G-III Apparel (NASDAQ:GIII), a designer, manufacturer, and marketer of apparel and accessories for men and women, has been on a tear this year. The company's stock has shot up by 58% so far, and recent quarterly results indicate that there's more to come from G-III. The company beat analyst estimates in the second quarter and issued an encouraging outlook. Year-to-date, G-III has outperformed peers such as Urban Outfitters (NASDAQ:URBN) and American Eagle Outfitters (NYSE:AEO) by a big margin and that performance is likely to continue.

GIII Chart

GIII data by YCharts.

A look at the results
As mentioned earlier, G-III's rise has been driven by its solid quarterly performances. In the previous quarter, net sales grew 21% to $304.2 million, driven by positive trends across all of its segments and brands. Encouraged by the strong results, G-III issued a bullish forecast and expects full-year revenue to come in at $1.61 billion.

Driven by the revenue jump and also as a result of a 3-percentage-point gain in gross margin, earnings came in at $0.17 per share. This beat analysts' estimates of only $0.07 per share.

Looking ahead
G-III is expanding the Wilsons brand with 15 new full-price stores that are scheduled to open before the Christmas holiday shopping season. This move is quite logical as the Wilsons brand's comps had increased by 13.7% in the previous quarter on top of a 12.7% gain last year.

G-III continues to see strong demand for Calvin Klein dresses, women's suits, and handbags. An impressive growth of 70% was seen in Calvin Klein's women's suits and separates, which are now sold at more than 1,100 locations as compared to 800 a year ago. In addition, the sportswear segment witnessed an increase of 50% as compared to last year; it is now sold at 890 locations as compared to 662 last year.

The global branded apparel market is estimated to reach $600 billion by 2015 and Calvin Klein is firmly established in this segment. G-III has around five years of the licensing period for Calvin Klein remaining, and it maintains a good relationship with the brand's owner, PVH.

The outerwear segment of G-III remains the largest and the most valuable segment of the company. G-III has approximately 30 licensed, owned, and private-label brands, covering the entire spectrum of retailers from mass market to luxury.

G-III acquired Vilebrequin in August last year. This helped non-licensed revenue grow from $48 million to $70 million year over year. Going forward, the company will be adding footwear to its stores by the end of November. Furthermore, Vilebrequin's e-commerce site should be live going into the holiday season. G-III's foray into the footwear market is a well-thought-out strategy and in line with its long-term plans to become a men's and women's head-to-toe apparel maker.

Looking around
G-III is in a better position compared to peers such as American Eagle Outfitters. American Eagle had a terrible quarter recently as it lost favor among its target customers – teenagers. Teens started moving away from logo-centric, expensive fashion wear to cheaper and more affordable fast-fashion apparel.

A sluggish job market led to drops in store traffic, comps, and revenue in the previous quarter. The company reported a revenue decline of 3% from the year-ago-quarter and comps declined 7%. American Eagle expects this trend to continue going into the holiday season. Since its target customers are only teens, it lacks the opportunity that G-III has with respect to being able to serve a wider demographic.

American Eagle's loss was Urban Outfitters' gain, however, as teenagers started to move toward cheaper options for their apparel needs. Unlike American Eagle, it targets a wider demographic of consumers through its different brands -- Urban Outfitters (18-28 age group), Free People (25-30 age group), and Anthropologie (28-45 age group.)

In order to attract more consumers, Urban Outfitters is now planning to offer food and drinks in its stores. It has applied for a liquor and restaurant license for its forthcoming megastore at Williamsburg, and if this works out well then it could possibly expand this to other outlets as well. This move is based on a survey by Boston Consulting Group which found that Millennials spend more on restaurants than any other spending category, and also spend more on apparel than non -Millennials.

Valuation and final words
The great thing about G-III is that the stock is cheap even after recording solid gains this year. At a trailing price-to-earnings ratio of 18 times, the stock trades well below the industry average of 26.5. G -III licenses well-known brands and is also trying to improve its private label business by way of acquisitions.

This indicates that the company is following a good strategy of diversification. Moreover, with earnings expected to grow at a CAGR of 14.6% over the next five years, G-III looks like a good stock to buy at current levels .

ANUP SINGH has no position in any stocks mentioned. The Motley Fool recommends Urban Outfitters. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.