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

By Kanchana Chakravarty

(Reuters) -American Eagle is proving that there's no such thing as bad publicity.

The company's shares jumped 33% on Thursday, fuelled by a flurry of interest in the retailer, thanks to a controversial ad campaign featuring "Euphoria" actor Sydney Sweeney.

"'Sydney Sweeney Has Great Jeans' (the ad campaign) is not going anywhere. Sydney will be part of our team as we get into the back half of the year, and we'll be introducing new elements of the campaign as we continue forward," Chief Marketing Officer Craig Brommers said.

The campaign, which faced backlash on social media over perceived racial undertones related to genetic traits, nonetheless delivered what Brommers called "unprecedented new customer acquisition," during the company's post-earnings call on Wednesday.

The company is also benefiting from its collaboration with National Football League (NFL) star and pop superstar Taylor Swift's fiancé, Travis Kelce. Partnering with Kelce's clothing brand Tru Kolors has helped AE amplify its reach among young shoppers.

American Eagle said its customer count was up more than 700,000 since the launch of the campaigns with Sweeney and Kelce, and the ads have generated 40 billion impressions.

The company is relying on celebrity-led campaigns to attract Gen Z and boost demand among shoppers who are pulling back on spending amid economic uncertainty.

"Q2 results eased concerns around execution and proved marketing momentum is translating into sales," said Lale Akoner, global market analyst at eToro.

HOLIDAY BUMP?

American Eagle forecast flat annual comparable sales, compared with analysts' estimate of a 1.1% drop.

"(The) collaborations were, and are, genius in successfully driving traffic, conversion and sales. These collaborations are only getting started ... with the NFL season on the horizon and more to come from both collaborations in a meaningful way during the holiday season," Barclays analyst Adrienne Yih wrote in a note.

"So long as the marketing is in play for 2H25, we expect AE brand to beat current guidance for 2H25."

American Eagle's forward price-to-earnings multiple, a common benchmark for valuing stocks, is 13.05, compared with peers Abercrombie & Fitch's 8.94 and Urban Outfitters' 12.13.

Short interest in American Eagle, whose shares were trading at $18, stood at 16.6% of public float, per data compiled by LSEG.

(Reporting by Kanchana Chakravarty and Aishwarya Venugopal in Bengaluru; additional reporting by Purvi Agarwal in Bengaluru; Editing by Sumana Nandy and Shinjini Ganguli)