American Eagle Outfitters Inc. (NYSE:AEO) is attempting a high-wire act ahead of its third-quarter earnings: balancing a star-studded marketing pivot with significant macroeconomic headwinds. Investors will be watching closely to see if this can generate enough top-line momentum to hit the targeted $1.32 billion in revenue while offsetting an expected $20 million in tariff-related costs.
Check out AEO’s stock price here.
From Viral Trends To ‘Live, Laugh, Low Rise’
After actress Sydney Sweeney successfully captured Gen Z's attention during the back-to-school season, the retailer is now banking on domestic icon Martha Stewart to target the rest of the market.
The retailer's marketing strategy has evolved from a singular focus on youth culture to a broader, multi-generational approach. Management credited the "Sydney Sweeney Has Great Jeans" campaign with driving “record-breaking” new customer acquisition and a mid-single-digit traffic bump in August.
Now, to sustain that momentum through the critical holiday corridor, AEO has tapped 84-year-old Stewart.
Stewart’s partnership is a strategic play to remind older demographics that "American Eagle is there for her, too." The hope is that bridging these generations will sustain the mid-single-digit traffic gains seen early in the quarter.
See Also: American Eagle Analysts Increase Their Forecasts After Better-Than-Expected Q2 Results
The $20 Million Headwind
Despite the marketing buzz, financial realities loom large. During the second quarter earnings call, CFO Michael Mathias explicitly guided for approximately $20 million in tariff headwinds for the third quarter.
This pressure on gross margins makes the consensus estimate revenue of $1.32 billion—a projected increase from $1.29 billion year-over-year—critical for protecting profitability.
Management has guided for third-quarter operating income between $95 million and $100 million, assuming comparable sales rise in the low single digits. The key question for Wall Street is whether the “Sweeney effect” provided enough of a buffer in August and September to absorb these rising supply chain costs.
Wall Street's Verdict
Sentiment remains cautiously optimistic. Analysts expect AEO to report earnings per share (EPS) of $0.43, down from $0.48 in the prior year, according to Benzinga Pro.
The stock closed 4.17% higher at $21.25 apiece on Monday, trading near a 52-week high of $21.28 as expectations are elevated. With the stock up 27.47% year-to-date, it rose 10.45% over the year.
Benzinga Edge’s Stock Ranking shows that it maintains a stronger price trend over the short, medium, and long terms, with a poor quality ranking. Additional performance details are available here.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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