Celebrity effect boosts American Eagle Outfitters shares up 24% after hours, but tariff pressure leads to lowered earnings guidance

On September 4, American Eagle Outfitters surged 24.52% in after-hours trading on Wednesday. In terms of news, American Eagle Outfitters released its Q2 2025 earnings on Wednesday, with multiple indicators far exceeding market expectations: earnings per share reached $0.45, a significant increase from the expected $0.20; revenue was $1.28 billion, higher than the expected $1.23 billion.

The company simultaneously announced the reissuance of its previously withdrawn full-year guidance, expecting comparable sales to remain roughly flat, better than analysts’ forecast of a 0.2% decline. However, full-year operating income guidance was revised down from the original $360 million to $375 million to $255 million to $265 million, mainly due to the impact of tariff costs—an expected loss of $20 million in Q3, expanding to $40 million to $50 million in Q4.

This quarter’s performance boost benefited from celebrity collaborations with Sydney Sweeney and Travis Kelce. The “Great Jeans” ad campaign with “Euphoria” star Sweeney, though controversial, became the “best ever” marketing case: the campaign drove jeans sales to sell out, the Sydney jacket and custom jeans sold out in a single day, and all related proceeds were donated to mental health organizations; traffic achieved double-digit growth, and brand awareness and engagement increased significantly.

The Tru Kolors co-branded collection with Kelce launched the day after his engagement to Taylor Swift, with single-day sales tripling those of previous collaborations in a week, and multiple items sold out quickly. Previously, the company had continued to cultivate Gen Z consumers through collaborations with tennis player Coco Gauff and actress Jenna Ortega—a strategy backed by a PwC survey showing that economic uncertainty is causing the largest drop in U.S. holiday spending since the pandemic, especially as Gen Z shoppers cut back, prompting the company’s precise focus on younger demographics.

In response, American Eagle Outfitters expects Q3 comparable sales to grow by about 10%, higher than analysts’ forecast of 0.9%, and Q4 to maintain the same growth trend, with a strong start to the fall season. However, the company also faces multiple challenges. eMarketer analyst Sky Canaves pointed out that the impact of tariffs, increased advertising spending, and a surge in holiday promotions may erode profits, but for now, these marketing campaigns have driven sales growth sufficient to offset some losses.

In addition, missteps in product promotion, increasingly cautious consumer choices, tariff pressures, and intensified industry competition—Abercrombie & Fitch launched the “Better in Denim” campaign, Levi’s collaborated with Beyoncé, and Gap focused on sports marketing and partnered with the NFL—all pose competitive pressure on American Eagle Outfitters. Furthermore, the company is reducing its reliance on Chinese manufacturing to below 10%, but factories in Vietnam and India are still affected by reciprocal tariffs.

Although controversial campaigns have drawn some criticism—such as left-wing figures questioning whether the “Great Jeans” slogan contains eugenics double meanings, while right-wing figures and Trump praised it as the “hottest ad”—the company emphasized that the campaign has attracted 700,000 new customers, with all-channel traffic maintaining positive growth in August, successfully offsetting some market pressure. Analysts believe that while celebrity collaborations have increased advertising spending, current sales growth is sufficient to make up for profit losses, but continued attention is needed on the impact of tariffs and the effectiveness of strategic initiatives.