Beautiful dreamers: Abercrombie & Fitch model what not to do in a recession

Teen apparel purveyors Abercrombie & Fitch and Aeropostale have been a merchandising professor's dream case study of what to do -- and what not to do -- during a recession.

Abercrombie & Fitch dragged its feet when it came to cutting prices on its trademark tees and jeans, and teenagers responded by avoiding the retailer (scantily-clad catalog models notwithstanding).

On top of A&F's clunker of a first quarter (read about it here, if you need something to make you wince), the company announced this week that it's scuttling its Ruehl brand, a more upscale line that "defines the aspirational Greenwich Village lifestyle," as its website helpfully clarifies. Five year-old Ruehl turned out to be a bit of a problem child for A&F in this more budget-conscious climate; it lost $58 million last year and sales dropped by a whopping 33% last month.
Compare that to the overachieving Aeropostale: The brand's stock has more than doubled in price and it's had 13 quarters (that's three years-plus) of record profit growth. Aeropostale is funneling a good chunk of its extra cash into a new brand targeting its existing customers' younger siblings: Called P.S., the new store will sell clothes for the "'tween" demographic of 7 to 12 year-olds. The company says it'll open 10 P.S.'s this year and states long-term plans for more than 500 stores.

It's an ambitious strategy, but it's also a big gamble. This is a company that has proven it knows how to ride out a recession (even if some Walletpoppers quibble with their Jenga tower-pricing strategy of markdowns-on-top-of-markdowns). But the 'tween category hasn't exactly been immune to slumping consumer spending; Saks Incorporated deep-sixed its chain of tween accessories and "makeover" stores, Club Libby Lu, earlier this year.

There's also the question if rock-bottom prices and two-for-$22 T-shirt promos will be enough to retain the attention of a notoriously fickle audience once the economy swings back into positive territory. Aeropostale and its new, younger sibling are on good footing for now, but they could one day find themselves as unwelcome as N'Sync at a Jonas Brothers concert if they don't stay in tune with what their growing base of customers demand.