American Eagle is defying the odds thanks to a brilliant new strategy

American Eagle is defying a slump in teen retail, with sales rising 11% in the most recent quarter. 

The retailer has been taking several steps to avoid slipping sales, Phil Wahba of Fortune reports. A crucial component of this is avoiding heavily discounted clothing - a trend that's hurting competitors Abercrombie & Fitch and Aeropostale.

While shoppers love discounts and good sales, too many of them can be detrimental for retailers. Constant heavy discounts can condition consumers to not want to pay full price.

This trend is evident at retailers like J. Crew, where drastic discounts have become the norm.

American Eagle is getting out of this trend by focusing on high-quality products, Fortune reports, specifically pointing to jeans.

"Everybody makes jeans, and most everybody is competing on pricing down," Chad Kessler, global brand president for American Eagle Outfitter, said to Fortune. "I don't know that you can get off the merry-go-round without having something the customer is going to respond to." 

American Eagle is also avoiding this common downfall in the industry by making an effort to eliminate excess inventory, Fortune reports.

Additionally, clearing inventory comes with an added benefit, Fortune points out. It allows American Eagle to not only avoid profit losses, but it also lets the retailer pick up its pace reacting to trends, permitting it to be more competitive with fashion giants, like Zara.

Zara has the genius strategy in which it stocks very little and updates its collections frequently. Instead of other brands that only update once a season, Zara restocks with new designs twice a week, reports Suzy Hansen at The New York Times. 

It looks like American Eagle is trying to replicate that strategy.

"If we don't get clogged up in inventory, then we can really react to what's working, or what's not working," Kessler said to Fortune.