By Bill Peters
‘We do not assign a high likelihood that momentum from this campaign can fully inflect the business over the long run,’ BofA analysts say
A window display of actress Sydney Sweeney is seen on a window of an American Eagle store on Aug. 1 in New York City.
Early data has shown that despite the eruption in online discourse, American Eagle Outfitters Inc.’s “great jeans” ad campaign featuring actress Sydney Sweeney has yet to help in-store traffic or sales. Now, BofA analysts are casting further doubt on the denim retailer.
Analysts there said Monday that American Eagle and Aerie – American Eagle’s intimates, activewear and swimwear brand – had little leeway to work around U.S. tariffs on imports and that it was a “tough time for a turnaround.”
“AE and Aerie are in tough positions to navigate tariffs,” they said, adding: “we do not think that either brand has much pricing power.”
The BofA analysts downgraded American Eagle’s shares (AEO) to underperform from neutral, sending them 2.7% lower during the day. The analysts also cut their per-share profit estimates by 8% for this year and 30% for next year.
As for the Sweeney campaign – which angered some progressives who said it amounted to an endorsement of eugenics, which angered conservatives who said that reaction was overblown – the analysts said “we do not assign a high likelihood that momentum from this campaign can fully inflect the business over the long run.”
“On AE, the jury is out on whether product outside of denim can gain momentum,” they said.
For Aerie, they said there were “secular challenges” in intimates and swimwear. “Pulling back on promos could curtail traffic, and we see risk that Aerie could pull back on store-opening plans next year if the retail environment remains tough,” they said.
Clothing retailers have been dealing with more muted demand over the past three years, as inflation forces some shoppers to cover expenses for more important things. As tariffs start to kick in, American Eagle, in its most recent annual report, said that a “substantial portion of our products are manufactured abroad, including in China,” which is the biggest target in President Donald Trump’s trade war.
The BofA analysts noted that the back-to-school season could bring potential upside. And they said that American Eagle had been cutting costs over the past few years.
However, they added, “we worry that the low-hanging fruit has been accomplished and marketing spend remains below peers.”
-Bill Peters
This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
08-25-25 1817ET
Copyright (c) 2025 Dow Jones & Company, Inc.