Net income rose to $1.15 billion, or 50 cents a share, as sales in the quarter ended Nov. 2 rose 15 percent to $16.6 billion, the Atlanta-based company said in a statement. Profit was 4 cents more than analysts expected. Sales of stores open at least a year rose 7.8 percent, a second straight gain.

The average sales ticket rose to a record $52.10 as customers spent more on tractors, paint and kitchen cabinets. Chief Executive Robert Nardelli is spending more on marketing including Home Depot's first holiday catalogue, adding goods such as Ridgid tools and investing $250 million to renovate stores with larger signs and softer colors.

``Home Depot is paying more attention to its stores,'' said Michael Farr, who helps manage $400 million for Farr Miller & Washington, including 250,000 Home Depot shares. ``Home Depot saw its problems, reinvested in its stores and made changes. It's a good company that is coming back.''

Home Depot raised its annual earnings forecast to as much as 17 percent from 14 percent, while reiterating its sales forecast for as much as a 12 percent gain.

The company had been expected to report same-store sales increased 4.5 percent, with profit of 46 cents, according to analysts surveyed by Thomson Financial.

Shares of Atlanta-based Home Depot rose 23 cents to $35.70 at 10:24 a.m. in New York Stock Exchange composite trading. The stock had risen 48 percent this year, recouping much of the 53 percent decline registered in 2002.

Tax Rebates, Confidence

A strong U.S. housing market, tax rebates and rising consumer confidence are leading more people to spend on their homes, Nardelli said on a conference call with investors.

``We're encouraged by the strength in the home-improvement sector,'' Nardelli said, adding fourth-quarter sales at older stores are increasing at a faster rate than the past quarter.

Lowe's Cos., the world's No. 2 home-improvement chain, said yesterday its third-quarter profit climbed 33 percent and sales at stores open at least a year climbed 12 percent, the biggest gain since 1994.

Home Depot, which has 1,643 stores, said it had installed self-checkout stations in 760 stores by the quarter's end to cut waiting lines and move sales people to the store's selling floor. The self-checkout lines handled 40 million sales in the quarter, the company said.

Store improvements helped boost sales in some of the company's most competitive markets, including 17 percent gains at older stores in Charlotte and Asheville, North Carolina, Nardelli said. Lowe's is based in Wilkesboro, North Carolina.

More Commercials

Nardelli, chief executive since December 2000, raised selling expenses such as advertising 9.2 percent, including commercials urging customers to spend tax rebate checks on home- improvement projects that will raise the value of their homes. It's also run football-themed commercials on ESPN and CBS and took over sponsorship of a reality-based program, ``Trading Spaces,'' on Discovery Networks.

Home Depot is adding new signs to almost 600 stores to make merchandise easier to find, and modernizing older stores with lighter colors rather than its trademark orange.

``The stores certainly look better than a year ago, and people are buying more,'' said Evan Rothschild, analyst with Delaware Investors, which owns 1.5 million Home Depot shares. ``The employees are more excited about working -- they are getting paid more. The consumers feel the momentum.''

Female Customers

Home Depot is trying to cultivate women by holding do-it- yourself workshops for women, which attracted 150,000 in May, July and October. Lowe's has sought to target women by designing stores with wide aisles and bright lighting.

Nardelli's bonus was cut 20 percent last year to $4 million after the stock fell 53 percent. His salary was raised 22 percent to $1.87 million and he received options valued at about $22.1 million.

Home Depot's gross margin, or percentage of sales after subtracting the cost of goods sold, fell to 31.3 percent from 31.6 percent.

The retailer cautioned in August that big increases in profit margins may end in the second half as the company faces tough comparisons from last year, when Nardelli's moves to cut supply costs created big savings.

Nardelli, 55, lacked retailing experience when he was hired from General Electric Co. to trim expenses. He eliminated a layer of management, increased inventory management and moved buying decisions away from store managers.

While those moves have helped profit margins, they jolted some long-time employees and caused Home Depot sales gains to trail Lowe's, investors said.

Lowe's had 932 stores in 45 states as of Oct. 31.