What Happened?
Shares of young adult apparel retailer American Eagle Outfitters (NYSE: AEO) fell 3.1% in the morning session after new data revealed a significant drop in in-store foot traffic, raising concerns that a controversial ad campaign is failing to drive sales. Data from retail analytics firm pass_by showed that for the week ending August 9, in-store visits to American Eagle fell 8.96% year-over-year. This followed a 3.9% decrease in the prior week, marking the largest two-week decline in store traffic in over a year. While the campaign, featuring actress Sydney Sweeney, generated significant online buzz and increased web traffic, it has not translated into higher sales or market share, which has remained relatively flat. Analysts had previously cautioned that the social media attention was not reflected in Google search trends for the company's products, and the new foot traffic data appears to validate those concerns.
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What Is The Market Telling Us
American Eagle’s shares are very volatile and have had 24 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago when the stock gained 6.3% after continued positive sentiment as President Donald Trump acknowledged the company's recent advertising campaign featuring actress Sydney Sweeney. The gain built upon a massive surge on August 4th, when the stock jumped over 23% for its biggest one-day leap since 2000. That initial spike followed a social media post where Trump called the ad the 'HOTTEST ad out there,' pushing the stock into meme territory. While the endorsement created significant market interest, some reports cautioned that the rally was driven by hype rather than the company's underlying financial health, which they described as having weak margins.
American Eagle is down 26.9% since the beginning of the year, and at $12.52 per share, it is trading 44.8% below its 52-week high of $22.70 from August 2024. Investors who bought $1,000 worth of American Eagle’s shares 5 years ago would now be looking at an investment worth $1,026.
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