July 24 (Reuters) - American Eagle Outfitters AEO.N surged 16% on Thursday after unveiling a new denim campaign with Sydney Sweeney, as the apparel retailer bets on the "Euphoria" and "The White Lotus" actress to reignite sales and reconnect with Gen Z shoppers.

In a campaign called "Sydney Sweeney Has Great (American Eagle) Jeans," the company partnered with Sweeney for its fall season denim collection that includes a limited-edition denim jacket as well as a "The Sydney Jean."

The campaign is American Eagle's latest effort to drive up demand as the company navigates muted consumer spending and potential price hikes due to tariffs.

The retail industry in the United States has been struggling to spur demand as consumers grappling with financial constraints cut back on non-essential buys, including apparel and accessories.

In May, American Eagle pulled its annual forecasts due to tariff uncertainty, with the company primarily sourcing from China.

The Sweeney partnership is not the first time a celebrity tie-up has helped drive shares of a company. In 2020, Crocs CROX.O shares jumped after singer Justin Bieber teased a collaboration with the shoe maker.

American Eagle has also previously teamed up with celebrities, including tennis player Coco Gauff and actress Jenna Ortega.

Sweeney's campaign, which launched on Wednesday and is reportedly the company's most expensive campaign to date, will also run across the exosphere of Las Vegas's 3D display orb Sphere.

Short interest in the company, whose shares were trading at $12.55 before the bell on Thursday, stood at 12.2% of public float, according to LSEG data.

The stock was the fourth-most trending ticker on Stocktwits, a social media platform for retail investors, indicating interest from individual traders who have boosted shares of retailer Kohl's KSS.N and other highly shorted names in recent days.

(Reporting by Aishwarya Venugopal and Sruthi Shankar in Bengaluru; Editing by Janane Venkatraman)

((Aishwarya.Venugopal@thomsonreuters.com; within U.S. +1-646-223-8780; outside U.S. +91 80 6749 2830;))