Warehouse Group, the country's biggest listed retailer, lifted first-quarter sales 3.5 percent, opening more Noel Leeming and stationery stores, and widened margins at its dominant 'Red Shed' unit.

Group sales rose to $589.4 million in the three months ended Oct. 26, from $569.8 million in the same period a year earlier, the Auckland-based company said in a statement.

Sales at its dominant 'Red Shed' unit rose 1.3 percent to $359.2 million with new season launches in its home and leisure section and a strong performance in events, branded imports and some lines of its celebration category, which offset lower apparel sales. The retailer widened its gross margins at the Warehouse division, with fewer winter apparel clearance sales after a strong exit to the inter season.

"While we have improved margins in Red Sheds, with a much cleaner exit of winter seasonal apparel than last year, we will also be absorbing budgeted one-off rebranding costs for both Torpedo7 and Noel Leeming in the quarter," chief executive Mark Powell said. "We are confident this strategic focus will deliver long term results for our shareholders in a retail environment that is continuing to evolve to satisfy customers changing buying habits."

Investors expect Warehouse to deliver a return this year after the retailer spent hundreds of millions of dollars overhauling stores and buying new businesses over the past couple of years in a bid to reposition itself in a changing retail environment.

That included the acquisition of the Noel Leeming consumer electronics chain, which delivered a 2.9 percent increase in first-quarter sales to $143.2 million, and online retail group Torpedo7, which lifted first-quarter sales 49 percent to $28.7 million.

Its 'Blue Shed' stationery unit increased first quarter sales 2.5 percent to $58.3 million.

Powell said the company sold a store in Whangarei last month, realising a pretax gain of about $5 million.

The shares rose 0.3 percent to $3.20 yesterday, and have dropped 14 percent this year.