FILE PHOTO: People stand near an American Eagle ad campaign featuring Sydney Sweeney in New York City, U.S., August 4, 2025. REUTERS/David 'Dee' Delgado/File Photo

By Neil J Kanatt

(Reuters) -American Eagle Outfitters forecast third-quarter comparable sales above expectations on Wednesday, signaling a demand boost in the fall season from its Sydney Sweeney and Travis Kelce partnerships.

Its shares surged 25% after the bell as the company hailed the controversial "Great Jeans" campaign with actress Sydney Sweeney, which included a fall denim collection, as a success.

"The campaign has generated unprecedented new customer acquisition," chief marketing officer Craig Brommers said in a post-earnings call.

American Eagle also tied up with National Football League player Travis Kelce's clothing brand Tru Kolors for a limited edition apparel lineup, creating buzz among shoppers as the news followed Kelce's engagement to pop star Taylor Swift.

It had previously entered into partnerships with tennis player Coco Gauff and actress Jenna Ortega, eyeing Gen Z shoppers.

The company's focus on the younger demographic comes at a time when U.S. holiday spending is expected to see its steepest drop since the pandemic as shoppers — particularly Gen Z — pull back amid economic uncertainty, according to a PwC survey.

EMarketer analyst Sky Canaves said American Eagle faces "a bumpy road" as tariff impacts, higher advertising spend and an uptick in holiday promotions could dent profit.

"The campaigns appear to be driving enough sales to offset deeper losses," Canaves said.

The company expects quarterly comparable sales to rise in the low single digits, compared with expectations of a 0.3% decline, according to data compiled by LSEG.

American Eagle, which had pulled its annual forecasts in May, expects annual comparable sales to be flat compared to a year ago, while analysts estimated a decline of 1.1%.

It expects a $20 million hit from tariff costs in third quarter and $40 million to $50 million in the fourth quarter.

For the second quarter, comparable sales fell 1%, compared to an expected 2.4% decline, while adjusted profit per share of 45 cents beat estimates of 21 cents.

(Reporting by Neil J Kanatt in Bengaluru; Editing by Alan Barona and Arun Koyyur)