Best In Class: Price Is Right at Aeropostale

The teen market is fickle, just like its core customers. Throw in parents cutting back on discretionary apparel purchases -- not to mention cutting back on allowances -- and the sector today seems all but impenetrable.

But business maxims don't change in trying times -- they are, in fact, made all the more true. The key to success for teen retailers in the economic crisis is therefore the same as it has been throughout time: Give shoppers what they want at prices they can afford. And this deceptively simple formula that has helped Aeropostale(ARO Quote) to not only survive, but thrive, during the recession.

Aeropostale has prided itself on its ability to offer "trend-right" merchandise at value prices, perfecting its promotional business model long before consumers began seeking out lower prices. Call it a miniature Wal-Mart(WMT Quote). Indeed, much as that big-box discounter has done, Aeropostale has transcened its core middle-income demographic through an appeal to frugality.

But unlike Wal-Mart, which is still delivering its usual steady results amid the recession, Aeropostale's numbers are breathtaking -- making the New York City-based Aeropostale our pick for the best in class of the retail.

Luckily for Aeropostale, the "new normal" is expected to continue long after the economy rebounds. "The idea that shoppers will immediately revert back to purchasing a $20 shirt with a $60 logo just won't happen," says Craig Johnson, president at Customer Growth Partners.

Indeed, through sourcing, Aeropostale has been able to be a price player without disregarding its margins. In the company's first quarter, which ended May 2, the mall-based retailer posted an 81% surge in profit, with gross margins experiencing a 220 basis point improvement.