An article in The Wall Street Journal about the impact of tariffs on furniture retailers included comments from Home Furnishings Association members Matt Schultz and Ed Menapace.
The report by Katy Stech Ferek, published Nov. 11, was headlined, “Furniture retailers start to feel tariff pain more acutely.”
“’This has been very challenging for the furniture industry as a whole because of the huge exposure that it has to China,’ said Peter Keith, a Piper Jaffray analyst who added that the discretionary nature of furniture purchases means the industry faces more potential for tariff-related financial difficulties than many other businesses,” Ferek reported.
Keith recently spoke to a gathering of Top 100 furniture retailers at the HFA’s CEO Summit.
“While a 25 percent tariff suggests steep price increases and plummeting sales, retailers and industry experts said the furniture industry’s pain has been dulled by several factors, including furniture shipments from countries other than China and suppliers who agreed to cover some of the costs,” the Wall Street Journal reported. “They also said customers often aren’t aware of the shifting prices.
“Ed Menapace, the owner of the Farmhouse Store in Westfield, N.J., said he has made more than 30 passes through his 10,000-square-foot furniture showroom since the tariffs first hit, adjusting prices. Still, he said his customers haven’t noticed the changes. ‘They don’t have a clue how much furniture costs,’ he said.”
Furniture prices are rising since tariffs took effect
The Wall Street Journal story noted that furniture prices are increasing.
“After falling about 1 percentage point a year from 2014 to 2017, prices began to climb in 2018 as the tariffs took effect. They rose 2.3 percent for the year ended Sept. 30, according to the Labor Department.
“A June study from the National Retail Federation warned that the tariffs would add $4.6 billion a year to what consumers will spend on imported furniture such as recliners, couches and upholstered living-room items.
“The Trump administration has defended tariffs by saying they are necessary to force China to end practices that hurt U.S. businesses,” the Wall Street Journal article continued. “President Trump has said the tariffs could also lead to the return of more manufacturing jobs to the U.S.
“Industrial-production data shows that there has been no spike in U.S. furniture manufacturing since the tariffs took effect, but import patterns are shifting.
“Shipments of furniture from China to the U.S. declined 30 percent from September 2018 to September 2019, according to records collected by Panjiva, a division of S&P Global Inc. that tracks the flow of goods overseas.
“During the same period, shipments from Vietnam increased by 51 percent. (HFA member) Ashley Homestores Ltd., one of the world’s largest furniture manufacturers and retailers by sales, began moving the bulk of its sourcing to Vietnam more than a decade ago.
The impact on consumers is cushioned
“Retailers credit two factors with cushioning the impact to consumers: increased furniture supplies from non-tariffed countries, and the availability of financing plans that allow shoppers to spread out payments over time.
“’I don’t think it’s forced anybody to close,’ said Matt Schultz, president of John V Schultz Furniture, whose operations include a 90,000-square-foot store in Erie, Pa.”
Schultz leads HFA’s Government Relations Action Team. The HFA supports President Trump’s efforts to force China to reform its trade practices. However, it also holds the view that tariffs aren’t the best negotiating tool, as they place the greatest burden on U.S. businesses and consumers. The HFA is part of a large business coalition called Americans for Free Trade.
In September, HFA CEO Sharron Bradley wrote a letter to President Trump asking him to delay an increase in tariffs on furniture imports from China that was scheduled to take place on Oct. 15. The president did indefinitely suspend that increase. The president responded to the HFA’s request in an Oct. 29 letter, thanking Bradley “for taking your time to express your views.”
Marketplace cites HFA’s Schumacher
Marketplace, a nonprofit radio news organization, also recently reported on the impact of tariffs on furniture sales.
“To get around the tariffs, some furniture stores have changed where they get things made,” reporter Andy Uhler said. He noted that imports from China have decreased while imports from Vietnam have increased in the past year, adding:
“Mark Schumacher, executive vice president of the Home Furnishings Association, said that’s easier said than done.”
“Every retailer is different, but one thing that’s true for all of them is they can’t pivot on a dime when it comes to what they have available in their warehouses,” Schumacher said.