and free or subsidised shipping were partly reflected in a 55% jump in PDD’s sales and marketing expenses to $3 billion in the latest quarter from the same period last year.

The U.S. is a huge focus for Shein as it is for Temu. The latter’s efforts to win customers including from Amazon.com AMZN.O are underscored by its commitment for a second year in a row to buying multiple advertisement slots for the National Football League’s annual Super Bowl, as reported on Tuesday by the Wall Street Journal. Here too, the e-commerce parent’s cash, cash equivalents and short-term investments of $28 billion will come in handy. Temu has so far managed to avoid its Chinese roots causing much controversy. Relocating its headquarters from China to tax-friendly Ireland may have helped a bit. Similarly, Shein is now based in Singapore.

The warm overnight reception to Temu’s strong earnings suggests Shein could beat a path to a public listing. Anti-China sentiment is so prevalent in the U.S. that it may not prove much of a differentiating issue for politicians in next year’s election; TikTok, owned by China’s ByteDance, is more controversial because it is social media. PDD shares have risen 70% this year, though are still down one-third from their peak in early 2021, and the company trades at nearly 5 times one-year forward sales, a premium to Japan’s Fast Retailing 9983.T and Zara-owner Inditex ITX.MC, per LSEG data.

Temu and Shein might avoid being engulfed by geopolitics, but they still have to deal with major issues including rising official scrutiny over global plastic waste and supply chain responsibility. That’s a problem for the entire fast-fashion industry currently enjoying rapid growth.

Follow @anshumandaga on X

CONTEXT NEWS

Temu parent PDD on Nov. 28 unveiled third-quarter results that beat revenue estimates as heavy discounting boosted sales across its e-commerce platforms in China and overseas.

PDD's top line rose 94% year-on-year to 68.8 billion yuan ($9.6 billion) in the quarter to Sept. 30, compared with the average estimate of 54.6 billion yuan, according to LSEG data. The year-earlier result was impacted by strict Covid-19 curbs in China.

PDD owns both Chinese online discount retailer Pinduoduo as well as international e-commerce platform Temu, which is known for selling $4 earphones and $15 hoodies.

Shares of the company, which has moved its headquarters from China to Ireland, closed up 18% in New York after the earnings announcement.


Fast-fashion company shares are rising fast https://tmsnrt.rs/47UGk7a


Editing by Una Galani, Antony Currie and Thomas Shum

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