Dive Brief:
- The wave of tariffs placed on U.S. goods in retaliation for import duties on steel and aluminum is creating an "uncertain time for cost inputs," according to Kurt Darrow, president and CEO of furniture manufacturer and retailer LaZBoy.
- "We are now also faced with some challenges on tariffs and have no clear path to know whether or not the raw material increases have topped out," Darrow told investors in an earnings call.
- In the past year, LaZBoy has suffered "two price increases" from inflationary pressures on steel, lumber and foam. Now, there's a 10% tariff being placed on furniture exported from the U.S. to Canada and potentially more product categories if retaliations continue.
Dive Insight:
LaZBoy prides itself in its all-import business model. Like many other retailers and manufacturers, the model allows it to source high volumes of products from overseas to maintain a "high in-stock position," Darrow said. In turn, high in-stocks allows the company to "ship product quickly to our dealers, typically, in as little as five days."
The supply chain speed and sourcing excellence is a key part of the company's e-commerce strategy. But it also relies on healthy purchasing and selling margins, both of which are now being threatened by the new wave of tariffs.
"The next hurdle for more tariffs, that's another thing we'll have to take into our pricing element," Darrow said.
It's not just one or two product categories that are in the crosshair. Rises in the price of steel due to countervailing duties could be priced into costs, allowing purchasing teams to potentially find alternatives. But the retaliatory measures by U.S. allies directly affect the company's core business — furniture exports — as well as various inputs.
"We learned late last week that there is the potential to have a tariff on the actuators that are coming from China that (are) used at most of the industry's power products," Darrow said. "And then there's the announcement of a plan for more tariffs coming."
The various actions combined are leading procurement teams to scramble, as import costs could rise in any category upon every new announcement. It's no wonder retail trade associations heartily oppose the actions.
"With Canada, Mexico, the EU and China all promising retaliatory measures at the same time, America's retailers, farmers, autoworkers and American employees throughout the global value chain are at risk," said Hun Quach, vice president of international trade for RILA in a statement at the time of the tariff announcements. "In a trade war, there are no winners, only losers."
