This is "money time" for the retail industry; the holiday season, which is usually the fourth quarter for most retailers, can make or break the year for most of them. Through October, it appears that retailers are gaining momentum on the strength of strong sales trends and increased store traffic.

One retailer that has broken free of recent struggles is Federated Department Stores (NYSE:FD). The company reported third-quarter earnings of $0.42 a share, which was $0.06 better than last year's earnings and $0.03 per share ahead of the analysts' consensus estimate. This outperformance was even more impressive considering that Federated recently bumped up its Q3 earnings expectations from the low-$0.30 range to the high-$0.30 range.

Federated's third-quarter sales increased 0.2%, and its same-store sales rose 0.4%. Fourth-quarter same-store sales started on an uptrend in October; the company produced 4% growth in that month. The positive retail same-store sales trend also was shared by Nordstrom (NYSE:JWN), up 11.5%; Neiman Marcus (NASDAQ:NMGA), up 13.6%; and Saks (NYSE:SKS), up 4.4%.

Looking ahead, the company expects earnings of $2.45 to $2.55 per share for the fourth quarter, which is in line with the $2.51 forecasted. Federated sees its fourth-quarter same-store sales increasing 1.5% to 3%; its November same-store sales should be in the flat-to-up 2% range, and for December it sees a 1% to 3% gain.

In the third quarter, the company repurchased 7.4 million of its shares for $336 million. Federated is also using its excess cash flow to open stores in Georgia and California. The company now operates 450 stores in 34 states, Guam, and Puerto Rico under the Bloomingdale's and Macy's brand names.

The company's shares, which are trading at 12 times the 2005 earnings estimate of $4.51 per share, appear to be attractive relative to the expected earnings growth rate of 19% combined with a 1% dividend yield. In retail investing, it's always best to ride high sales waves before the inevitable wipeout.

Shopping for more retail news? Check out:

Fool contributor Phil Wohl spent more than 12 years on Wall Street and loves to go shopping this time of year.