I would hope they reduce the tariffs down to nothing: Leon's Furniture president
The incoming chief executive of Canada’s largest furniture retailers doesn’t see the pandemic-driven demand for couches, chairs and mattresses easing any time soon.
In a television interview Wednesday, Leon’s Furniture Ltd. President and Chief Operating Officer Mike Walsh said work-from-home weary Canadians sitting on piles of pandemic savings appear keen to spend those dollars on new furnishings.
“We’ve had a lot of pent-up demand and when patio furniture was available early in the spring, we sold a lot of it very, very quickly,” he said.
“Everything’s gone up: if you buy lumber, food, everything’s gone up, along with furniture and I just think that there’s pent-up demand. The consumer has nowhere else to spend their money right now and they’ve been sitting on their furniture for the last fifteen months working from home and I think they just need a fresh change.”
Walsh will take over the role of chief executive officer upon current CEO Edward Leon’s retirement on July 1.
That demand has borne out in Leon’s financial results so far this year. The parent company of the eponymous brand, along with The Brick banner, booked a 16.6 per cent increase in system-wide sales in its most recent quarter, hitting a record $697.1 million.
That surge in sales coincides with eye-popping inflation for Canadian consumers. Furniture prices rose 9.8 per cent year-over-year in May, the largest increase since 1982, according to Statistics Canada.
While some of that price growth is attributed to so-called "base effects" – where prices rebound after a period of low inflation or outright deflation – input costs including lumber and foam prices have surged during the pandemic, and led to an increase in the price of furniture.
Beyond the raw cost of materials, furniture retailers are also dealing with headwinds on the trade front. The Canada Border Services Agency introduced preliminary tariffs on some upholstered furniture from China and Vietnam on May 5 following an investigation into allegations of dumping, the practice of exporting goods at unreasonably cheap prices that could harm domestic industry.
Those tariffs run as high as 295.9 per cent on Chinese goods, and 101 per cent on products sourced from Vietnam. The situation has prompted the Retail Council of Canada to challenge the ruling on behalf of a group of retailers, including Leon’s.
Walsh said he was hopeful the challenge would prove successful, but that the combination of tariffs and a run-up in commodity prices iscreating input price pressures that Leon’s will have to pass some of onto customers.
“It’s pretty significant. Even domestic suppliers, depending upon where they get their springs, and foam, and wood, they’re seeing price increases, which they’re passing along to us,” he said.
“We started to raise some prices, but we’re not raising them up to the 295 per cent tariffs, but at some point every retailer has to pass along the cost. We have to run a business.”