Garment with classic hem is exquisite (7)
I believe the answer is:
chemise
'garment' is the definition.
(chemise is a kind of garment)
'with classic hem is exquisite' is the wordplay.
'with' indicates a hidden word.
'CHEMISE' can be found hidden inside 'classic hem is exquisite'.
(Other definitions for chemise that I've seen before include "Loose-fitting shirtlike dress" , "garment" , "Smock" , "Shift" , "Apron" .)