NEW YORK (CNN/Money) - Home Depot Inc. Tuesday reported a 6 percent rise in earnings and higher sales for the first quarter, citing a new advertising campaign, better inventory management, and strong sales of its John Deere product line.

The results topped Wall Street forecasts and the nation's largest home improvement retailer also reaffirmed its earnings outlook for the full year, and Home Depot (HD: Research, Estimates) shares closed up about 9 percent on the New York Stock Exchange.

The Atlanta-based home improvement chain, which is the nation's No. 2 retailer behind Wal-Mart Stores Inc. (WMT: Research, Estimates), said it earned $907 million, or 39 cents a share, in its fiscal first quarter ended May 4. That was up from $856 million, or 36 cents, a year earlier, and also beat the 37 cents forecast by analysts surveyed by earnings tracker First Call.

The company said it expects full-year earnings per share to increase between 9 and 14 percent, which would bring EPS to between $1.70 and $1.78. First Call's consensus forecast is for EPS of $1.69 for the full year, with estimates ranging from $1.60 to $1.76.

Sales rose to $15.1 billion from $14.3 billion, edging past the First Call revenue forecast of $15.05 billion. The company said bad weather, war, and a weak economy contributed to a decline of 1.6 percent in sales at stores open at least a year, a closely watched retail measure known as same-store sales.

However, the first-quarter decline compares with a much wider 5.9 percent decline in the fourth quarter. Home Depot said it foresees second-quarter same-store sales running ahead of its first-quarter totals.

Home Depot said overall sales for the year are expected to rise between 9 and 12 percent this year, while same-store sales will be flat-to-slightly higher.

"The Home Depot is beginning to gain traction from the transformational initiatives launched last year," said Bob Nardelli, chairman, president & CEO. "We introduced new products, increased the overall inventory levels in our stores, and introduced a cohesive, nationwide marketing program. Collectively, these initiatives helped us perform through a tough environment."

Kitchen and bath, appliance, and lawn and garden -- including John Deere lawn tractors and mowers -- were the strongest performing categories in the quarter.

Analysts said Home Depot's improved sales showed that the retailer is possibly narrowing the sales gap with its archrival Lowe's, which had been steadily stealing market share as Home Depot struggled with inventory and customer service issues.

"But with its new initiatives, Home Depot has done a good job to stem the tide of market share losses to Lowe's. That's a risk for Lowe's, although Lowe's still leads in comparable store sales," said Michael Baker, analyst with Deutsche Bank.

Lowe's Monday posted sales at stores open at least year that were basically flat, up only 0.1 percent, compared with Wall Street expectations of 2-to-4 percent growth. Lowe's (LOW: Research, Estimates) also trimmed its full-year same-store sales estimate to 3-to-4 percent growth against the previous 4-to-5 per cent forecast. The retailer logged same-store sales up 4 percent in the fourth quarter.

Added Baker, "Home Depot's balance sheet looks strong, with enough cash and low debt. But we remain concerned about declining return on capital from Home Depot's high inventory levels."

Baker upgraded Home Depot to "hold" from "sell" and raised his price target to $30 from $20. He does not personally hold shares of Home Depot and his firm does not have an investment banking relationship with the company.

On its expansion plans, the retailer said it plans to open 200 new stores in 2003, including 39 new stores in the second quarter. The Home Depot opened 36 new stores this year, bringing its total stores to 1,568 at the end of the first quarter.

Home Depot shares closed at $30.67, up $2.60 or 9.26 percent, Tuesday on the New York Stock Exchange.