Recessions are bad news for nearly every industry under the sun, but they are particularly chilling for apparel retailers. Splurging for pricey shirts, khakis and related fare falls by the wayside when consumers decide to tighten their belts. Also, clothing makers that are considered "higher end" are usually the first to suffer. After all, why pay $100 or more for a pair of jeans at a fancy store in the mall when you get something of comparable quality at the Gap (NYSE:GPS) for far less cash? Heck, even Target (NYSE: TGT) has created a loyal following of clothing shoppers with its affordable yet trendy offerings.

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With signs that the economy is starting to perk up, we decided to examine two higher-end apparel names that are known for their preppy clothes and sometimes lofty price tags to see if there is a clear winner for investors. Both stocks have been lifted by the recent market rally, but that doesn't mean both are created equal. As we will show you, there are plenty of reasons to favor one member of our pair over the over.

Abercrombie & Fitch (NYSE:ANF) Forward P/E: 20.5 year-to-date performance: 40%
Polo Ralph Lauren (NYSE:RL) Forward P/E: 18 year-to-date performance: 65%

Facing Some Headwinds
Knocking a stock that is up 40% year-to-date that is trading under 21-times forward earnings isn't a frequent course of action, but Abercrombie & Fitch has likely benefited from a rising tide lifting all boats during the market rally more than it has from its own fundamentals. The stock is downright expensive, with a trailing P/E of almost 63 and its 12-month sales growth is expected to be negative 5.6% while EPS growth is expected to be -41%. In fact, Abercrombie's five-year EPS growth is terrible at -6.5%, downright startling over three years with a -33% growth rate and that just gets worse on a one-year basis.

One reason Polo is favorable to Abercrombie is that Abercrombie faces more competition in the form of Aeropostale (NYSE:ARO) and American Eagle (NYSE:AEO). All three companies target the same demographic, teenagers to 25 year olds, and this is a notoriously fickle group. Plus, with mom and dad footing the bill, Abercrombie is vulnerable due to its high prices.

This demographic is also exceptionally limiting for Abercrombie. Let's be honest, 30 isn't "old," but most consumers in the that age group aren't seeking out cargo shorts and expensive t-shirts, at least not for their daily fashion choices.

Here's another reason to avoid Abercrombie: The dividend yield is anemic at 2.1% and if you had invested $1,000 in Abercrombie shares on Jan. 1, 2008, you'd have around $400 today. All that while the CEO made $71 million last year. (Find our how to determine whether a CEO is being overpaid in our article Evaluating Executive Compensation.)

Pushing More than Polos
Polo Ralph Lauren recently touched a new 52-week high of $78.44, but has pulled back a bit since. Yes, the price tag is far loftier than Abercrombie's, but Polo is actually a cheaper stock, trading at below 20-times trailing earnings. Polo's revenue and EPS growth over the past year and five years also paint a much prettier picture than the equivalent figures from Abercrombie. Not to mention there is a growth story here with the company's plans to take advantage of Chinese demand for luxury goods by opening 15 new stores in China annually. Put another way, Ralph Lauren is a recognized brand in China, while Abercrombie is not on that level just yet.

Investors are taking note of the Polo story, and that includes more than just stock purchases. Options buyers snatched up 3,400 Polo October 75 calls on September 22 when the open interest in the strike was just 638 contracts.

Beyond the market stats, Polo has huge advantages over Abercrombie in that its clothing, while pricier for certain items, appeals to a broader swath of consumers and is more functional. Polo offers fashions for nearly every age demographic, featuring items ranging from casual wear to tuxedos.

The Bottom Line: A Clear Winner
Although Polo is a far younger company than Abercrombie, the former has mastered the art of timeless fashion and that is a big deal in the clothing world. No, Abercrombie isn't going to disappear from the fashion landscape, but the stock is simply inferior to Polo shares. Recession or no recession, it is hard to argue that Abercrombie's apparel is fairly priced. On the other hand, Ralph Lauren is considered a luxury brand, and that makes the stock the winner here. (Read Analyzing Retail Stocks to learn about the most important metrics to look at when analyzing retail stocks.)

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