Supervalu (NYSE: SVU), whose competitors include Kroger (NYSE: KR), Safeway (NYSE: SWY), and Wal-Mart (NYSE: WMT), reported results for its fiscal second quarter. Net sales unfortunately didn't budge much at all. They came in essentially flat at $10.2 billion. Earnings per share on an adjusted basis were $0.61. According to this article, the expectations were for $0.69 per share. So, as can be seen, Supervalu lost the analyst-expectations game by a wide margin. Last year's adjusted earnings were $0.64 per share. Not only are those numbers disappointing, but comps saw a decrease of over 1%. And the gross margin suffered as well.

So, we have an earnings miss, flat revenue growth, and a decline in the bottom line. What does all that add up to in terms of market reaction? The stock sees a bid. At the time I began writing this piece, it was up 2.5%. As I found with Kroger, the market may be looking at supermarket businesses as defensive plays. Of course, at the time I covered Kroger, that company's numbers were a lot better than Supervalu's.

However, last time I checked the stock before sending this piece in, it was becoming more volatile along with the market, moving from green to red in quick succession. Given the weak data, I can't say that I'd be considering Supervalu right now. It is true that people will continue to shop at supermarkets even during economic downturns, but I'd rather look at something the supermarket sells as opposed to the supermarket itself to get defensive. I'd rather align my portfolio with the stronger brand equity of perhaps a Kraft (NYSE: KFT) or a Procter & Gamble (NYSE: PG) than a Supervalu.

Disclosure: I don't own any company mentioned; positions can change at any time.

I'll be honest. I'm not necessarily into the supermarket sector, so I've never strongly considered a company like Kroger (NYSE: KR) for my portfolio. Plus, we live in a Wal-Mart (NYSE: WMT) world, and with that retail giant trying its best to take aim at food shoppers with its own brand, I just was never into owning a Kroger. I do have to say, though, that I am wondering if Kroger might end up being a defensive stock in the current market environment. Although it has been down the last month or so, the stock has done well over longer timeframes, according to the AOL Finance snapshot taken at the time of this writing. It's been up over 5% year-to-date, and over 16% during the six-month period. And it is up over 6% today, as of 1:30 pm, on the company's Q2 numbers.

Net sales revenues increased almost 12%. The bottom line saw net income of $0.42 per diluted share. That was a solid 10% increase, and according to Earnings.com, Kroger beat estimates by one penny. Same-store sales increased a decent 4.7% excluding the effect of fuel sales. It's pretty important to exclude fuel sales, especially with the price of oil declining rapidly. With fuel, comps were up nearly 10%. Operational cash flow was flat at $2.1 billion, but it more than covered capital expenditures, dividend obligations, and share repurchases.

Kroger seems to be a healthy company at the moment. And, again, the stock seems to be working, too. Could this business be a defensive play? It sure looks like it. I wouldn't chase it today, however. I'd wait for a pullback and consider pulling the trigger after further due diligence.

Disclosure: I don't own any company mentioned; positions can change at any time.

Much of the U.S. economy -- save the oil/oil services sector -- is in a consolidation and right-sizing mode, or something resembling it. Retail chains, home builders, auto manufacturers etc. are all thinning their employee and production ranks, in anticipation of a period ahead with lighter demand. And most investors and readers all familiar with the consolidation in the investment banking sector.

Add another sector to the list: the grocery store sector. After more than a decade of building bigger and bigger stores (and superstores) retailers are experimenting with considerably smaller grocery stores that feature prepared meals in gourmet delis, and fresh produce, The New York Times reported Wednesday.

Safeway Inc. (NYSE: SWY) has opened a smaller-format store in Southern California, Jewel-Osco is building one in Chicago and Whole Foods Market, Inc. (NYSE: WFMI) is considering opening smaller stores, The Times reported.

This post is part of our Big Company, Small Town series, featuring large companies and the small towns in which they are headquartered.

Publix Super Markets is the largest employee-owned supermarket chain in the U.S. with 936 stores in Florida, Georgia, South Carolina, Tennessee, and Alabama. You must be an employee of Publix to buy stock in the company. More than 30% of the stock is owned by employees, and more than 30 million shares are owned by members of the founding family -- Jenkins. Its chairman is a family member -- Charlie Jenkins, Jr.

Publix ranks number 11 on the Forbes list of largest private companies, and 107 on the Forbes 500 list. It employs more than 100,000 employees, with revenues over $23 billion.

Yes, if you haven't figured it out, the company was founded by a Jenkins -- George W. Jenkins, Jr., in Winter Haven, Florida, in 1930. In 1940, Jenkins built Florida's first supermarket by mortgaging an orange grove. Jenkins moved the headquarters for Publix to Lakeland, Florida, in 1951, and built its first distribution warehouse there. In 2005, Publix celebrated its 75th anniversary.

Shares in supermarket chain Safeway (NYSE:SWY) dropped 7% yesterday setting up investors with an interesting investment opportunity. The stock is off more than 25% from its' 52-week high. Investors were spooked about a slowdown in same store sales. I think investors need to take a second look at the company.

With an economic slowdown, many consumers will turn to home made food as opposed to eating out. This will be a big benefit to the supermarket. Another catalyst for the stock is that, unlike other food retailers like restaurants, they are able to pass on rising costs to the consumer. This will help keep their bottom line from dropping.

At these levels for investors looking for an inflation protected portfolio, you may want to take a look at Safeway.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no positions in any stock mentioned as of 2/22/08.

Main market news here.

J.P. Morgan Chase & Co. (NYSE:JPM) Chief Executive Jamie Dimon would probably earn a gold medal for cost-cutting if the Olympics gave such things out. Now, investors are wondering how the high-profile Wall Street executive is going to grow JP Morgan's bottom line the old-fashioned way, organically. The Wall Street Journal (subscription required) argues in its "Heard on the Street" column that investors will be keenly interested in hearing Dimon's plans at a company meeting tomorrow.

Like the stock market, the oil market also is in decline Prices for light, sweet crude for April delivery fell $1.12 to $60.52 in electronic trading on the New York Mercantile Exchange, according to the Associated Press. Tensions between the U.S. and Iran along with lower-than-expected stockpiles will continue to bolster the market, the AP said. The New York Times points out that technological advances makes it possible for oil companies to get more oil from oil fields.

Subprime lender New Century Financial Corp. (NYSE:NEW) will need help from Wall Street firms such as Morgan Stanley (NYSE:MS) and UBS AG (NYSE:UBS), according to Bloomberg News. New Century had a $3 billion credit line wit Morgan Stanley that was supposed to expire last month and a $2 billion line with UBS that's good until September 2008, with $1.5 billion outstanding, Bloomberg said.

As expected, Great Atlantic & Pacific Tea Co. (NYSE:GAP), owner of the A&P supermarket chain, agreed to buy rival Pathmark Stores Inc. for $1.3 billion in cash, stock and debt, the Associated Press said. The merged company will own 550 stores in the New York and Philadelphia areas as well as Michigan, Maryland and Louisiana.