Dive Brief:
- About one-third of the products La-Z-Boy imports come from China and have been impacted by the 10% tariff that is currently in place. The other two-thirds come from Mexico and are not impacted by the tariffs, La-Z-Boy CEO Kurt Darrow said on a recent earnings call.
- The company is dealing with this cost by passing it along to retailers in the form of a 2% surcharge on standard upholstery items and a 3% surcharge on upholstery items that have an electrically powered component, Darrow said.
- "It’s a straight pass through on the invoice," La-Z-Boy Director of Media Relations Kathy Liebmann told Supply Chain Dive in an email. "As noted in our call this morning, thus far, with the initial tariff pass through, we have not seen a change in buying patterns."
Dive Insight:
If tariffs rise from a current level of 10% to 25%, La-Z-Boy expects its surcharge to go up in response, too.
The increase "would translate to a roughly 6% to 7% increase in pricing and combined with several other price increases over the past 18 months to offset raw material costs, it does remain a question as to whether or not we will see an impact to demand elasticity," Darrow said on the call. "We do believe we are more competitively positioned than many if not most in the industry due to our domestic footprint and our supply chain structure."
When analysts asked if these surcharges should be expected from the company in coming months, Darrow said it's hard to know at this point. "Well, you have to tell us what's going to happen with tariffs, so I can answer that question," he said. "So ... I don't have the exact numbers."
