Furniture retailers face existential threat

The Supreme Court struck down President Donald Trump’s so-called “reciprocal tariffs” on Friday. Whatever the decision, the furniture industry finds little solace.

Furniture importers are facing high import duties after the industry was hit last fall with higher tariffs on items such as sofas, kitchen cabinets and vanities under Section 232 of the Trade Expansion Act.

While the country-specific tariffs imposed by Trump under the International Emergency Economic Powers Act and announced in April were under review by the nation’s highest court, the specific duties on furniture importers, of about 25 percent, were not.

Adding to that problem is a constant thread of uncertainty plaguing the industry, said Peter Theran, CEO of the Home Furnishings Association, the trade group representing furniture retailers.

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

“It’s a very, very difficult time to be running your business,” Theran said. “The No. 1 factor that makes it difficult to run your business is unpredictability and the inability to develop alternative plans and invest in those plans because you don’t know what tomorrow will be.”

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

During the Covid-19 pandemic, when people were stuck at home and flush with cash, many Americans took the opportunity to refresh their spaces and purchase new furniture and decorations. Then, low interest rates led to a surge in demand for new housing, which served as a catalyst for furniture purchases.

The result was outsized growth in the home goods industry and a boom period for furniture.

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

By the time the tariffs took effect, home sales had slowed and some furniture companies were already struggling to keep their operations afloat and couldn’t handle the sudden increase in fixed costs.

American Signature Furniture, the parent company of Value City Furniture, declared bankruptcy late last year after nearly 80 years in business. Last month, it began liquidation sales at its remaining 89 stores.

In a court filing, the company said that as a result of 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 fell from $18 million to $70 million during the same period, it said.

At the end of 2024, the company faced “significant liquidity constraints,” which were then “further exacerbated and accelerated by the introduction of new pricing policies,” the company said in the filing.

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

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

“The smaller players are certainly the ones who will be hit the hardest because they don’t necessarily have the deep financial wherewithal, they don’t have the economies of scale, they don’t have the huge sourcing teams that may suddenly look to change where products are going or where they’re coming from,” 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 this independent space.”

Joseph Cozza, whose small furniture company East Coast Innovators supplies retailers such as Macy’s and Raymour & Flanigan, told CNBC it was forced to raise prices between 15% and 18% to offset the rate hike, leading to lower demand during the holidays.

For now, Cozza said he can keep his business running, but he’s hoping for lower interest rates, a jolt in the real estate market and larger-than-expected tax filings to boost sales.

“I pray about it,” he said.

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

“I have a nice company with nice employees, and I pay them all a really good salary, and I get penalized,” Cozza said. “I’m being penalized for what I’m doing and I just don’t think it’s fair.”

The advent of tariffs has created a market capture opportunity for large companies, which are better equipped than small businesses to deal with political changes and keep prices low.

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

In Ikea’s 2025 fiscal year, the company managed to keep prices relatively stable and revenue roughly flat compared to 2024, it said in a press release. It did report higher operating expenses, but attributed the increase to an acquisition in the Baltics and not to tariffs.

HR, Williams-Sonoma And Wayfair all increased their sales and margins even as they faced higher import costs.

In the nine months ended November 1, RH saw its sales increase by almost 10% thanks to increased margins. At Williams-Sonoma, sales rose about 4% in the 39 weeks ended Nov. 2, while operating margins increased slightly. Wayfair, which reported fourth-quarter results on Thursday, saw revenue increase 5.1% in fiscal 2025 as gross margin remained flat and operating expenses declined.

Wall Street has yet to see the full impact of the furniture-specific tariffs on these companies, as most of them last reported results around the time the tariffs were enacted.

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

These country-specific obligations are the ones that were struck down by the Supreme Court. At the heart of the case was the question of whether Trump had the legal authority to impose what he called reciprocal tariffs, which critics said encroached on Congress’s taxing power.

A reversal of these duty rates means even more uncertainty. The main question now is how the tariffs will be refunded and whether the administration will find new ways to implement trade initiatives.

“A CEO of one of the nation’s largest furniture retailers told me, ‘Even if the pricing strategy resulted in the worst possible outcome for my business, then I would create a plan, invest in that plan, execute according to that plan and create the best possible outcome,'” said Theran of the Home Furnishings Association.

“No one can do that,” he said. “No one can invest in a plan now, because the pricing strategy has not stabilized. It continues to change.”