* Shares fall more than 4%, rival Coles down over 1.5%

* E-commerce sales up 54%; total sales up 8% to A$16.07 bln

* Coles to report on Thursday

Oct 27 (Reuters) - Australia's biggest supermarket chain Woolworths Group said on Wednesday that sales had started to slow down in October, as COVID-19 restrictions that helped boost it in the first quarter by nearly 8% start to unwind.

Shares of the grocer fell more than 4% in early trade, with rival Coles Group, set to report on Thursday, dropping 1.6% amid a broader market moving in the opposite direction.

Both Woolworths and Coles have benefited from higher spending by people stuck at home as most of Australia was under lockdown with Melbourne, the country's second largest city, going through the world's longest period under restrictions https://www.reuters.com/world/asia-pacific/australias-melbourne-enjoys-weekend-eased-covid-curbs-after-long-lockdown-2021-10-23.

With people hauled up at home and buying their groceries online, Woolworths' e-commerce sales surged around 54% to A$1.88 billion ($1.40 billion) in the quarter ended Oct. 3.

Its Australia food sales climbed 3.9% to A$12.27 billion, just about missing estimates for a 4% rise by UBS and Jefferies.

"This has arguably been one of the most challenging quarters for our business since the onset of COVID-19," Chief Executive Officer Brad Banducci said on an analyst call.

"We have changed the way we live, even when we're not in lockdown. (Overseas) we've seen elevated home consumption even in the time post the lockdown," he added.

Food turnover was now starting to "taper off really high levels of elevated sales", with Melbourne and Sydney coming out of lockdown, Banducci said, adding that Woolworths would rely more than usual on a pick-up in the year-end holiday season trading.

The group's total sales, excluding its recently spun-off liquor and hotel business Endeavour Group, came in at A$16.07 billion, compared with A$14.91 billion a year earlier. ($1 = 1.3398 Australian dollars) (Reporting by Riya Sharma and Nikhil Kurian Nainan, additional reporting by Byron Kaye in Sydney and Arundhati Dutta in Bengaluru; Editing by Aditya Soni and Rashmi Aich)