What to Watch With AEO Stock in 2026

American Eagle Outfitters (NYSE: AEO) shows that you don't have to rely on artificial intelligence (AI) stocks to beat the S&P 500. The global clothing retailer is up by more than 50% over the past year and made plenty of headlines with its viral Sydney Sweeney marketing campaign. Its revenue swung back to growth in its fiscal third quarter, which ended Nov. 1, after a few consecutive quarters of declining sales.

However, investors shouldn't assume that American Eagle can consistently outperform the S&P 500. The apparel company's stock is only up by 21% over the past five years, and its positive returns over that stretch are largely due to the stock's run-up in the second half of 2025.

These are some of the things investors should monitor and consider when determining if American Eagle belongs in their portfolio.

The Sydney Sweeney campaign changed the trajectory

Image source: Getty Images.

The first ads in the Sydney Sweeney campaign debuted on July 23, 2025, and they changed how people view the American Eagle brand. Up until that point, the company looked destined for another tepid performance in 2025, but that campaign, which was a big hit among conservatives, made many of them more eager to shop at American Eagle.

While conservatives have turned away from brands that don't align with their values -- sales of Bud Light still haven't recovered from the Dylan Mulvaney marketing campaign in 2023 -- the Sweeney campaign demonstrated that appealing to this group can turn a business around.

American Eagle grew its revenue by 6% year over year in its fiscal Q3. This was the first quarter that fully reflected the Sweeney campaign, and it also came with 4% year-over-year comparable sales growth. American Eagle CFO Craig Brommers later told Marketing Brew that the Sweeney campaign was worth every dollar.

Those aren't eye-popping numbers, but they are still a big deal, especially for a dividend stock with a yield that is approaching 2%. In its fiscal Q2, the clothing retailer's sales dropped by 1% year over year, with comparable sales dropping by the same percentage. That quarter ended on Aug. 2, just after the Sweeney campaign began.

Moreover, when American Eagle reported on its fiscal third quarter on Dec. 2, management told shareholders that it was sustaining its momentum in fiscal Q4 and had experienced a record-breaking Thanksgiving weekend to start the holiday season. The Sweeney campaign was the most noteworthy catalyst that could have produced this transformation.

Aerie sales have been gaining momentum

American Eagle also can't win on politics alone. The company must continue to innovate and release high-quality clothing lines to deliver positive returns for its shareholders in 2026 and beyond. That's exactly what the company is doing with its fast-growing Aerie segment.

Aerie markets its clothing and accessories with a focus on body positivity. This segment was gaining momentum before the Sweeney campaign, with comparable sales up by 3% year over year in fiscal Q2. It was a bright spot in that quarter, which featured a 1% year-over-year revenue decline for the company overall.

Aerie's comparable sales then increased by 11% year over year in fiscal Q3, while the American Eagle brand's comparable sales only increased by 1%, and gross margins took a slight hit. It's nothing to worry about for now, but tariffs contributed to that margin contraction. U.S. trade policies that raise the costs of imports can translate into lower margins for companies like American Eagle that source their wares internationally, so investors should continue to monitor tariff news.

Not all of the company's growth in its most recently reported quarter was driven by the Sweeney campaign, but it played a big role. If American Eagle can maintain its current momentum, it has a chance to surprise investors and deliver solid share price gains in 2026.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool recommends American Eagle Outfitters. The Motley Fool has a disclosure policy.