Warehouse Group says it is encouraged by a 3.6 per cent increase in first-quarter sales and improved margins at its core Warehouse chain and stationery outlets.

The company said the rise in group sales to $668.3 million was particularly encouraging given sales in the first-quarter last year fell 1.7 per cent.

The biggest improvement within the group was at Noel Leeming, where sales improved by $14.5m, or 7.4 per cent, to $209.6m. They rose 3.2 per cent on a same-store basis.

Sales at the Red Sheds increased by $7.2m to $360.1m, up 2 per cent or 2.7 per cent on a same-store basis.

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The company noted the chain's return to growth after five periods of same-store sales declines as it moved to a full 'Every Day Low Prices' model.

Volumes of product sold increased 2 per cent, with the rest of the growth due to higher average selling prices, it said.

"There has been some good early demand for some of the spring seasonal categories such as outdoor furniture. Our gross margin percentage improved slightly compared to Q1 last year.

"The overall market remains very competitive for both general merchandise and apparel. We are focused on continuing to improve our gross margin and maintaining the positive momentum in sales as we go into our largest sales quarter with Christmas and summer seasonal products."

The quarterly result will be heartening for the company, which reported a 13 per cent decline in profit from continuing operations for the year through July. It also wrote $25.6m off the value of the five-year-old Torpedo7 business in what it called a period of "significant change."

Torpedo7 sales for the quarter fell 5.6 per cent to $37m and were down 2.7 per cent on a same-store basis.

The company said the decline reflects closures during the past year, including the sale of its Shotgun brand and the closure of the Number 1 Fitness website as a separate fitness equipment channel.

Sales from the continuing business were up 14.1 per cent, driven by new outlets opened during the quarter in Palmerston North, Te Rapa, Manukau and New Plymouth.

Warehouse said it is continuing to focus on improving the gross margins within its Blue Shed stationery chain.

Sales there increased 4.4 per cent to $61.7m and were up 4.1 per cent on a same-store basis. The company noted trading a year earlier was disrupted by integration projects between the red and blue chains.

"Gross margins improved during the quarter and we continue to focus on this area. We continue to evaluate the operation of some of our stationery stores within our Warehouse store footprint."

It now has five stationery outlets operating within a Warehouse store.

Warehouse said Noel Leeming benefited from continued focus on "passionate experts" and end-to-end service in the extremely competitive appliances and technology market.

Key areas of growth included communications, wireless audio and computer accessories categories. During the quarter, Noel Leeming acquired the assets of the Appliance Shed, including leased stores in Auckland. Three of those have been converted into additional clearance stores for Noel Leeming.

Online sales across the group rose 5.3 per cent to $49.3m, and now account for 7.4 per cent of group sales. Excluding Torpedo7, quarterly online sales were 27 per cent higher.