Michael Hill International shares fell 5.7 per cent after the jewellery chain reported weaker sales in its core Australian and New Zealand markets in the first three months of 2019.

Total sales fell 0.8 per cent to A$117.6 million ($124m) in the March quarter, and were down 1.5 per cent on a same-store basis. That was due to a 3.2 per cent decline in Australian sales to A$61.9m and a 6.3 per cent fall in New Zealand sales to $24.7m. Canada was the highlight for the retailer, with sales up 2.5 per cent at C$26.2m ($29.1m).

Michael Hill said the decline was an improvement on the September and December quarters, when same-store sales were down 11 per cent and 2.9 per cent. Gross margin was 62.1 per cent through the nine-month period, down from 62.6 per cent in the six months through December, and 62.7 per cent margin in the nine-month period a year earlier.

"The company's performance continued to stabilise during the quarter, as refinements to the strategy improved our position from the first half, further regaining ground lost in the first quarter," chief executive David Bracken said in a statement.


Still, the dual-listed stock fell 4 cents to 66 cents on the NZX, and was down 5.2 per cent at 63.5 Australian cents on the ASX.

The Brisbane-based retailer restructured its business last year, quitting the US and exiting its Emma & Roe sub-brand to focus on high-margin sales and make better use of other sales channels, such as online.

Year-to-date e-commerce sales totaled A$12.5m, up 53 per cent from a year earlier, and accounting mounting to 2.9 per cent of group sales.

Michael Hill also scaled back its discount sales to discourage people from putting off purchases until they could take advantage of those cheaper prices, but changed that strategy when alternative promotions didn't bring punters through the doors.

Bracken said the retailer's new model helped lift same-store sales in the month of March.

"We have already seen the potential for the new integrated model to lift customer engagement and sales, as well as improve operational efficiencies," he said.

The retailer has stripped out A$5m of annual costs and reiterated plans to snip another A$5m through the rest of the financial year.

Michael Hill opened one store in Australia and closed three, giving it 171 stores in its biggest market. It had 52 New Zealand stores and 84 Canadian stores at the end of the quarter after closing one store in each region.