Intelligencer

Spiking Heels

The rising euro has U.S. shoe designers worried about slipping profits.

By Amy Larocca

(Photo: Liz Steger)

The shoe designer Edmundo Castillo does not dream of stiletto heels or capretto toes. “Every morning, when I open my eyes, the first thing I think is, What’s the euro today?” he says. “And then I run to the newsstand, and I know immediately if I am going to have a great day or a terrible one.”

Castillo is not alone: If you are a designer of high-end shoes—the type with smooth leather soles, invisible glue, and lovely hand-stitching—they simply must be made in Italy. But as a result of the increasingly mighty euro, the cost to U.S.-based designers of making a shoe there has skyrocketed. “The costs have risen 30 percent since the days of the lira,” says shoe designer Diana Broussard. Naturally, the cost of buying an expensive shoe here has shot up, too.

“Our retail prices have gone up, like, $100 in some instances” from last year, says Castillo. “But,” he insists, “the difference is not going to me.”

So, how much does this $515 shoe actually cost to make? Follow these three steps.

1.) The Italian factory charges the designer around $130. Of that, $40 to $60 is for the leather. Extras (in this case, the buckle and stiletto heel) cost $40 to $50.

2.) Another $40 to $60 of that goes to labor, which varies depending on complexity. The most expensive way to finish the heel is the “coda” method, in which one piece of leather is stretched the length of the shoe, from tip to heel. For this shoe, separate pieces were used. To get the shoe to the U.S., the designer pays a further “landing cost” (shipping and duties) of $20 to $30.

3.) Retailers mark up the shoes by the standard industry multiplier of about 2.4 times the wholesale price they’ve paid for them. A $515 shoe, then, would have a wholesale price of $216, meaning that after paying the factory and landing costs, the designer makes a profit, depending on the euro, of anywhere between $40 and $70.