“The age of thrift is here. You have to do innovation at both ends–premium innovation and innovation for the value consumer.”

– PepsiCo (PEP) chairman and CEO Indra Nooyi in a recent Q&A with Pattie Sellers. No. 1 on Fortune’s 2009 Most Powerful Women in Business list (for the fourth year in a row) Nooyi today delivered another quarter of solid earnings. PepsiCo beat analyst expectations with net income of  $1.72 billion, up 9% over last year.

Nooyi is relentless in reinventing a company that many others might have thought didn’t need reinventing. Investing in healthier products, reorganizing her core team, spending billions to acquire Pepsi’s two largest bottlers…the list of changes go on and on. “Any capital we invested in the company has to be rethought,” Nooyi said in the interview, noting, “The bottom line is: Through this downturn, you have to increase your investment, not cut back.” She added, “Now is a wonderful time to look for disruptive models.”

Click here for a series of video clips from Pattie’s interview with Nooyi. –Jessica Shambora

Home Depot (HD) hammered it home this morning–earnings beat expectations, and the stock is up 3%, to just under $27. Nice surprise after Lowe’s (LOW) disappointed yesterday. The No. 2 home-improvement retailer reported a 19% profit dip in its second quarter and, even more worrisome to investors, a 9.5% decline in same-store sales.

So what is Home Depot, the market leader, doing right? The new Fortune, hitting newsstands this week, delivers some intelligence on that. My colleague Geoff Colvin did a comprehensive interview with Home Depot CFO Carol Tome, who has seen it all. I remember when Tome joined Home Depot from Riverwood International Corp., a packaging and paper products company, 14 years ago. (I was a student of Home Depot back then.) We’ve followed Tome via our Most Powerful Women tracking and watched her weather the tumult as the mega-retailer has gone through four CEOs. Tome has worked for Bernice Marcus, Arthur Blank, Bob Nardelli, and Frank Blake.

Now Blake is Home Depot’s chief, and Tome has an expanding purview. (She’s also on the UPS (UPS) board, where she chairs the audit committee, and last year she joined the board of the Federal Reserve Bank of Atlanta, where she’s deputy chair.) Blake and Tome and their team are doing a lot of smart things. Since you probably don’t yet have your new Fortune in hand and since the Tome interview won’t be on Fortune.com and CNNMoney.com until Thursday, here’s a preview of what the savvy survivor says about “Renovating Home Depot”:

Recognize what you’re good at. “We have a three-legged strategy, and you will recognize this from Jim Collins’ book Good to Great. What are we passionate about? We are passionate about our customers. What are we the best at? Product authority. And what drives our economic engine? Productivity and efficiency. It is no longer driven by square-footage growth. We’re still going to open stores–we’re opening 13 stores this year. But it’s not about that any longer. It’s about how do we get more sales per square foot in the existing stores.”

Rethink your people strategy. “We introduced something we call power hours inside our stores. In the hours when traffic is heaviest, we stop all activity that is not customer-facing–pack-down activities, say–and spend 100% of our time taking care of customers…Even if you’re in the receiving area, if you’re in the vault, you come out on the floor.”

Remember that  the devil is in the details. “The professional contractor is a very important customers to us–3% of our transactions and about 30% of our business. We serve coffee at the pro desk. By changing the brand of coffee–not stopping the coffee, because coffee is important–but by changing the brand, we will save our company $500,000. It doesn’t take too many $500,000 decisions to make a penny per share.”

P.S. Credit Suisse (CS) analyst Gary Balter today reaffirmed his bullish view and raised his estimates on Home Depot, noting that HD’s U.S. quarterly same-store sales, while down 8.5% company-wide and down 6.9% in the U.S., beat Lowe’s for the first time in memory. Guess that cheap coffee isn’t turning off too many Home Depot customers.

So now we have evidence that Goldman Sach’s (GS) Lloyd Blankfein and JPMorgan Chase’s (JPM) Jamie Dimon are the rock-star CEOs in financial services. Two days after Goldman announced blowout quarterly profits, JPMorgan soundly beat the Street today.

Investors predicted it. JPM’s stock is flat today, trading around $36–that’s evidence enough. But one thing few investors knew is that Dimon spent a month, until July 2, in Asia–confident enough, obviously, to take the time away with his wife and three daughters along for the ride.

This trip (which included Japan, China, Thailand, and India) wasn’t exactly hush-hush. Dimon was working furiously–meeting with employees, clients, government officials and the press in key markets–and in unrelenting contact with his execs the whole time. But his Asian journey was also not something the company advertised. And Dimon turned down our request to talk to him on the ground.

