Clothing Chain Popular With Teens [and Investors]

Started as a Macy's-men's brand in the early 1980s, apparel-retailer, Aeropostale brought in $1.58 billion during its fiscal year, which ended Feb. 3. [Aero's market-value is currently 18% that of Macy's.] The stock has more than doubled in price since its 2002 debut. Though retail stocks, in general, have lagged the market in recent months, Aeropostale isn't struggling. Thus, marking the fifth straight month Aeropostale has handily outpaced rivals American Eagle Outfitters and Abercrombie & Fitch.
So what is Aeropostale doing different?
Apart from targeting a narrower age group (just high-schoolers, not twenty-somethings), it's cheaper. It has also become more sophisticated in product selection and inventory management, say analysts. The narrower product assortment allows the company to spend more on marketing the inventory-likely 'winners.' It divides offerings into groups it calls core (jeans, polo shirts), fashion basics (dresses) and veneer (high-quality novelties), and seeks roughly a 35-55-10 split of the three, respectively. That's a shift to more fashion than the company has historically carried, which is boosting average receipts and margins and helping the company to capture a greater share of lower-income customers (a key strategy, which is proving successful, during tough-financial time for Americans.)
"Both fashion and quality continue to improve, narrowing the gap between Aeropostale and American Eagle's product lines," wrote Christine Chen, an analyst with Needham & Co., an investment bank, on Jan. 24. "Aeropostale's price points, however, remain 30% to 50% below those of American Eagle, which we think attracts the more price-sensitive customer in the more promotional and challenging retail environment this Spring season."