Furniture retailers face an existential threat

The Supreme Court on Friday struck down President Donald Trump's so-called “reciprocal tariffs.” Regardless of the ruling, the furniture industry finds little comfort.

Furniture importers face steep import duties after the industry was hit by higher tariffs on items such as sofas, kitchen cabinets and dressers last fall under Section 232 of the Trade Expansion Act.

While the country-specific “liberation day” tariffs imposed by Trump under the International Emergency Economic Powers Act and announced in April were under review by the country's highest court, the tariffs specific to furniture importers, of about 25%, were not.

Compounding the problem, there is a constant thread of uncertainty affecting the industry, said Peter Theran, executive director of the Home Furnishings Association, the trade group that represents furniture retailers.

The 25% tariff on certain furniture imports was supposed to rise to 50% in January, but in late December, that plan was pushed back to 2027. It's also become common over the past year for Trump to threaten new tariffs on various imports that never end up being enacted.

“This is a very, very difficult time to run your business,” Theran said. “The number one factor in the difficulty of running a business is unpredictability and the inability to make alternative plans and invest in those plans, because you don't know what tomorrow will be.”

The tariffs and the uncertainty they have brought are the latest blow to the furniture industry, which has been struggling for the past four years and was under pressure long before Trump's trade war.

During the Covid-19 pandemic, when people were stuck at home and strapped for cash, many Americans took the opportunity to renovate their spaces and purchase new furniture and decor. Low interest rates then caused a surge in demand for new homes, which served as a catalyst for furniture purchases.

The result was enormous growth in the home goods industry and boom times for furniture.

But as inflation and interest rates began to rise in 2022, the sector began to falter and then decline for the first time in at least seven years, according to Euromonitor data.

When the tariffs hit, home sales had slowed and some furniture companies were already struggling to keep their operations afloat and couldn't manage the sudden increase in fixed costs.

American Signature Furniture, the parent company behind Value City Furniture, filed for bankruptcy protection late last year after nearly 80 years in business. It began liquidation sales at the remaining 89 stores last month.

In a court filing, the company said the fallout from the Covid pandemic, subsequent changes in consumer spending and rising costs led to a 27% decline in sales between 2023 and 2025. Net operating losses soared from $18 million to $70 million during the same period, it said.

At the end of 2024, the company was facing “significant liquidity constraints”, which were then “further exacerbated and accelerated by the introduction of new tariff policies”, the company said in the document.

Over the past year, at least 10 other furniture companies have filed for bankruptcy, with some liquidating and ceasing operations entirely, according to a CNBC review of federal bankruptcy filings.

Most of the companies are smaller companies, which have been hit harder by the tariffs because they have fewer resources than their larger competitors.

“The smaller players are definitely the ones that will be the hardest hit because they don't necessarily have a lot of money, they don't have economies of scale, they don't have big sourcing teams that can suddenly look to change the destination or the origin of products,” said Neil Saunders, retail analyst and managing director at GlobalData. “So they're under a lot of pressure and we'll probably see more failures in that independent space.”

Joseph Cozza, whose small furniture company East Coast Innovators supplies retailers like Macy's and Raymour & Flanigan, told CNBC it was forced to raise prices by 15% to 18% to offset higher tariff costs, leading to a drop in demand over the holidays.

For now, Cozza said he can keep his business running, but he expects an interest rate cut, a shakeout in the housing market and higher-than-expected tax returns to spur sales.

“I'm praying about it,” he said.

Otherwise, he might have to move his business from Philadelphia to North Carolina, where operating costs are lower, he said.

“I have a good company with good employees, I pay everyone a really good salary and I'm being penalized,” Cozza said. “I'm being penalized for what I do and I just don't think it's fair.”

The arrival of tariffs has created an opportunity to corner the market for larger companies, which are better equipped than smaller ones to weather policy changes and keep prices low.

Over the past year, some large publicly traded furniture companies have increased profits and sales despite higher costs from tariffs.

During fiscal 2025, Ikea was able to keep prices relatively stable and revenue practically stable compared to 2024, it said in a press release. It did report higher operating expenses, but attributed the increase to an acquisition it made in the Baltics, not to tariffs.

RH, Williams-Sonoma and fair way All of them have increased their sales and margins even when faced with higher import costs.

In the nine months ended Nov. 1, RH saw sales grow nearly 10% as margins widened. At Williams-Sonoma, sales grew about 4% in the 39 weeks ended Nov. 2, while operating margins rose slightly. Wayfair, which reported fourth-quarter results on Thursday, posted 5.1% revenue growth in fiscal 2025 as gross margin held steady and operating expenses fell.

Wall Street has not yet seen the full impact of the specific furniture tariffs on these companies because most of them last reported results right around the time the tariffs were enacted.

But they already faced a wide range of tariffs throughout 2025. Most US furniture imports come from China, Vietnam and other parts of Southeast Asia, which have seen a series of higher tariffs before specific furniture levies were introduced. At one point, imports from China had to pay tariffs of up to 145%, while Vietnam faced tariffs of around 20%.

Those specific duties of each country were the ones that the Supreme Court annulled. At the center of the case was whether Trump had the legal authority to impose what he called reciprocal tariffs, which critics said infringed on Congress's power to impose taxes.

A reversal of those tariff rates means even more uncertainty. The main question now is how the tariffs will be refunded and whether the administration will come up with new ways to implement trade initiatives.

“A CEO of one of the largest furniture retailers in the country told me, 'Even if the tariff strategy ended with the worst possible outcome for my business, then I would create a plan, invest in that plan, execute on that plan, and create the best available outcome,'” said Theran of the Home Furnishings Association.

“Nobody can do that,” he said. “No one can invest in a plan now because the rate strategy has not stabilized. It keeps changing.”