American Eagle tumbles after BofA says Sydney Sweeney boost won’t beat tariffs
Analysts say the buzzy mall retailer’s pricing power is limited as tariffs add pressure to both AE and Aerie.
American Eagle shares slid as much as 4% Monday after Bank of America downgraded the stock to “underperform” (sell) from “neutral” and cut its price target to $10 from $11 — or about 22% below Friday’s close.
The downgrade comes despite a buzzy campaign with actress Sydney Sweeney that helped drive AE shares up 18% in August. Analysts said the splash may have supported near-term sales momentum, but doubted it would be enough to spark a long-term turnaround.
The bigger issue: tariffs. Analysts warned that AE and Aerie have limited pricing power, making it hard to offset new costs. Management has already said tariffs would cut fiscal 2025 gross profit by roughly $40 million, or 150 basis points, even after mitigation. Bank of America estimates that an additional 20% tariff on goods from the rest of the world would pile on another 20 to 70 basis points of margin pressure over the next two years.
Competition is also heating up: rival Gap recently launched its “Better in Denim” campaign with girl group Katseye, which the retailer says has become its most viral ad ever, resonating strongly with younger shoppers who value diversity and inclusion.
American Eagle is down 27% year to date, with the company poised to report earnings next week.
