Furniture retailers face an existential threat

The US Supreme Court could strike down so-called “reciprocal tariffs” imposed by President Donald Trump as soon as this week. Regardless of the ruling, there is little comfort to be found in the furniture industry.

Furniture importers face hefty, and in some cases cumulative, import duties after the industry was hit with higher tariffs on items like sofas, kitchen cabinets and sinks last fall under Section 232 of the Trade Expansion Act.

While Trump’s “Emancipation Day” tariffs imposed under the International Emergency Economic Powers Act and announced in April are under review by the nation’s highest court, the duties for furniture importers, of about 25%, are not.

Compounding the problem is the persistent thread of uncertainty plaguing the industry, said Peter Theran, CEO of the Home Furnishings Association, the trade group that represents furniture retailers.

The 25% tariffs on some furniture imports were supposed to rise to 50% in January, but at the end of December, this plan was postponed to 2027. It has also become common over the past year for Trump to threaten to impose new tariffs on various imports, which were never enacted.

“This is a very difficult time to run your business,” Theran said. “The number one reason it’s difficult to run a business is unpredictability and the inability to make backup plans and invest in those plans, because you don’t know what tomorrow will be.”

The tariffs and the uncertainty they bring 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 flush with cash, many Americans took the opportunity to spruce up their spaces and purchase new furniture and decor. Subsequently, low interest rates increased demand for new homes, which served as an incentive to purchase furniture.

The result was significant 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, later falling for the first time in at least seven years, according to data from Euromonitor.

By the time the tariffs were imposed, home sales had slowed and some furniture companies were already struggling to keep operations running and could not manage the sudden increase in fixed costs.

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

The repercussions of the Covid pandemic, subsequent shifts in consumer spending and rising costs led to a 27% decline in sales between 2023 and 2025, the company said in a lawsuit. Net operating losses swelled from $18 million to $70 million over the same time period, she said.

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

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

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

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

Joseph Koza, whose small furniture company, East Coast Innovators, supplies retailers like Messi Raymore and Flanigan told CNBC that he had to raise prices by 15% to 18% to compensate for higher tariff costs, which led to lower demand during the holidays.

For now, Koza said he can keep his business afloat but is hoping for lower interest rates, a jolt in the housing market and larger-than-expected tax filings to stimulate sales.

“I’m praying about it,” he said.

If not, he added, he may have to move his business from Philadelphia to North Carolina, where operating costs are lower.

“I have a nice company with nice employees, and I pay them all really well, and I get punished,” Koza said. “I’m being punished for what I do, and I don’t think it’s fair.”

The emergence of tariffs has created an opportunity to capture the market for large companies, which are better equipped than small companies to weather changes in policy and keep prices low.

Over the past year, some large, publicly traded furniture companies have increased their profits and sales despite rising tariff costs.

During IKEA’s 2025 fiscal year, it was able to keep prices relatively steady and revenues flat compared to 2024, it said in a press release. It reported higher operating expenses but attributed the increase to an acquisition it made in the Baltics, not to tariffs.

Rs, Williams Sonoma and Wayfair They all grew sales and margins even when they faced higher import costs.

In the nine months ended Nov. 1, RH saw sales grow nearly 10% as margins expanded. At Williams Sonoma, sales grew about 4% in the 39 weeks ended Nov. 2 while operating margins grew slightly. Wayfair, which reported fourth-quarter results Thursday, saw revenue grow 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 tariffs on these companies because most reported their latest results around the time the tariffs were enacted.

But they already face a wide range of tariffs throughout 2025. Most US furniture imports come from China, Vietnam and other parts of Southeast Asia, which saw a range of higher tariffs before the furniture tariffs were imposed. At one point, tariffs of up to 145% were imposed on imports from China, while Vietnam faced tariffs of around 20%.

Most of these country-specific duties have been subject to review by the Supreme Court. The crux of the case is whether Trump has the legal authority to impose what he calls reciprocal tariffs, which critics say violate Congress’ authority to impose taxes.

Any ruling by the court would bring more uncertainty to the industry.

If the justices rule against the duties, there will be questions about how they will be recovered and whether the administration will come up with new ways to enforce the tariffs. If the justices rule in Trump’s favor, there will be questions about whether the tariffs could rise.

“The CEO of one of the nation’s largest furniture retailers said to me: ‘Even if a tariff strategy ends up with the worst possible outcome for my business, I’m going to make a plan, invest in that plan, execute on that plan and achieve the best results available,'” the Home Furnishings Association’s Theran said.

“No one can do that,” he said. “No one can invest in a plan now, because the tariff strategy is not settled. It is constantly changing, and the looming Supreme Court decision will certainly lead to change after this decision is issued.”