American Eagle said Wednesday its partnership with Sydney Sweeney has been its “best” advertising campaign to date as it announced fiscal second-quarter earnings that beat expectations. 

The company’s splashy, yet controversial, campaign with the “Euphoria” star led to some criticism and blowback but the launch, coupled with a recent partnership with Taylor Swift’s new fiancé Travis Kelce, has led to new customer acquisition and positive traffic across channels. 

American Eagle stock soared more than 20% in after-hours trading Wednesday.

“The fall season is off to a positive start. 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,” CEO Jay Schottenstein said in a news release. “We look forward to building on our progress and the continued strength of our iconic brands to drive higher profitability, long-term growth and shareholder value.” 

The company also re-issued its full-year guidance after withdrawing it earlier this year. It now expects comparable sales to be approximately flat, better than the 0.2% decline analysts had anticipated, according to StreetAccount. 

It still expects gross margin to be down for the duration of the year, but it made key changes to its outlook for operating income, which is bearing the brunt of the tariff impact. The company is now expecting its full-year operating income to be between $255 million and $265 million, down from a previous range of between $360 million and $375 million. 

Here’s how American Eagle performed during the quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: 45 cents vs. 21 cents expected
• Revenue: $1.28 billion vs. $1.24 billion expected

The company’s reported net income for the three-month period that ended Aug. 2 was $77.6 million, or 45 cents per share, compared with $77.3 million, or 39 cents per share, a year earlier. 

Sales fell to $1.28 billion, down slightly from $1.29 billion a year earlier. 

For the current quarter, American Eagle is expecting comparable sales to be up in the low single digit range, better than the 0.9% uptick analysts had expected, according to StreetAccount. It’s expecting the same trend during the fourth quarter. 

So far this year, American Eagle’s performance has been marred by merchandising missteps, tariffs and an uncertain consumer that’s being more selective when spending money on products like clothes and shoes. 

To turn things around, American Eagle launched its campaign with Sweeney ahead of the crucial back-to-school shopping season, but in some ways, that also backfired when it incited outrage from some customers. 

The slogan American Eagle chose for the campaign — “Sydney Sweeney has great jeans” — led some far-left critics to say the remark was a double entendre and a nod to eugenics. Meanwhile, those on the right celebrated the campaign, leading President Donald Trump to weigh in and call it the “hottest” ad around.

More widely, the campaign also faced pushback from some who said the ads were overly sexualized and out of touch, leading them to wonder what type of consumer the company was targeting. 

The campaign launched on July 23 at the tail end of American Eagle’s fiscal second quarter, but the company said it’s so far been a success, despite the pushback it received. The Sweeney campaign, along with the partnership it launched with Kelce, has led to “meaningful improvement in the business” with comps so far this quarter up in the mid-single digits. American Eagle said it’s gained 700,000 new customers and that traffic across channels has been “consistently positive” throughout August, despite some news reports indicating the contrary. 

The Sweeney campaign has led to denim sellouts, double-digit traffic growth and increased awareness and engagement, the company said. The Sydney Jacket sold out in one day and The Sydney Jean, a custom style that donated 100% of proceeds to the Crisis Text Line, which provides mental health support, sold out in one day. 

Meanwhile, American Eagle’s launch with Kelce, the Kansas City Chiefs tight end, the day after he announced his engagement to the pop star, drove three times more sales in one day than past collaborations did in a week, the company said. Many of the items, specifically ones worn by Kelce and his fellow athletes, sold out.

American Eagle’s partnerships with Sweeney and Kelce highlight the work the retailer is doing to stay relevant with consumers and cut through the noise as spending remains soft.

It’s also facing stiff competition from peers like Abercrombie & Fitch, Gap and Levi’s. Recently, Gap launched its “Better in Denim” campaign featuring Katseye and Kelis’s 2003 hit “Milkshake.” Meanwhile, Levi’s has had an ongoing campaign featuring Beyoncé while Abercrombie has taken a sports focus and partnered with the NFL. 

Compounding American Eagle’s challenges is the uncertain tariff environment. American Eagle has been working to reduce its reliance on China to under 10% this year but it also has a heavy manufacturing presence in Vietnam and India, which have been the subject of reciprocal tariffs.

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American Eagle warned investors on Wednesday that consumers are pulling back on spending and it’s seen a “slower start” to the year than it expected. 

