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Feb 20, 2019

La-Z-Boy recliner prices to rise again unless trade war resolved

Amanda Lang: Time to respond to 'Buy American' with 'Buy Canadian'

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Now may be a good time to buy that power recliner.

La-Z-Boy Inc., maker of the eponymous chair, has already passed on costs from last year’s tariffs to the tune of 2 per cent price hikes on regular recliners and 3 per cent on power models. If the U.S. and China can’t resolve their trade differences and levies on some goods from the Asian country climb to 25 per cent next month, prices would rise 6 per cent to 7 per cent, the company says.

It’s not just the tariffs though. On a conference call with analysts Wednesday, La-Z-Boy Chief Executive Officer Kurt Darrow said prices have also gone up amid increases in raw materials costs, which have hounded consumer companies over the past year.

And it’s not just China. Darrow said the company is seeing some volume erosion in Canada, because of a retaliatory 10 per cent tariff there on some U.S. goods. Combined with raw material costs and the impact of currency swings, Canadian “consumers are looking at furniture that could be as much as 15 per cent to 20 per cent more expensive than the previous year,” he said.

Last year’s 10 per cent tariffs on goods coming from China affected several items the company sources for its manufacturing, and impacted about a third of La-Z-Boy’s “cut and sew kits” Darrow said. The other two-thirds come out of its facility in Mexico and those aren’t subject to the tariffs, he said.

“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.” he said.

Investors appeared to shake off the trade issues Wednesday. La-Z-Boy shares climbed as much as 11 per cent to US$35.73 in New York, a day after posting same-store sales for last quarter that topped analysts’ estimates. The stock had already jumped 16 per cent this year through Tuesday’s close, outpacing the benchmark S&P 500 Index.