Updated 6:03 p.m. ET Sept. 3
It’s Sydney Sweeney’s world and the rest of us, apparently, are just living in it.
The controversy around Sweeney, her jeans — or genes — and the American Eagle ad campaign that launched a thousand think pieces and merited a mention from U.S. President Donald Trump doesn’t seem to have hurt the retailer’s business.
And American Eagle not only not backing down, it’s doubling down.
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Jay Schottenstein, executive chairman of the board and chief executive officer of American Eagle Outfitters Inc., stood by the campaign.
And where some saw a nod to eugenics as the campaign played off the idea of Sweeney having both great jeans and great genes, Schottenstein saw the pieces of a plan to revamp the retailer clicking into place.
“The fall season is off to a good start, fueled by the strength of our product lines and the success of our recent marketing campaigns,” the CEO told analysts on a conference call on second-quarter financial results. “The iconic fall denim campaign with Sydney Sweeney affirms we are the American jeans brand. We saw a record-breaking new customer acquisition and brand awareness cutting across age demographics and genders.
“The most recent collaboration with Tru Kolors by Travis Kelce has kept the momentum going,” he said. “We have seen periods of very strong demand from both campaigns, fueling positive traffic in August, which was up consistently throughout the month. And with our commitment to building on this quarter’s progress.”
Taken all together, investors liked what they heard and sent shares of American Eagle up 23.4 percent to $16.80 in after-hours trading.
American Eagle still has some work to do, but seems to be getting back on track.
Revenues fell 1 percent to $1.28 billion for the quarter ended Aug. 2, which was considerably better than the 4.3 percent decline analysts had penciled in, according to Yahoo Finance.
That only captures a part of the impact of the Sweeney campaign, which was launched on July 23, just over a week before the quarter ended.
As the campaign was whipped up into a firestorm animating the nation’s culture war and general political divisiveness, American Eagle said the ads were “always about the jeans.”
The conference call did not so much address the controversy as paint the campaigns — and the attendant exposure — as a kind of marketing masterclass.
Jennifer Foyle, president and executive creative director of American Eagle and Aerie, said the business was “at an inflection point” after the impact of some early spring receipts and softer demand in shorts and bottoms in the second quarter.
“Our exclusive product and marketing campaigns with Sydney Sweeney and Travis Kelce have created amazing energy and buzz,” Foyle said. “Over a year in the making, these two signature collaborations have generated a strong response driven by limited-edition merchandise, demonstrating the power of celebrity style and great product. Sweeney signature jeans sold out within a week and some products within one day. Demand for the curated online shop of Syd’s Picks has been very strong.
Since the launch, the brand has seen its customer base expand by 700,000 as well as 40 billion marketing impressions.
Craig Brommers, chief marketing officer of America Eagle, was brought on the call to unpack what all those impressions mean for the business.
“The American Eagle Sydney Sweeney campaign was intended to be a brand and business reset,” Brommers said. “In just six weeks, the campaign has generated unprecedented new customer acquisition. To be clear, that consumer acquisition is coming from every single county in the U.S. This momentum is national and it is pervasive. We have experienced denim sell out of items that Sydney has worn. We had strong positive traffic throughout this quarter and a staggering 40 billion impressions.
“Now is our opportunity to continue to convert this buzz into business and to convert these new customers into repeat customers. That’s the work of the work ahead…’Sydney Sweeney Has Great Jeans’ is not going anywhere. Sydney will be part of our team as we get into the back half of the year and will be interesting. We’ll be introducing new elements of the campaign as we continue forward.”
That puts the spotlight on sales going into the back half.
Second-quarter comparable sales slid 1 percent at the company, with a 3 percent decline at American Eagle partially offset by a 3 percent increase at the Aerie business.
American Eagle Outfitters’ second-quarter net income inched up to $77.6 million from $77.3 million a year earlier while operating income tallied $103 million.
Earnings per share totaled 45 cents — well ahead of the 20 cents analysts forecast.
AEO has been busy investing in itself and so far this year has spent $231 million to buy back 20 million shares, or about 10 percent of those outstanding. The company ended the quarter with inventory valued at $718 million, an increase of 8 percent that was driven by higher tariffs. Inventory on a unit basis rose 3 percent.
Neil Saunders, managing director of GlobalData, said the company retailer had seen a “step change.”
“The controversy around the Sydney Sweeney denim campaign proved to be something of a tempest in a teacup,” Saunders said. “While it generated strong reactions, it ultimately had no serious detrimental impact on sales. Indeed, guidance for the second half points to improved momentum, supported by both the denim marketing and the ongoing Travis Kelce partnership.
“Regardless of the merits of the collaborations, making more noise is exactly what American Eagle needs to do to cut through and regain ground among consumers for whom it has slipped off the radar,” he said.