“Entering 2025, the first quarter is off to a slower start than expected, reflecting less robust demand and colder weather,” CEO Jay Schottenstein said in a news release. “While we anticipate improvement as the Spring season gets underway, we are also taking proactive steps to strengthen the top-line, manage inventory and reduce expenses. As we navigate through an uncertain consumer and operating landscape, we will also remain focused on our long-term strategic priorities.” 

Shares fell about 5% in extended trading.

The downbeat commentary, which came along with weak guidance for the current quarter and year ahead, is the latest warning sign that the consumer might be slowing down as shoppers contend with persistent inflation and concerns around tariffs.

Over the past couple of weeks, a string of other retailers, including both strong companies and ones that tend to struggle, issued weak guidance and cautious commentary about the current macroeconomic conditions and warned 2025 might be a weaker than expected year for sales. 

Beyond its outlook, American Eagle issued mixed holiday results and comparable sales that beat expectations. Here’s how the apparel company did in its fiscal fourth quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:

• Earnings per share: 54 cents vs. 50 cents expected
• Revenue: $1.60 billion vs. $1.60 billion expected

The company’s reported net income for the three-month period that ended Feb. 1 was $104 million, or 54 cents per share, compared with $6.31 million, or 3 cents per share, a year earlier.

Sales dropped to $1.60 billion, down slightly from $1.68 billion a year earlier. Similar to other retailers, American Eagle benefited from an extra week in the year-ago period, which has negatively skewed results.

Comparable sales, which don’t include the effect of one less selling week, were up 3% during the quarter, ahead of expectations of up 2.1%, according to StreetAccount. Aerie, American Eagle’s intimates and activewear line, drove the company’s growth during the quarter with comps up 6%. Meanwhile, the company’s namesake banner saw comparable sales up 1%.

For the current quarter, American Eagle is expecting to see a mid-single-digit decline in sales, while analysts expected revenue to increase 1.3%, according to LSEG. For the full year, it is expecting sales to decline by a low single digit, compared with expectations of 3% growth, according to LSEG.

On a call with analysts, finance chief Michael Mathias said Aerie sales are expected to be positive for the year but that growth will be offset by a steeper decline at the American Eagle banner.

Tariffs are also expected to weigh on results, Mathias said. The company currently sources just under 20% of its products from China and is expecting a $5 million to $10 million hit from the new duties in fiscal 2025, which will also affect American Eagle’s gross margin. At the moment, the company isn’t planning on passing those costs on to the consumer and is working to get its China exposure down to under 10% by the end of the fiscal year, Mathias said.

Over the past year, American Eagle has made significant strides in improving profitability but has seen slower sales growth. In the three prior quarters, it missed Wall Street’s sales expectations, and on Wednesday, it issued revenue numbers that were in line with analysts’ forecasts but didn’t exceed them. 

During the quarter, the company acknowledged it had some product misses and had certain items that were out of stock, which affected sales, but American Eagle’s stores are also weighing on its results. The company still has a large mall footprint, and while there are some signals that malls are seeing a resurgence, traffic is still down significantly at U.S. malls, which means fewer people are coming into the retailer’s stores. For example, online sales are expected to be positive during the first quarter while store sales are expected to fall steeper than a mid-single-digit.

To combat the effect of declining malls, rival Abercrombie & Fitch has worked to move its stores to locations outside of malls while American Eagle has been working to remodel its existing fleet. Currently, the company’s stores are on average 12 years old, and it’s working to get that down to seven. In fiscal 2024, it remodeled around 56 stores, and in the year ahead, the company plans to remodel between 90 and 100 doors as part of its $300 million capex guidance.

In prior quarters, American Eagle has said it’s been contending with an uncertain economic environment and a consumer that tends to only come out and shop during key moments, but now a wide range of other retailers are reporting similar dynamics as cracks in the economy spread.

In February, consumer confidence saw the biggest drop since 2021, job growth slowed more than expected and unemployment ticked up. These signals and the effect they’ve had on the markets have led to concerns that a recession could be coming, especially if President Donald Trump’s trade war with Canada, Mexico and China continues.

A slowing economy is bad news for any retailer but especially those that primarily sell discretionary goods such as new clothes. During a call with analysts, Schottenstein shared his thoughts on the consumer and said the biggest thing affecting shoppers is uncertainty.

“They have the fear of the unknown, not just tariffs, not just inflation. They see the government cutting people off. They don’t know how that’s going to affect them. They see programs being cut, they don’t know how that’s gonna affect them,” said Schottenstein. “They just don’t know how it’s gonna affect them … they get very conservative.”

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