American Eagle Stock Jumps on Earnings. Sydney Sweeney Helped Drive Record Sales.

American Eagle’s high-profile marketing campaign featuring actress Sydney Sweeney. (Michael M. Santiago/Getty Images)

Key Points

• American Eagle’s revenue increased 6% year over year to $1.36 billion, with same-store sales up 4%, exceeding Wall Street expectations.
• The company’s gross margins decreased by 0.4 percentage point to 40.5% due to tariff impacts and increased marketing expenses.
• American Eagle raised its fourth-quarter operating income guidance to $155 million to $160 million, reflecting stronger sales trends.

American Eagle Outfitters’ high-profile marketing campaigns featuring celebrities like Sydney Sweeney and Travis Kelce helped improve the retailer’s sales and boost shares by more than 20% this year.

The stock was on track for more double-digit gains Wednesday after the company topped fiscal third-quarter earnings and raised income guidance for the holiday quarter to reflect the brand’s momentum.

American Eagle’s revenue rose 6% year over year to a record $1.36 billion, while same-store sales increased 4% from a year ago, accelerating from the prior quarter’s 1% decline. Wall Street had penciled in $1.32 billion and for same-store sales to rise by 2.5%.

The sales improvement reflects the success of American Eagle’s recent marketing campaigns featuring Sweeney and Kelce, which executives said have driven customer engagement and attracted new shoppers. Combined, the partnerships garnered more than 44 billion impressions.

The recent holiday campaign featuring Martha Stewart should keep the ball rolling.

“The holiday season is upon us and the fourth quarter is off to an excellent start,” said CEO Jay Schottenstein on a call with investors Tuesday. “We are seeing a clear acceleration from the third quarter, including a record Thanksgiving weekend with strong performance across brands and channels.”

Shares were up 13% in the premarket trading Wednesday. The stock has gained 25% this year.

Profit for the quarter ended Nov. 1 was also stronger than Wall Street expected. American Eagle posted earnings of 53 cents a share, ahead of estimates for 43 cents a share, according to FactSet.

Margins were the report’s relatively soft spot. Gross margins of 40.5% declined by 0.4 percentage point from a year ago, reflecting a roughly $20 million tariff impact and higher marketing expenses.

That said, the company still raised fourth-quarter operating income guidance to reflect the stronger sales trends to a range of $155 million to $160 million. Prior guidance called for operating income to range between $125 million and $130 million. Same-store sales will rise between 8% and 9% from a year ago in the fourth quarter, compared with the previous forecast for growth in the low single digits.

Created with Highcharts 9.0.1American Eagle OutfittersSource: FactSetAs of Dec. 2

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For the full fiscal year ending in January, operating income will now range between $303 million and $308 million, above the company’s past outlook for $255 million to $265 million.

American Eagle stock is up about 25% this year; however, most of those gains were notched in the wake of the company’s September earnings report, which suggested the celebrity marketing campaigns paid off. The stock closed 4.2% higher on Monday.

Before then, shares were off 18%, reflecting investors’ concerns about trade policy and how consumers would respond to the company’s denim ad that starred Sweeney. The campaign, which used the tagline “Sydney Sweeney has great jeans,” drew both condemnation and praise, with some consumers critiquing the ad’s play on the words “jeans” and “genes,” saying it had eugenicist undertones. Others praised it. President Donald Trump said it was “the ‘hottest’ ad out there.”

Write to Sabrina Escobar at sabrina.escobar@barrons.com