Sydney Sweeney helps spike denim profits

American Eagle Outfitter surged 10 per cent on Thursday after unveiling a new denim campaign with Sydney Sweeney, as the apparel retailer bets on the Euphoria and The White Lotus actor to reconnect with Gen Z shoppers and boost sales.

The company has partnered with Sweeney for its fall season denim collection that includes a limited-edition denim jacket as well as a "The Sydney Jean."

The campaign, called "Sydney Sweeney Has Great (American Eagle) Jeans," is the company's latest effort to revive demand as it navigates muted consumer spending and higher potential costs due to tariffs.

The retail industry in the United States has been struggling to spur demand as consumers grappling with financial constraints cut back on non-essential buys, including apparel and accessories.

In May, American Eagle, which primarily sources from China, pulled its annual forecasts due to tariff uncertainty.

"(The campaign) is its bid to stand out more and make some noise. Denim is popular right now, so putting money behind marketing makes sense for American Eagle," GlobalData managing director Neil Saunders said.

The Sweeney partnership is not the first time a celebrity tie-up has helped drive shares of a company. In 2020, Crocs shares jumped after singer Justin Bieber teased a collaboration with the shoe maker.

American Eagle has previously teamed up with celebrities, including tennis player Coco Gauff and actor Jenna Ortega.

"Well known personalities are always an easier way to tell a story quickly. It is one of the reasons athlete endorsements work so well," BMO Capital Markets analyst Simeon Siegel said.

Sweeney's campaign, which launched on Wednesday and is reportedly the company's most expensive campaign to date, will also run across the exosphere of Las Vegas's 3D display orb Sphere.

American Eagle's stock was discussed on retail trader-focused social media forums including Stocktwits and Reddit, indicating interest among small-time traders who have driven up shares of retailer Kohl's and other highly shorted names in recent days.