Farewell, KB Toys, Circuit City, Mervyn’s, and Linens ‘n Things.

Each retailer, now defunct, offered good prices, but that’s not enough in a recession. Quality and brand strength count as consumers look to stretch a buck, and so do well-managed expansion and debt loads.

The lesson for investors: Cheap prices alone don’t cut it, so look for companies that can offset declining sales on premium brands with low-cost alternatives to pick up the slack during the recession, or for a well-run company that fills a niche.

Case in point: MillerCoors, the joint venture of Molson Coors Brewing (TAP) and SAB Miller (SAB), said third-quarter net revenue rose 3.1% despite a 1.3% decline in sales to retailers. The company offset declines in premium brands such as Killian’s Irish Red and Miller Chill with cheap labels, including Keystone Light and Miller High Life. Like other companies, MillerCoors has aggressively slashed expenses.

Some companies are too confident in the strength of their brand and are slow to respond to changing spending patterns.

Abercrombie & Fitch (ANF) sells upscale men’s, women’s and kids’ casual clothes at hefty prices. The company did well during the flush times, but through the first nine months of 2009, same-store sales fell 28% from the same period a year ago. The reason: Men’s jeans at $75.95 aren’t part of most budgets now. The unanswered question: Will sales rebound as the economy recovers?

By contrast, Aeropostale (ARO) aggressively cut prices and offers printable discount coupons online. Net sales for the five-week period ended October 3 rose 28% to $187.3 million and year-to-date sales are up 21% to $1.3 billion.

There’s money to be made by going downscale, especially during a recession. Dollar Tree (DLTR) operates about 3,600 discount stores in 48 states and most housewares, toys, food, health, beauty aids, and seasonal items are priced at $1 or less. The company isn’t as large as Dollar General with about 8,575 stores or Family Dollar Stores (FDO) with about 6,600 stores, but Dollar Tree has spiffed up its stores in an effort to shed its bargain-basement image. The company looks like a good bet as the baby boomers retire and live on fixed incomes.