While "Made in Europe" denotes luxury and quality - which have always come at a price - that price tag is inching upward as the costs of finely tailored suits and glamorous couture rise with the euro.
"Those who produce in Italy are at a disadvantage," Diego Della Valle, the founder of Tod's shoes and leatherwear told a recent fashion symposium in Milan. "But it doesn't mean you have to pull out your hair. This is a trade where you shouldn't make the error of sacrificing long-term strategy for the short term."
Many designers so far are absorbing much of the increased costs, unwilling to alienate consumers, analysts say.
Department stores in the United States, however, have noted price increases on everything from handbags to ready-to-wear as the dollar has deteriorated over the last few years.
Stephen Sadove, chairman and chief executive of Saks, the operator of Saks Fifth Avenue, said it recently started seeing some price resistance among consumers in some European apparel.
"It's forcing everyone to be careful," Sadove said.
He said Saks was working more closely with its suppliers, who are either changing fabrics, absorbing costs or raising prices.
The euro's rise will hurt the luxury industry's bottom line in 2007 - with a bigger hit forecast in 2008. But so far, no one is beating a retreat from the United States, which remains the most lucrative single country market in the world with more than 2.5 million high-net-worth individuals, according to a study by the consulting company Bain.
In fact, Gucci and Armani both are opening major stores on Fifth Avenue in New York in 2008 as fashion houses move to strengthen their brands and position.
While European exporters have been adjusting for the last few years to the euro's steady rise, a study by Merrill Lynch showed that it began having an impact on balance sheets midway through 2007. While sales by publicly traded luxury firms were on course to increase about 20 percent in 2007, the euro's rise has prompted their slowdown to about 12 percent, Merrill Lynch said.
The situation could worsen in 2008, the Milan Fashion Chamber forecasts, with exports shrinking 7 percent if the euro remains in the $1.46 to $1.48 range; and by as much as 9 percent if it rises to a steeper $1.55. That compares to an increase of 4 percent forecast for 2007.
But the Milan Fashion Chamber's president, Mario Boselli, said those models did not take into account the fashion industry's response.
"Our entrepreneurs are very good, and we need to let them do their best," Boselli said. "I am not pessimistic."
Fashion houses can fight back by pushing the envelope into the upper extremes of the luxury market - where fortunes are more stable and consumer confidence more insulated from such tremors as the U.S. credit shortage and exchange rates, said Claudia D'Arpizio, an analyst with Bain.
Other fashion designers are working with less expensive fabrics to maintain prices. Robert Burke, a luxury consultant based in New York, noted that for the spring season, some designers were using more cottons than in years past, instead of silk or expensive jacket fabrics.
Ultimately, the amount shoppers are willing to splurge depends on the strength of the brand, said Sadove, the Saks chairman.
That is what the top-end companies of European fashion are counting on.
"You need quality and innovation, but you also need a history, which you build over time, over the years," Bernard Arnault, chairman of LVMH Moët Hennessy Louis Vuitton, said at a fashion conference in Milan.
