Key insights
- American Eagle Outfitters (AEO) stock rose after announcing a new advertising campaign with Sydney Sweeney. Previous campaigns with the actress boosted sales and investor confidence. While the stock is up significantly year-over-year, it has declined from recent highs. The success of this campaign, and the broader trend of casualization in office wear, will determine if AEO can sustain its rally. Overall, a minor positive signal for consumer discretionary stocks.
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Can Sydney Sweeney prompt another pop in denim sales? American Eagle investors hope so.
Shares of American Eagle Outfitters (AEO) were recently up more than 7% after the retailer announced an advertising campaign with the actress Wednesday morning. The jean shorts promo comes days after HBO released the third season of Euphoria, the show that catapulted Sweeney to fame in 2019 and which continues to inspire style guides, makeup tutorials and cultural commentary.
Some analysts expect denim sales to rise as offices adopt more casual dress codes. It remains to be seen whether more relaxed attitudes will extend to shorts.
Today's move extends what's been an eventful and generally positive year for the stock thanks in large part to a prior promo called "Sydney Sweeney has Great Jeans." The shares were recently trading for over $19—more than 80% above where they were a year ago, but down about a third from a recent peak above $20 in early January. Now investors are once again weighing whether the latest campaign can continue to lift the shares at a moment when investor appetite for hot trades appears particularly strong.
The initial Sweeney ad helped shares recover from a slump last spring. Customers were spooked by tariffs, inflation and government spending cuts, and consequently, spending less, American Eagle said. The first round of denim ads, released in August, boosted sales and generated buzz. The conversation heated up as critics claimed the campaign was hyper-sexual and referenced discriminatory ideas; the president weighed in, calling it the "'HOTTEST' ad out there."
Investors grew confident the rally could last when sales improved for the retailer’s loungewear line, which wasn’t promoted by Sweeney, and results came in above expectations in December. Still, shares have tumbled some since March, when an earnings report appears to have tempered enthusiasm for both American Eagle and meme stocks broadly.
Analysts are somewhat divided on the stock. About half of those who follow American Eagle and were polled by Visible Alpha gave it a “hold” rating, with others issuing “sell” and “buy” ratings. Analysts generally see shares climbing another 25% to nearly $24, according to an average analyst price estimate from Visible Alpha.
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