In lieu of Dimon’s Asia report, I’ll share with you another viewpoint that’s equally good. It was coincidence last Thursday when I got an email, here on Postcards, from Jing Ulrich, the managing director and chairman of China Equities. Ulrich happened to be in New York and hoped to meet. We got together yesterday.

“The single biggest concern is whether there’s an asset bubble in China,” she told me, referring to what she’s been hearing since she arrived in the U.S. a couple of days after Dimon. Indeed, the consumer is buoyant. Car sales are up 48% over last year. New loans have surged 360%. Home sales have boomed to record levels.

Late last night New York time, China’s second-quarter GDP was released: Growth improved to 7.9% year over year, from a 6.1% gain in the first quarter.

How can China keep this up?

“That’s a typical reaction,” Ulrich said to me yesterday when I asked the question. She went on to diss the doomsayers who have predicted China’s fall time and time again.

China’s biggest problem, which ignited the government’s aggressive stimulus program, has been a drop in exports. While a return to pre-crisis trade levels doesn’t look imminent, says Ulrich, the declines appear to have stabilized.

Ulrich, who hosted 1,000 investors at JPMorgan’s annual China Conference last month and had Dimon as the keynote speaker, insists: “The trajectory will continue to be up.”

“If you are in the investment business and you have a high IQ, sell 30 points to the next person. You do not have to be a genius at all. But you do have to have emotional stability, and you have to have some peace about your decisions. I don’t know how much is innate and how much can be taught. If you have that quality you will do very well. As I have said many times, it is simple, but not easy.”

–Warren Buffett at Berkshire Hathaway’s (BRKB) annual shareholder meeting in Omaha last weekend. Buffett’s theory that you don’t have to be a genius to make money investing is well known, but it bears repeating in these uncertain times where “emotional stability” and “peace” seem in short supply. After Friday’s closing bell, Berkshire reported a quarterly loss of $1.4 billion vs. a $1 billion profit in the same quarter a year ago. Among the culprits: write-downs in derivatives, falling oil prices, and the retail crunch. Strong profits in insurance underwriting shored Berkshire. Shares were up slightly in after-hours trading.  –Jessica Shambora

“At the end of a day the performance of a company like Kraft has everything to do with the quality of the people that we have in the key roles and so I spend most of my time worrying about whether that’s the case, making sure…we have the right people in the right places, that they have the resources that they need to get the job done.”

– Kraft (KFT) CEO Irene Rosenfeld in a recent interview with NPR’s Marketplace. Today Kraft reported first-quarter profits were up 10% over last year. It was the one bright spot in a sea of bad quarterly earnings news from companies with top women from Fortune’s Most Powerful Women list.  Avon (AVP), whose chief is Andrea Jung, and Archer Daniels Midland (ADM), led by CEO Pat Woertz, suffered steep profit drops of 36% and 98% respectively. The announcement from Disney (DIS)–where Anne Sweeney is president of the Disney-ABC Television Group–was also dismal: net income plunged 46% to $613 billion from $1.13 billion a year ago. While Rosenfeld pays lip service to the importance of people, cost cuts and price increases are credited with Kraft’s standout performance this time around. –Jessica Shambora

“It could well be that we are witnesses to the birth of yet another Apple ecosystem.”

– Sanford Bernstein analyst Craig Moffett in the New York Times Wednesday. After the bell, Apple (AAPL) reported a 15% jump in second-quarter net income to $1.21 billion. Sales of the iPhone surged 123% over the last quarter, with 3.79 million units sold.

“The iPhone has quieted any skeptics who thought this was a one-time event and for only the Apple enthusiasts,” Moffett said. “The iPhone App Store is creating a self-sustaining competitive advantage for Apple.” The iPhone’s success offset a 3% drop in Macintosh computer sales–the first decline in five years. The stock was up 3% in after-hours trading to $125.08.

Meanwhile AT&T (T), the iPhone’s exclusive U.S. carrier, announced a 9.7% profit decline. But that beat expectations, and the stock rise slightly. –Jessica Shambora

“They’ve never felt compelled to do anything because other banks were doing it, and that’s how banks get in trouble, when they say, ‘Everybody else is doing it, why shouldn’t I?’”

–Berkshire Hathaway (BRKB) CEO Warren Buffett in an interview with Fortune’s Adam Lashinsky about Wells Fargo (WFC). As the largest shareholder of Wells Fargo through Berkshire, Buffett knows the San Francisco bank well. “Those guys have gone their own way,” says Buffett, explaining that the bank’s management has avoided risky investments like option ARMs (adjustable rate mortgages).

In his story “Riders on the Storm,” Lashinsky explores how Wells Fargo’s takeover of Wachovia made it a national force–but also burdened it with toxic assets. The piece appears in this year’s Fortune 500 issue, online now and on newsstands next week. –Jessica Shambora

“I’m one of these who believes you have so much gray matter in your head. And if you take all your gray matter and you worry about what you can’t control, you’re wasting an awful lot of good gray matter, right?”

