American Eagle falls 15% on dismal forecast despite Sydney Sweeney jeans campaign

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 jean...