Extensive renovations and repairs at Home Depot are starting to pay off. When Nardelli took the helm in 2000, the former highflier was crashing back to earth. The slump was the result of an expansion spree by previous management that left the Atlanta-based retailer struggling to manage a bunch of new stores. Nardelli responded by centralizing purchasing, spending massively to modernize Home Depot's aging stores and the company's antiquated computer systems, and sourcing more of its own goods like Hampton Bay ceiling fans and Ridgid power tools. After a tough 2002, Home Depot began to get back on the growth track in 2003. Profits jumped 17% on an 11% rise in sales. Shareholder returns were up 56.2% in the 12 months ended Feb. 27. But Home Depot is still playing catch-up: Returns were down 12.9% from three years ago. And Nardelli can't afford to rest, with rival Lowe's--our No.9 company--nipping at his heels.