–Johnson & Johnson (JNJ) CEO Bill Weldon, in a recent interview with Fortune. The New Jersey-based maker of Band-Aids, knee replacements, and prescription drugs–and a bellwether for the health-care industry–announced mixed first-quarter results today. While quarterly earnings of $1.26 per share exceeded the Street’s  expectations, revenue of $15 billion was down 7.2% from a year ago and fell short of estimates.

Pharma revenues took a hit from an expired patent on anti-psychotic drug Risperdal. So Weldon said that he told employees to focus on what J&J can control: “Let’s worry about the products we have, and let’s go out and make sure we are getting those out to the people who can use our products.” –Jessica Shambora

It was, to steal a Malcolm Gladwell term, a “tipping point” in my outlook on the cratering economy. I call it my “That Girl” moment.

It was the fourth Monday in November last year. I was at a Thanksgiving party at the home of Cathie Black, the president of Hearst Magazines. Marlo Thomas was there, too. “Saks is selling shoes for 75% off. It’s incredible!” TV’s onetime Ann Marie was crowing, as a band of high-powered women—into shopping as well as business–crowded around her to hear details.

As I milled about the party—among women on Fortune’s Most Powerful Women list, publishing executives and New York Mayor Mike Bloomberg–one magazine exec told me that her company had readjusted budgets five times in a matter of months: Down. Down. Down. Down. Down.

I didn’t realize then how seriously that evening would foreshadow this terrible downturn we’re now in. But here we are. This week, Saks (SKS) reported a $98.7 million loss and a 15.3% drop in same-store sales in the fourth quarter; in January, its per-store sales fell 23.7%, the biggest decline among major retailers. Deep discounts helped Saks clean out inventory. But the outlook is troublesome. How will Saks wean its customers off these outrageous discounts–especially next year, when affluent Americans pay higher taxes under President Obama’s just-announced budget plan?

It was a grim week for retailers all around. Heavy markdowns weighed on Sears’ (SHLD) profits , as net income for the recent quarter declined 55% to $190 million. Investors who believed in hedge fund manager Eddie Lampert have seen Sears stock fall from $193 in 2007 to $38. (I was never a Sears investor, but I was a Lampert believer. See my 2006 profile.)

Home Depot (HD) reported poor results and lowered earnings guidance. But the world’s biggest home-improvement retailer showed impressive discipline with cost and inventory control. Better than rival Lowe’s (LOW), where management has been too optimistic about an economic turnaround. Credit Suisse analyst Gary Balter said this week that he wishes Lowe’s management “would treat the glass as half empty rather than half full.”

In light of Saks’ and Sears’ reliance on discounting, it’s worth noting that Home Depot’s “everyday low prices” pay off particularly in difficult times. This consistent pricing is more efficient than discounting items for short sales spurts. And it helps control inventories. I remember talking with Bernie Marcus and Arthur Blank, Home Depot’s founders, about this years ago. When they started the retailer, they swore by this approach and said they were following the rule of Wal-Mart (WMT) founder Sam Walton. Now, of course, we see Wal-Mart beating every other retailer. (Click here to read my Fortune colleague Suzanne Kapner’s story about new Wal-Mart CEO Mike Duke.)

I can’t end this week without returning to Cathie Black’s party, where her fellow Hearst execs, as well as everyone else, were hoping for a speedy recovery. Hearst announced this week that it will shut down the San Francisco Chronicle if it doesn’t find a buyer. Amazing and sad to see all these big-city newspapers folding!

But there is hope. Check out this story about e-readers by my Fortune collegue Michael Copeland. He interviews Hearst digital boss Ken Bronfin about a new electronic reading device expected this year. Bronfin happens to be the chairman of E Ink, which provides the technology for the Amazon (AMZN) Kindle and Sony’s e-reading device. I went to college with Bronfin. We both worked on the daily newspaper at the University of Virginia. He was the Cavalier Daily’s photography editor. I was co-editor of features.

That was 1981. Who could have imagined then what we’d be seeing today? Much of it bad. But some good and exciting things too. Keep the hope!

“When you are leading a large organization, you need to lead by example and appreciate that this includes having targets that generate value, not simply targets that can be easily hit.”

– Sears (SHLD) Chairman Eddie Lampert from his annual letter to shareholders, posted on Sears’ web site Thursday. The good news: Sears reported a fourth quarter profit of $190 million, beating analyst estimates. The bad news: That’s a 55% drop from $426 million a year earlier. The stock jumped 8% in early trading but lost ground and closed down 1% at $35.54. –Jessica Shambora