American Eagle has become the loudest voice in the denim wars. The brand’s high-profile campaigns with Sydney Sweeney and Travis Kelce have drawn 40 billion impressions, sold out products and brought in just under 800,000 new customers since late July. But as supply chain costs surge and pricing pressure builds, investors are asking whether American Eagle’s focus on cultural heat is coming at the cost of sustainable growth.
“In Q2, we were the No. 1 brand for 15‑ to 25‑year‑olds and the No. 2 jeans brand for 15‑ to 29‑year‑olds,” said Jennifer Foyle, president and executive creative director of American Eagle and Aerie, during the company’s September 3 earnings call. “We experienced a positive response in denim and were chasing back into key fits, like Dreamy Drape and Athletic.”
But not all categories are hitting. “We saw softness in shorts, sweaters and core basics — categories that we know are important, but didn’t quite land,” she added. To course-correct, she confirmed that Aerie “hired a new lead merchant to better align our assortments and drive speed and relevance.”
The numbers paint a mixed picture. Net revenue for Q2 fell 1% year-over-year to $1.28 billion. Comparable sales were down 1%, with AE brand comps down 3%. Aerie grew 3%, bolstered by continued strength in intimates, which Foyle confirmed still make up “approximately 40% of the assortment.” While earnings per share rose 15% to $0.45, this was largely driven by $231 million in share buybacks. Average unit retail dropped 5%, and inventory rose 8%.
CMO Craig Brommers led the call with marketing wins. “Sydney Sweeney sells great jeans. She is a winner,” he said. “We saw The Sydney Jacket sell out in one day, and her Dreamy Drape Jean sold out in a week. That’s why we’re restocking it this fall.”
Still, some analysts questioned whether that engagement was translating into operational strength.
In an interview with Glossy, Brommers was quick to deflect criticism of the campaign’s reception. “It is completely false to say the campaign was overwhelmed by negative sentiment,” he said. “This campaign has cut through the noise at a time when there is uncertainty in the retail environment.”
That uncertainty includes trade policy. American Eagle expects $20 million in tariff costs in Q3 and up to $50 million in Q4, even after early mitigation. “We were looking at $180 million in impact, and through early moves in sourcing and logistics, we were able to bring that number way down,” said CFO Mike Mathias. “We’ve taken decisive action.”
American Eagle has shifted production away from China to countries including Vietnam, Indonesia, India, Bangladesh, Cambodia and Central America. “While we have introduced selective price increases, especially in denim, we do not expect broad-based pricing actions,” Mathias said. “That’s not our strategy.”
But those costs are still expected to compress margins, especially during the holiday season.
Meanwhile, AE confirmed it would increase marketing spend in Q3, with more campaigns planned for both Kelce and Sweeney in the months ahead.
“He’s truly a partner, and we are just getting started,” Brommers said of Kelce.
By contrast, competitors are playing a quieter — and leaner — game. Abercrombie & Fitch posted record Q2 sales of $1.2 billion, up 7%, driven by 19% growth at Hollister. “We delivered our 11th consecutive quarter of growth while also exceeding our top and bottom line expectations,” CEO Fran Horowitz-Bonadies said.
“We’re operating in this new tariff landscape from a position of strength, in terms of our brand health, our balance sheet and cash flow,” she added. CFO Robert Ball underscored the brand’s track record navigating economic shocks, including “tariffs 1.0, the pandemic, inflation, cotton spikes, freight rate spikes, you name it.”
Notably, Abercrombie is not relying on broad pricing increases. “We do not anticipate broad-based ticket price increases this year,” Ball said. “And we’ve not assumed meaningful AUR mitigation in our outlook.”
Gap Inc. echoed that stance. “We are not spending more in stores or in marketing. In fact, we’re getting much more efficient and effective,” said CEO Richard Dickson during the company’s August 28 call. Gap reported flat revenue at $3.55 billion, with 1% comp growth across its brands.
“Our marketing is working,” Dickson added. “That’s a reflection of the playbook. … We’ve been spending less and driving more effective results.” Referring to the success of the recent buzzy campaign featuring the girl group Katseye, he credited “vastly improved” creative and smarter media placement. “Our media mix model has been changing over time to be more reflective of where our consumers are.”
In the short term, American Eagle is winning attention. But analysts are watching closely to see whether that awareness will convert into earnings. With Q4 tariff costs mounting and Q3 pricing pressure already in play, the brand’s reliance on buzz may need to shift toward a system of more operational discipline.
