Dollar Drops. Jaws Drop. Prices? Well, You Know. – The New York Times

The soaring cost of European fashion is a sensitive issue for designers, who have been challenged by American retailers to help justify higher prices by improving their workmanship and styles. “Designers are offering a lot more construction, fur trims in many cases, because if the price points will be up, the clothes will have to be more special,” said Ronald Frasch, the chief merchant at Saks Fifth Avenue.

Fashion companies have taken different approaches to the declining dollar. Some have lowered their profit margins rather than steeply increase prices, and large companies can hedge currencies to lock in lower exchange rates for 2005 and 2006.

But the prevailing response is to pass on the expense to consumers with small seasonal adjustments, which have added up to significantly higher prices over three years. Consumers may be growing accustomed to paying more for basics like health care, gas and wireless services, but there may be a wall in terms of what they will pay for fashion.

“Last year the prices were somewhat within reason, but now they’ve priced themselves out of the market for me,” said Rudy Torrijos, an equity researcher in New York who spends about $4,000 a year on clothes. “I used to buy shirts from Etro and Dolce & Gabbana that were in the upper $200’s, but now they are in the upper $300’s. Some things are out of my price range.”

Some companies have tried to hold on to customers like Mr. Torrijos by maintaining prices on classic pieces while marking up the trendier looks of the season. For example Loro Piana, the Italian cashmere company, is raising prices in the American market for fall by about 5 percent, with its staple V-neck sweaters priced at $550, and crew necks at $595, up $30.

“We have had much more modest increases than we should have, as the problem is compounded by the fact that cashmere raw materials from China have increased significantly over the past six months,” said Pier Luigi Guerci, the president of Loro Piana’s United States division.

Certain changes are modest enough that they may go unnoticed by the sort of affluent customers who are willing to spend on clothing what many Americans would consider exorbitant. Customers will pay $340, up from $310, for a ballet flat at Ferragamo’s Fifth Avenue store this fall, and they also are likely to see the price of a man’s tie go up $5, to $125.