Aéropostale a Back-to-School (and Recession) Winner

Last Updated Sep 10, 2009 1:56 PM EDT

The back-to-school season, usually one of the most lucrative in retail, is posing major problems for the industry this year. American Apparel, Abercrombie & Fitch, Zumiez and other stores catering to teens posted dismal sales figures in August.
One exception in the landscape, though, is Aéropostale. The New York City-based teen-apparel chain of nearly 900 stores posted a nine percent same-store sales gain in August, beating analyst estimates of a 7.1 percent gain. Total sales rose 16 percent from August 2008, hitting $241.7 million.

August was not a unique month for the company as of late. Aéropostale just turned in record-breaking second-quarter results as well, and every month this year so far saw same-store sales increases, while the apparel sector on average is posting an average monthly year-to-date decrease of 6.4 percent, according to International Council of Shopping Centers data.

So what is Aéropostale's key to success where others in this space are faltering?

For one thing, the retailer is not adverse to promotional pricing in a recession unlike Abercrombie, which posted a 29 percent same-store sales plunge in August, and is just now warming up to decreasing its price points. Mindy Meads, Aéropostale's president and chief merchandising officer, said during its second-quarter conference call that the retailer's main advantage lies in its pricing flexibility.

"We have the ability on any given week to raise prices, [then] take them down at the peak selling period," she said. Aéropostale is also not shy about promoting its low-priced deals and sales on its Web site.

Another tactic that likely helped Aéropostale is the shedding of 11-unit Jimmy'Z concept before it let the chain grow too large. Too many retailers in the apparel sector let their spin offs grow too large too quickly in efforts to accelerate the business, but larger retailers like Abercrombie, Gap and Pacific Sunwear of California ended up closing them after low sales and substantial expense.

The main challenge facing Aéropostale? According to Eric Beder, an analyst at Brean Murray Carret & Co., its needs to keep selling fashion that keeps the interest of fickle teen consumers. "It's really going to be a test of the status of Aéropostale among their core customers and whether they can keep the fashion going," Bloomberg quoted him saying.