The Aug. 8 earnings announcement from industry-leading Macy's (NYSE: M) surprised absolutely no one who follows the company. As noted a month and a half ago, the owner of both Macy's stores and higher-end retail giant Bloomingdale's has consistently grown same-store sales, revenues, and earnings. Yet Macy's remains the best value in the sector, even after the post-announcement investor buying spree raised the share price near its 52-week high.

The results
This is the kind of consistency investors dream about. Once again, quarter-vs.-quarter results were off the charts. Sales topped $6.1 billion in Q2, a 3% increase over last year. The $12.26 billion in sales for the first half of this year is a 3.7% improvement over 2011. Top-line growth is driving bottom-line increases, too. Earnings rose 22% for the quarter, 27% through the first six months of the year.

Operating income and cash flow improved, and they weren't bad to start with. Operating income for the quarter jumped 9.5% to $554 million compared with Q2 2011, equal to 9.1% of sales. And that 9.1% is up from 8.5% last year. The increase in this key area is a good indicator of a company that's becoming even more efficient.

cash flow also impressed, up to $638 million through June of this year, from $587 million in 2011. The $1 billion share-buyback program in 2012 continued in Q2. The 10.6 million shares this past quarter brings the total to 16 million year to date, equal to $588 million. I'm not a fan of buying back shares just for the sake of doing it, but the company's depressed share price warrants the investment.  

After all the good news, Macy's raised earnings expectations for the balance of the year to $3.30 to $3.35 a share, up a nickel from earlier estimates. That may not have appeased some analysts who had hoped for more, but it certainly beats heading in the opposite direction.

Bricks-and-mortar retail lives, but online sales can't be ignored
According to the U.S. Census Bureau, online transactions accounted for 4.9% of the $1 trillion in total retail sales in Q1 of this year. Retailers need an online business plan in today's Internet-ready world. Wal-Mart (NYSE: WMT) and Target (NYSE: TGT) are retail leaders, and their commitment to growing online revenues is no secret. In fact, Wal-Mart, Macy's, and other big retail players are adding return centers for Web purchases, payment booths, and pickup locations at their bricks-and-mortar outlets.

As good as the overall numbers are at Macy's, they pale in comparison with what it's doing online. Second-quarter online sales jumped 36.1% and are up nearly 35% year to date. The online results added an impressive 1.7% to same-store sales in Q2, and 1.6% through the first half of the year. With the busy back-to-school season upon us and the holidays not far behind, this key area will generate significant revenue growth for Macy's for the balance of 2012.

Value at Macy's
Even after the share price run-up following the Aug. 8 earnings announcement, Macy's remains the best value in a surprisingly strong industry. Nordstrom (NYSE: JWN) and Saks (NYSE: SKS) both trade at considerably higher earnings multiples than Macy's 12.5. Nordstrom's 17.3 P/E is close, but Saks is nearly twice as expensive by comparison. Wal-Mart and Target are also more expensive, though Target's 14.5 P/E is at least in the ballpark.

The company's strong profit and operating margins are better than most. And the 2.2% dividend yield Macy's provides shareholders is also near the top of the industry. Only Wal-Mart's 2.1% and Target's 2.3% are in the same neighborhood.

As Macy's approaches its 52-week high of $42.17 a share, don't be surprised to see some slight resistance. As you know, that's often par for the course. But there's only so long a company can continue to outperform both the industry and expectations and remain undervalued. Macy's is on the rise, and there's more to come.

In spite of tepid economic data both here and abroad, retail continues to offer investors solid growth and income opportunities. We've covered several here, but this hardly covers the full spectrum. There's a great international retail investment opportunity detailed in our special free report "The Motley Fool's Top Stock Pick of 2012."