Aug. 28 (Bloomberg) -- Aeropostale Inc., the U.S. teen retailer with more than 900 stores, said a strategy of planning discounts ahead of time has helped it outperform competitors in the recession.

Aeropostale, which caters to 14- to 17-year-olds, sells $10 t-shirts, $12 hooded sweatshirts and $20 jeans, and sets prices for such items with the purpose of accelerating demand, Chief Executive Officer Julian Geiger said. Other retailers mark down merchandise that’s not selling.

“None of our competitors are really doing that,” Geiger, 63, said of the strategy based on pre-planned promotions, in an Aug. 20 telephone interview. “Our prices still represent a significant value to our competitors even when they lower their prices.”

The company’s pricing model has helped its shares more than double this year. To keep teenagers interested, Aeropostale will need to maintain the level of popular fashion it has introduced to its products, according to Eric Beder, an analyst at Brean Murray Carret & Co. in New York who recommends the stock.

“It’s really going to be a test of the status of Aeropostale among their core customers and whether they can keep the fashion going,” said Beder, who has a price target of $48 on the shares.

Aeropostale fell 60 cents to $39.70 at 4:07 p.m. in New York Stock Exchange composite trading. The stock has jumped 147 percent this year. American Eagle Outfitters Inc., the clothing retailer for 15- to 25-year-olds, has climbed 48 percent in that period. Abercrombie & Fitch Co., the operator of Abercrombie and Hollister stores, has risen 46 percent.

Rising Sales

Aeropostale, based in New York, has reported sales gains at stores open at least a year in the past eight months, while higher-priced retailers including Abercrombie and American Eagle have faced declines.

Pittsburgh-based American Eagle is lowering starting prices for its clothes and factoring pre-planned promotions into its price model, Chief Executive Officer James O’Donnell said yesterday on a conference call.

“Pre-planned promotions are a significant part of our value strategy,” said Jani Strand, a company spokeswoman.

Abercrombie, based in New Albany, Ohio, has started to offer discounts and promotions to drive traffic.

“It is not the primary vehicle nor will it be the primary vehicle for driving business, but it is part of the balance at this point,” Chief Executive Officer Michael Jeffries said on an Aug. 14 conference call. “The driving force is fashion, quality, aspiration, and will continue to be so.”

Fashionable Polo

Consumers have slashed clothing budgets and flocked to retailers that offer value at low prices in the recession. Aeropostale won over shoppers not only with discounts but also with designs, Beder said.

“You can get a more fashionable polo for $15 from Aeropostale than you can get from either American Eagle or Abercrombie, and they’ll be much more expensive,” Beder said. “The teen customer is a very trend driven customer.”

Aeropostale, on it Web site, is offering 2 t-shirts for the price of one and polo shirts for $15. American Eagle’s classic polo costs $24.50 and Abercrombie’s vintage polo is $50.

In the second quarter, Aeropostale’s gross margin, the share of sales after subtracting the cost of goods sold, widened to 36.6 percent from 33.4 percent a year earlier. American Eagle’s gross margin was 37.8 percent, and Abercrombie’s was 66.5 percent.

Aeropostale Logo

Aeropostale has become synonymous with its logo and graphic t-shirts, sporting the retailer’s name. Aeropostale sold less than a million of these t-shirts in 1996, and expects to sell 40 million to 50 million this year, Geiger said.

The retailer uses its graphic t-shirts as a selling “weapon” by always offering a buy one, get one free promotion or some other discount, Beder said.

The chain’s sales at stores open at least one year advanced 12 percent in the second quarter. American Eagle’s comparable- store sales declined 10 percent and Abercrombie’s sales slumped 30 percent in the same period.

The mall-based company, with stores in Canada and Dubai, will announce further international expansion plans in the next four to five months, Geiger said, declining to be more specific.

“We have the ability to grow far wider and far broader,” Geiger said.

To contact the reporter on this story: Allison Abell Schwartz in New York at aabell@bloomberg.net.

Last Updated: August 28, 2009 16:15 EDT