American Eagle saw sales beat expectations in the most recent quarter, after a controversial ad featuring Sydney Sweeney sparked a positive reaction from President Donald Trump and his Make America Great Again base.
Shares in the company rose by almost a quarter overnight (23.5 per cent), equivalent to around a $500m bump in market capitalisation value.
The Europhia actress made waves with her participation in a July ad for the clothing company. The ad used wordplay on “jeans” and “genes,” highlighting Sweeney’s physical appearance and saying she “has great jeans.”
While critics accused the ad of playing into eugenic ideals, that some genetic qualities are better than others, MAGA came to her defense.
Even Trump himself praised Sweeney when he found out she was a registered Republican, writing on social media she “has the ‘HOTTEST’ ad out there.”
“The jeans are ‘flying off the shelves,’” Trump wrote.
But that assessment of American Eagle sales was not totally reflected in its second quarter earnings released Wednesday.
Sales actually fell to $1.28 billion, slightly down from $1.29 billion the year before - though they comfortably beat revenue estimates of $1.23bn and were the firm’s second-highest ever for the second quarter of the year.
The company has celebrated Sweeney’s ad, as well as a product collaboration with Kansas City Chiefs Tight End Travis Kelce, who recently got engaged to singer Taylor Swift.
“The fall season is off to a positive start. Fueled by stronger product offerings and the success of recent marketing campaigns with Sydney Sweeney and Travis Kelce, we have seen an uptick in customer awareness, engagement and comparable sales,” American Eagle CEO Jay Schottenstein said in a statement Wednesday.
American Eagle stock spiked more than 20 percent in after-hours trading on Wednesday.
Share price rises are not entirely linked to product sales. In this instance, an improving profit margin would have contributed toward investor confidence, as well as the announcement of a share buyback from the company. Store closures of 35-40 American Eagle locations by the end of the year would also contribute to a reduced cost base.
While the stock has mostly gone up since late July when Sweeney’s ad rolled out - it was around 25 per cent up since 1 August prior to the pre-market frenzy into Thursday - the share price was still down 18 per cent year to date.
Even when markets open on Thursday with American Eagle stock at around $16.50, it will remain some distance off last October’s price of $22 a share, and more than 55 per cent down from earlier highs in 2021 when the price reached near $38.
The company has maintained the ad “is and always was about the jeans.”
“We’ll continue to celebrate how everyone wears their AE jeans with confidence, their way,” American Eagle said in a previous statement. “Great jeans look good on everyone.”
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