Shares of American Eagle fell 15% Thursday after the teen retailer revealed a dismal forecast for the current quarter, despite its high-profile jeans campaign with Sydney Sweeney.
After the closing bell Wednesday, the retail chain reported upbeat revenue of $1.4 billion in the second quarter, but it kept its annual same-store sales forecast unchanged and forecast flat gross margins for the third quarter.
It’s a sign American Eagle is expecting discounts on its excess denim inventory to hit profits, as well as soft sales in its namesake brand.
Most of the company’s growth has come from its intimates and loungewear brand, Aerie, and its activewear offshoot, Offline.
Earlier this year, American Eagle renewed its tie-up with Sweeney, known for her roles in “Euphoria” and “White Lotus,” for a denim shorts campaign, hopeful it could juice sales once again.
American Eagle’s initial racy jeans campaign with Sweeney in 2025 marked a departure from past forays into tame “body-positive” ads.
The new promos garnered the attention of President Trump and helped drive sales, bringing in almost a million new customers – even as unhinged online critics baselessly accused the commercial of promoting Nazi-style eugenics.
Jay Schottenstein, the company’s chief executive, resisted online pressure to pull the provocative ad campaign as the collection flew off the shelves – with the “Sydney Jean” selling out in a week.
The Sweeney campaign was American Eagle’s attempt to win over Gen Z shoppers – but the company has continued to fall behind rivals like Abercrombie & Fitch and Gap, both of which recently raised their annual profit forecasts.
Raymond James analyst Rick Patel said steady demand at Aerie is not enough to offset weakness at American Eagle, especially as customers stray away from the chain’s signature jeans.
American Eagle executives said Wednesday that they have been struggling to clear out older inventory, especially after low-rise denim jeans suddenly became trendy.
The company’s inventory costs rose 14% in the second quarter.
“AEO remains a tale of two brands, with Aerie remaining red-hot, but the larger American Eagle brand is still a bit of a mixed bag,” Needham analyst Tom Nikic said in a note.
He predicted the company will face an even tougher retail climate in the second half of the year due to a “volatile macro environment.”
Demand across the broader retail sector has been choppy as inflation-battered customers cut back on non-necessities.
Shares of American Eagle are down 45% so far this year.
Even before the controversial Sweeney campaign, American Eagle had started shifting its brand to more provocative looks in an attempt to win back customers, as The Post previously reported.
A decade ago, its Aerie brand had surpassed longtime lingerie queen Victoria’s Secret as millennial shoppers favored its ads showing diverse body types and ordinary women – but that momentum slowed.
The company was “almost paralyzed by their body positivity movement” and scared about coming across as “too sexy,” according to retail analyst Gabriella Santaniello, who heads up A-Line Partners.
After Trump’s re-election win, American Eagle started adding string bikinis and “cheeky bottoms” to its stores – items that were previously only available online. It also adopted “edgier” looks for its models, with more fitted cropped camisoles instead of boxy T-shirts.