With the all-important holiday shopping season nearly upon us, in conjunction with a slowly improving economic environment, it'd be nice if all retailers shared the same, high expectations heading into Q4. Of course, that's not reality – some retailers are simply better prepared and better managed than others.

If you're a retail investor in search of opportunities heading into Q4, you'd be hard-pressed to find two more diametrically opposed alternatives than Macy's (NYSE:M) and J.C. Penney (OTC:JCPN.Q). Both industry stalwarts announced Q3 results within the past few days; unfortunately for J.C. Penney, that's about where the similarities end.

J.C. Penney's running out of time
When J.C. Penney CEO Ron Johnson decided to do away with the "old jcp" in favor of everyday low prices and a "store within a store" format, I admired his gumption. Any time senior management makes such a bold move, it's hard not to (at least) admire the effort. Like many, I was willing to give Johnson some time; reinventing a 100-year old institution requires it. But Penney's Q3 results announced Nov. 9 made it pretty clear that this ain't working.

The transformation of over 7 million square feet of retail space to the "shop" format included big names like Levi's, Izod, and Liz Claiborne, a pretty impressive who's, who on the retail clothing scene. Johnson did his best to put a spin on reality, saying:

While the quarter overall was challenging, the performance of jcp's new brands and shops reinforces our conviction to transform jcpenney into a specialty department store.

Unfortunately, there's no escaping Penney's net loss of $0.93 a share after removing the impact of its asset sale in Q3. Or, a total sales decrease of 26.6%, same-store sales dropping over 26%, gross margins dropping to 32.4% (from over 37%), and online sales falling through the floor. It's early, so no one should expect Penney's to have suddenly become a growth machine; but there aren't even signs of life yet.

Macy's on a roll
The recent decline in Macy's share price since it announced stellar earnings Nov. 7 doesn't make a lick of sense -- but that's alright. For investors, what more could you ask for? Virtually every aspect of Macy's Q3 not only improved, but surpassed even its own expectations -- topped by its increasing Q4 guidance heading into the holidays.

As CEO Terry Lundgren put it, "We were pleased to deliver sales and earnings growth for the 11th consecutive quarter" -- shareholders should be, as well. Earnings jumped 12.5%, to $0.36 a share, compared to last year. Total sales were up nearly 4%, and results for stores open at least a year jumped 3.7%. So much for a tough retail environment.

And, as impressive as Macy's operating income and the huge jump in net cash is, long-term investors should be ecstatic with its 40.4% Q3 improvement in online sales. For the year, Macy's online revenues are up nearly 37%. There's no denying the impact of online retailer Amazon.com (NASDAQ:AMZN) on consumer's shopping habits. With $13.8 billion in revenues in its recent Q3, Amazon.com is the clear leader in the online space. Lundgren obviously gets it and, more importantly, Macy's online strategy is working.

How important is an online presence for traditional retailers? According to Retailing Today, online shopping in Q3 jumped 15% vs. last year, to an impressive $41.9 billion. And with the holiday's coming? Every retailer needs a successful online strategy, and Macy's has one.

Macy's recently announced that new debt offering will result in a charge in Q4, but will allow it to take advantage of low interest rates, minimizing expenses going forward. Macy's is already doing a great job of managing overhead -- sales are steadily climbing, but expenses aren't -- and that's a nice combo. Lower interest expense will only improve Macy's already sound cost-management efforts.

Macy's is the retailer of choice
In addition to Macy's, another strong investment option in the retail sector is Nordstrom (NYSE:JWN). Not surprisingly, Nordstrom had yet another stellar quarter -- absolutely obliterating 2011 Q3 earnings, revenues, and same-store sales comparisons. Saks (NYSE: SKS), on the other hand, announced so-so Q3 results Nov. 13, just as it did last quarter. But Nordstrom and Saks have something in common relative to Macy's -- both are significantly more expensive on a trailing earnings basis.

With all the problems facing J.C. Penney, the biggest is its disappearing cash on the balance sheet; down from $888 million in Q2, to $525 million today, and that includes the recent sale of $279 million in non-core assets. Time is of the essence for Johnson and team, but the only rush for Penney investors is to find other options this holiday season -- like Macy's, with its significant growth potential and 2.1% dividend yield.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.