Online critics have pitted two celebrity-led denim campaigns against each other: Sydney Sweeney for American Eagle and Gap’s collaboration with KATSEYE. Wall Street thinks they are both winners.
Since American Eagle Outfitters rolled out a series of controversial denim ads featuring actress Sweeney in late July, shares of the company have jumped a whopping 95% percent, closing at $19.87 on Tuesday.
A few weeks later, Gap’s “Better in Denim” video featuring rising international girl group KATSEYE dancing to “Milkshake” by Kelis went viral. Since the ad’s release, Gap Inc.’s stock is up over 9%, closing at $22.64 on Tuesday. It’s not exactly the ‘Sweeney bump,’ as American Eagle investors have coined that company’s surge, but it’s still a welcome rise that outpaced the S&P 500, which rose 2.43% in the same period.
Before American Eagle’s Sweeney campaign rallied the company’s shares, it ignited a cultural firestorm. Numerous ads claimed Sweeney has “great jeans,” a pun on “genes” that critics perceived as promoting eugenics, a discredited racist theory popular in far-right circles.
“Genes are passed down from parents to offspring, often determining traits like hair color, personality and even eye color,” Sweeney, who is white and blue-eyed, says in one of the ads. “My jeans are blue.”
The ads seemed to be intentionally provocative, anthropology professor Shalini Shankar told CNN. “It seemed clear to me that they were aligning themselves with a white nationalist, MAGA-friendly identity,” Shankar, who studies youth and advertising at Northwestern University, said, per CNN. “People don’t invoke genetics casually.”
When Gap’s collaboration with pop sextet KATSEYE came out the following month, it was hailed in online chatter as a refreshing alternative to the American Eagle ads. One X user called it “the antithesis of that Sydney Sweeney ad” due to the featured group’s diversity and individuality.
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All news may have been good news for American Eagle, says Matthew Jones, senior analyst at M Science.
“That seemed to be an outlier, the controversy surrounding the campaign,” Jones said. “Ultimately, I think it’s leading to more interest in the name.”
The Sweeney campaign drove up traffic, sales and brand awareness for the company, CEO Jay Schottenstein said on a recent earnings call after touting a stronger-than-expected second quarter.
“The iconic fall denim campaign with Sydney Sweeney affirms we are the American jeans brand,” Schottenstein said on the call. He also credited the success of a campaign with Kansas City Chiefs player Travis Kelce, whose star has risen since his relationship-turned-engagement to pop singer Taylor Swift.
Although the September report exceeded expectations, American Eagle Outfitters’ total revenue in Q2 was down 1% compared to last year. The company’s Aerie brand sales grew 3% compared to last year, but the American Eagle brand’s comparable sales decreased 3%.
If the slight decline made investors nervous, they didn’t show it. American Eagle’s stock jumped 30% in after-hours trading following the earnings call, surging from $13.62 to $17.75.
Amin Eftegarie, a 36-year-old who lives in Bangkok, Thailand, had no idea who Sydney Sweeney was before her campaign went viral. But he feels fondly toward her now because she drove major returns in his investment portfolio.
“Sometimes a stock needs a catalyst,” the retail investor said. “Something needs to be shaken up so that investors take a second look at the company and then realize that it’s cheap. And in this case, it was Sydney Sweeney.”
A value investor, Eftegarie looks for stocks that are trading below what he believes is their intrinsic value. A few months ago, he bought call options for American Eagle, encouraged by the company’s profitability and durability as a brand.
“If you zoom out all the way back to the early ‘90s, roughly when I was born, they’ve been selling clothing for my entire life,” Eftegarie said. “This is not a business that is going anywhere. It’s here to stay.”
American Eagle and Gap denim both launched in the ‘70s and have proven to have “real staying power” as trends have come and gone, said Zachary Mannes, lead analyst at Stock Waves.
“There are plenty of people who, for their body type, these jeans fit them the best, and they’re always going to go buy their jeans in that size,” he said. “They don’t even have to try them on anymore.”
Denim purveyors like Gap and American Eagle may also be benefiting from current fashion trends. On TikTok, young shoppers have declared leggings, a once popular alternative to jeans, as “dead.” That trend seems to be showing up in the market: Shares of Lululemon, one of the most popular legging and athleisure brands, have fallen almost 59% year-to-date, closing at $162.34 on Tuesday.
Meanwhile, shares of denim brand Levi’s have jumped more than 27% in the same period, closing at $22.50. The jeans maker has had its own celebrity campaign over the last year, releasing a series of ads starring Beyoncé that coincided with the singer’s promotion of her country-fusion Cowboy Carter album. Levi’s CEO Michelle Gass credited a song on the album called “Levii’s Jeans” with helping drive Levi’s stock up 20% in a single day last year.
Jeans may be having a moment, but apparel companies like American Eagle and Gap still have to contend with weakening macroeconomic conditions in the near future, including tepid consumer sentiment and ongoing tariffs. Trends alone are no guarantee of success — they are inherently fickle.
“These names have been riding the wave of jeans becoming more popular,” Jones said. “However, one thing to consider is it’s a very cyclical business, and something that’s hot this year could be not very hot in the next couple years.”
Investors will have to wait and see whether the buzz around Sydney Sweeney and KATSEYE has given American Eagle and Gap shares boosts that will last, or whether they’ll disappear as quickly as a viral internet moment.