Well, that didn’t last long.
Earlier this month, shares of American Eagle Outfitters (AEO) soared after President Donald Trump stepped into the controversy involving Sydney Sweeney’s ad campaign for the apparel and accessories retailer.
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The hullabaloo stemmed from the tagline “Sydney Sweeney has great jeans.”
Critics interpreted this as a coded reference to eugenics, linking her blonde hair and blue eyes to the idea of “good genes” and played on historical associations with white supremacy and Nazi propaganda.
Conservatives rallied to the Euphoria star’s defense, including Trump who said in a Truth Social post that “Sydney Sweeney, a registered Republican, has the HOTTEST ad out there.”
“Go get ’em Sydney!” the president declared.
American Eagle’s stock took flight following Trump’s post, surging 23% on Aug. 4.
Shares American Eagle Outfitters have been sliding. Photographer: David Paul Morris/Bloomberg via Getty Images
American Eagle CEO disappointed with results
However, the Trump bump didn’t last long. Shares of American Eagle, which is slated to report second quarter results on Sept. 3, are down nearly 25% this year and the stock is down 44% from this time in 2024.
The company’s shares were about 2.3% in the red at last check after Bank of America Global Research downgraded the Pittsburgh-based company to underperform from neutral and cut its price target to $10 from $11.
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“We see a longer path to a more normalized earnings profile in this environment,” the firm said in a research note.
BofA cut its earnings estimates for 2025 and 2025 to reflect the impact of higher tariffs and lower sales at American Eagle’s sub-brand Aerie.
Apparel retailers are getting the worst of Trump’s tariff regimen, as an estimated 97% to 98% of all clothing and footwear sold in the US is imported.
“AE and Aerie are in tough positions to navigate tariffs,” the firm said. “We do not think that either brand has much pricing power.”
“On cost control, AEO has made a lot of progress tightening its belt over the last few years,” BofA noted. “We worry that the low-hanging fruit has been accomplished and marketing spend remains below peers.”
In May, American Eagle said it was writing off $75 million in spring and summer merchandise and withdrawing its full-year guidance in the face of slow sales, steep discounting and economic uncertainty.
“We are clearly disappointed with our execution in the first quarter,” CEO Jay Schottenstein said in a May 13 statement.. “Merchandising strategies did not drive the results we anticipated, leading to higher promotions and excess inventory.
BofA said that it believes a sales recovery for both brands following first quarter assortment issues will take time.
Analyst: jury out on products outside of denim
“On AE, the jury is out on whether product outside of denim can gain momentum, and on Aerie, secular challenges in intimates and swim adds more pressure on Offline to maintain momentum,” the firm said.
“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.”
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In the near term, BofA said that there is risk that the recent Sydney Sweeney campaign added momentum to AE to bridge a positive 3Q sales guide.
“However, we do not assign a high likelihood that momentum from this campaign can fully inflect the business over the long run,” the firm said. “Another risk is that denim should be a strong category this (Back to School) season based on our industry reads.”
American Eagle missed Wall Street’s quarterly earnings expectations on May 29, with Schottenstein saying “the first quarter was a challenging period for our business.”
“While we are disappointed with the results, we are taking actions to better position the company and drive stronger performance in the upcoming quarters,” he said.
“Our brands remain resilient. The team is executing with urgency as we look to strengthen both the topline and profit flow-through.”
Earlier this month, the National Retail Federation said retail spending bounced back in July as consumers sought out summer sales promotions to buy goods before more tariffs take effect.
“Consumer spending increased in July, driven by successful summer sales events held by many retailers and shoppers continuing to pull purchases forward ahead of tariffs,” Matthew Shay, the federation’s president and CEO said. “Month-over-month gains were sizeable against a weaker-than-normal June.”
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