Shein, the Chinese fast-fashion giant, has launched a legal battle against its rival, Temu, owned by PDD Holdings Inc. In a lawsuit filed on Monday, Shein accuses Temu of stealing its designs, engaging in counterfeiting, violating intellectual property rights, and perpetrating fraud.
This isn’t the first time Shein has been involved in legal disputes related to intellectual property. Several brands and independent artists, including Levi Strauss and H&M, have accused Shein of copying their designs.
Shein’s complaint against Temu highlights the aggressive tactics employed by both companies. Shein claims that Temu attracts US customers with promises of extremely low prices, but these prices are so low that Temu has to subsidize each sale, effectively losing money on every transaction.
The legal battle between Shein and Temu comes amidst a challenging economic environment for Chinese discount retailers. Alibaba Group Holding Limited, a major player in the Chinese e-commerce market, reported a 29% decline in profit for the first quarter of fiscal year 2024.
Temu, in turn, filed a lawsuit against Shein last year, citing copyright concerns. The growing competition in the discount retail sector has even attracted Amazon, which is reportedly launching a new bargain section on its platform, focusing on items from China. This move could potentially pose a significant challenge for Chinese discount retailers like Shein, Temu, and Alibaba.
Amidst this legal and competitive landscape, PDD Holdings, the parent company of Temu, remains a target of investor interest. Equity research analysts have assigned an average 1-year price target of $212.83 for PDD shares, representing a potential upside of 44.82%. Although analysts’ opinions vary, none have issued bearish recommendations on PDD. The highest price target comes from Bernstein at $235.0, while Goldman Sachs has the lowest at $184.0. As of Wednesday’s close, PDD stock traded at $147.41, up 2.21% for the day.
