By Bill Peters
Stock shoots 25% higher while analysts still worry about rising tariff costs and the retailer’s ability to avoid them
Sydney Sweeney in an American Eagle ad in New York’s Times Square.
American Eagle Outfitters Inc.’s advertising campaign featuring actress Sydney Sweeney, featuring the tagline “Sydney Sweeney Has Great Jeans,” caused controversy this summer – with progressives claiming it amounted to an endorsement of eugenics, while conservatives, including President Donald Trump, defended the ad.
As far as American Eagle’s business was concerned, some data last month revealed minimal sales impact, and even a possible dent to store traffic.
But on Wednesday, executives at the clothing retailer said to expect more from the campaign through the rest of the year, following what they characterized as strong demand and an outlook that sent the company’s shares (AEO) skyrocketing 25% higher after hours.
“‘Sydney Sweeney Has Great Jeans’ is not going anywhere,” American Eagle Chief Marketing Officer Craig Brommers said on the company’s earnings call. “Sydney will be part of our team as we get into the back half of the year, and we’ll be introducing new elements of the campaign as we continue forward.”
Sweeney’s signature jeans sold out within a week, executives said. While same-store sales at American Eagle were down 3% during the second quarter, which ran through July, demand picked up in August, and the company pointed to an overall uptick in fall-season demand. Helped as well by a limited-edition collaboration with NFL star Travis Kelce’s Tru Kolors sportswear and lifestyle clothing line, the retailer said it picked up new shoppers in “every single county in the U.S.” and posted its best Labor Day ever. Back-to-school demand also helped.
“The fall season is off to a positive start,” American Eagle Chief Executive Jay Schottenstein said in a statement. “Fueled by stronger product offerings and the success of recent marketing campaigns with Sydney Sweeney and Travis Kelce, we have seen an uptick in customer awareness, engagement and comparable sales.”
The remarks by American Eagle executives came as other brands continue to find themselves in the political crosshairs. Most recently, Cracker Barrel Old Country Store Inc. (CBRL) abandoned a new logo design last month after anger from conservatives, including prodding from Trump himself.
Looking forward, American Eagle on Wednesday said it expects “approximately flat” same-store sales for the full year. Wall Street analysts expected a 0.2% dip.
For the third and fourth quarters, the company forecast same-store sales to increase in the “low-single-digit” range. Wall Street expected same-store sales gains of 0.9% and 1.7%, respectively, for those two quarters.
The retailer said the outlook “includes estimated tariffs based on the latest trade policies.”
During the second quarter, American Eagle reported sales of $1.28 billion, down 1% year over year. Same-store sales decreased 1%, and the company earned 45 cents a share.
Analysts polled by FactSet expected second-quarter adjusted earnings of 20 cents a share on revenue of $1.24 billion, with same-store sales down 2.2%.
Still, as of the close of trading Wednesday, the stock was still down 18.3% so far this year. Analysts have been skeptical about American Eagle’s ability to navigate U.S. tariffs on imports, as well as the longer-term benefits of the collaboration with Sweeney.
“The retailer has little room to pass costs directly from tariffs to shoppers who are already highly price-conscious and will likely have to absorb some of the margin pressure,” Natasha Nair, an analyst at Third Bridge, said in emailed commentary.
“American Eagle also faces tough competition from brands like Zara and Shein, which target a similar set of price-conscious customers,” she added. “These brands can quickly follow the latest trends and offer lower prices, making it harder for American Eagle to stay competitive.”
Like other retailers dealing with tariffs, American Eagle said it would raise prices in some cases, but emphasized that is only one of multiple options. It said it would also negotiate with suppliers and shuffle around where it makes clothing and how it gets shipped. Executives said that American Eagle was relying less on China – expected to account for a single-digit percentage share of the company’s manufacturing this year – and moving some production out of Vietnam.
American Eagle said it expects tariffs to cost it around $20 million in the third quarter, and $40 million to $50 million in the fourth quarter.
But executives also noted Kelce’s Tru Kolors items were selling well at higher prices, helping to boost interest in American Eagle’s men’s sections. They said Kelce worked personally with American Eagle’s designers in selecting fabrics and helped recruit other athletes who are also promoting the collaboration.
“Travis is driving interest in fashion like never before,” Brommers said on the call.
-Bill Peters
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09-03-25 2012ET
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