(Reuters) -Australia's Woolworths warned of caution among consumers and cost-of-living pressures on Thursday, even as inflation moderated, as it faced a slowdown in sales from its biggest segment, sending its shares to a near four-year low.

Shares of the country's largest supermarket operator fell as much as 4.8% to A$30.31, their lowest level since May 29, 2020.

Total sales for the grocer's Australian Food business rose just 1.5% to A$12.58 billion ($8.21 billion) in the 13 weeks to March 31, compared with a 5.1% at Coles, signalling that the smaller rival is slowly bridging the gap.

"(It's a) very weak update, with sales slightly weaker than we expected and materially lagging Coles," Jefferies said.

Outgoing CEO Brad Banducci flagged that the company is seeing a significant shift in customer sentiment and shopping behaviours since Christmas, as customers adjusted their spending sprees post the festival season.

"Outlook commentary is generally very downbeat, although this may somewhat reflect the heightened political and media scrutiny," Jefferies said, adding that they expect the stock to trade poorly.

"Customers are looking for more ways to save," Banducci said, while customer segments across the Australian Food division reported highest levels of concern amid a spark increase in the country's housing costs.

"We expect trading conditions to be challenging for the next 12 months due to competition for customer shopping baskets and as inflation returns to a very low single digit range," he added.

Woolworths has noticed an improvement in unit volumes, as the quarter progressed and expects stable operating conditions in the last quarter of the year.

Woolies said total group sales were at A$16.80 billion ($10.97 billion) for the March quarter, slightly ahead of Jefferies estimates of A$16.62 billion, and a 2.8% rise from a year earlier.

Woolies' prices for its food products were almost unchanged from a year ago, which signifies that the rise in group sales is driven by strong volume growth across operations.

While cost-of-living pressures remained elevated, demand for groceries and essential items stayed high, with supermarkets passing costs from suppliers on to shoppers.

($1 = 1.5326 Australian dollars)