By Mimosa Spencer

PARIS, April 25 (Reuters) - Birkin bag maker Hermes

reported a 17% surge in first-quarter sales on

Thursday, sustaining a rapid growth rate from the previous

quarter including in China, and underlining strong demand for

high end luxury.

Its first-quarter growth beat expectations and far outpaced

larger rival LVMH, showing the strength of businesses

operating in the top end of the market and defying broader

weakness in key market China.

Sales rose to 3.81 billion euros ($4.08 billion) for the

three months to March 31 and beat expectations for a 13% rise,

according to consensus provider Visible Alpha.

One of the most consistent performers in the luxury goods

sector, the fashion group is known for its ability to maintain

strong growth even in the face of deteriorating economic

conditions.

Hermes shares traded down 2.5% in late morning trading as

investors who have benefited from an over 20% rise since the

start of the year, took profits.

The consensus-beating sales figure was probably not a "major

surprise" given the company's record over the past four years of

exceptional growth and "consistent over-delivery on

expecations," said Thomas Chauvet, analyst with Citi.

He highlighted, as an exception, a miss in expectations for

the smaller watches division, which clocked 4% growth, compared

to Citi's forecast for 11% growth.

Sales updates from several leading luxury groups including

LVMH and Kering have offered little reassurance that

Chinese demand for high-end fashion is bouncing back.

Consultancy Bain forecasts mid-single-digit percentage

growth for China's luxury market this year, slowing from 12%

growth in 2023, when business boomed following the lifting of

COVID-related lockdowns.

Hermes, which sells handbags priced at more than $10,000,

said its sales in Asia excluding Japan grew 14%, and all other

regions reported double-digit rises.

The company saw "slightly softer" traffic in China in March

following the Chinese New Year holiday, Hermes Executive

Vice-President Finance Eric du Halgouet, told journalists.

However, strong demand from wealthier clients offset fewer

store visits from clients seeking more affordable silk items and

fashion accessories, he said.

"Our more well-off clients continued to visit our stores,"

said du Halgouet, noting that average spending was higher.

Globally, the leather goods division, the company's largest,

grew by 20% in the quarter, driven by new models such as the

Constance Elan bag.

After holding back when Chanel, LVMH-owned Dior and Louis

Vuitton raised prices of their handbags more aggressively during

the pandemic, Hermes started raising prices more significantly

from last year.

This year's increase of 8% will provide it with a tailwind,

said analysts at Bernstein.

Hermes has a higher valuation than rivals with a 12 month

forward price-to-earnings ratio based on projected earnings of

51, according to LSEG data. That compares with LVMH at

24 and Kering at 16.

($1 = 0.9340 euros)