* Shein sales growth has slowed dramatically

* In AI-driven market, some investors question strategy

* Some investors view IPO valuation range as high

By Summer Zhen, Kane Wu and Helen Reid

HONG KONG/LONDON, Aug 12 (Reuters) - Even after cutting its

expected IPO valuation to $30 billion to $40 billion from a near

$100 billion private market peak, Shein faces questions over

whether slowing growth, rising costs and changing market

conditions justify that price tag.

Five investors who attended presentations or reviewed recent

financial statements ahead of a Hong Kong offering expected to

launch as early as August 19 said they were not convinced

fast-fashion retailer Shein could return to the growth rates

that valued it at nearly $100 billion in a 2022 fundraising

round.

"The future is quite challenging ... Shein at its core is

still a supply chain company," one investor said, citing slowing

sales growth due to fierce competition, and pressure on its core

business model.

Shein's management highlighted opportunities to expand its

portfolio of in-house brands, said the investor, who questioned

whether that represented a meaningful new growth avenue.

Another investor said Shein was an increasingly mature

e-commerce business whose IPO valuation would need to reflect a

more modest growth outlook.

A third investor said in their view Shein should be valued

at a single-digit price-to-earnings (P/E) ratio, closer to that

of PDD Holdings ( PDD ), which owns shopping platform Temu.

A lower price would have consequences for Shein's ownership

as under terms in its IPO filing, the company's founders would

be required to provide extra shares to certain pre-IPO investors

if the valuation falls below agreed thresholds.

Representatives for Shein declined to comment.

Morgan Stanley analysts estimated a "fair value range" of

$39 billion to $52 billion in a report provided to potential

Shein investors, which was seen by Reuters.

They said the price range was based on 18 to 24 times

Shein's projected 2027 earnings, taking into consideration the

price at which competitors such as Inditex and H&M

trade.

Morgan Stanley, which is a sponsor on Shein's IPO alongside

Goldman Sachs and JPMorgan, did not immediately respond to a

Reuters request for comment.

GROWTH SLOWS SHARPLY

Shein's biggest challenge is convincing investors that a

sharp slowdown in growth is temporary rather than structural.

Its revenue rose by 41.1% in 2023 and 20.7% in 2024 and

research firm Coresight expects growth to slow to around 2% this

year as changes to customs regimes in key markets raise costs

and weigh on demand.

The European Union imposed hefty fees on e-commerce packages in

July, after the U.S. last year ended duty-free access for cheap

parcels, removing a key advantage of Shein's direct-shipping

business model and forcing it to invest in local warehousing

capacity.

"We think Shein will make a big push in the rest of the

world, as we saw when the U.S. introduced de minimis changes,

and try to limit pass-through of costs to EU consumers in view

of its IPO," said Coresight head of global research John Mercer.

CUSTOMER ENGAGEMENT

Investors and analysts are also scrutinising customer

metrics disclosed in Shein's IPO filing.

While annual active customers rose to 273 million in 2025

from 230 million a year earlier, purchase frequency remained

unchanged at roughly four orders per year.

The figures suggest Shein continues to attract new shoppers

but has yet to demonstrate significantly deeper engagement.

"The reason Shein got on everyone's radar is that they

decided to turn on this fire hose of advertising and make a play

for market share," said Mike Ryan, head of e-commerce insights

at Smarter Ecommerce.

"They got app installs, they got users, but it wasn't

sustainable," he added.

Shein has ramped up marketing spending, to $1.43 billion in

the first quarter from $1.09 billion a year earlier, and will

have to show investors that is helping boost demand.

MORE SELECTIVE

Several investors said Shein's presentations highlighted

operational technology and data capabilities but lacked the

growth story now attracting capital to AI-linked businesses.

The term "artificial intelligence" appears only a handful of

times in Shein's Hong Kong filing.

A source close to Shein said it was not attempting to market

itself as an AI company or to achieve an AI valuation, and

instead viewed the technology as a tool making its supply chain

more efficient.