American Eagle's Sydney Sweeney boost will not last long, according to Bank of America. Ahead of the clothing retailer's second-quarter earnings release on Sept. 3, analyst Christopher Nardone downgraded shares to underperform from neutral. He also lowered his price objective to $10 per share from $11, which signals downside of more than 21% from Friday's close. Nardone noted that the boost from the Sweeney ad push will be sapped by higher tariffs. "AE and Aerie are in tough positions to navigate tariffs; we do not think that either brand has much pricing power," he wrote. "We cut our F25/F26 EPS estimates by 8%/30% to $0.65/$0.95 to reflect the impact of higher tariffs and lower Aerie sales." Shares of American Eagle have jumped more than 18% in August and 9% over the past month after the retailer launched a fall campaign with the actress , with President Donald Trump included among fans of the viral advertisements. While this initiative can drive near-term sales, this momentum may not last, Nardone warned. AEO 1M mountain AEO 1-mo chart "Near term, there is risk that the recent Sydney Sweeney campaign added momentum to AE to bridge a positive 3Q sales guide; however, we do not assign a high likelihood that momentum from this campaign can fully inflect the business over the long run," he wrote. On top of that, the current macroenvironment remains a tough one for brand turnarounds in general. Nardone added that a sales recovery for both American Eagle and sub-brand Aerie "will take time." "On AE, the jury is out on whether product outside of denim can gain momentum, and on Aerie, secular challenges in intimates and swim adds more pressure on Offline to maintain momentum," he wrote. "Pulling back on promos could curtail traffic, and we see risk that Aerie could pull back on store opening plans next year if the retail environment remains tough." Shares fell more than 3% in the premarket after the downgrade.
