Dive Brief:
- The Lovesac Company, a direct-to-consumer furniture retailer, has made significant headway on a four-point plan to mitigate tariff costs, executives told investors.
- The strategy's components include negotiating concessions from long-term vendors, diversifying the supply base, raising prices and cutting costs throughout the business, President and COO Mary Fox said in a Sept. 11 earnings call.
- "We believe that this four-point plan will mitigate the majority of the current tariff pressures," Fox said.
Dive Insight:
A cross section of retailers has implemented tactics similar to Lovesac’s to reduce tariff costs. Companies that have increased prices and sought adjustments from suppliers include American Eagle, Macy's and Dollar General.
Lovesac launched its four-pronged tariff strategy in April and is seeing “strong progress from all fronts," Fox said.
The initial priority was negotiating new agreements with longstanding suppliers, Fox said. Secondly, the company continued shifting production out of China, aiming to cut tariff costs by reducing share of output there to the mid-teens for the fiscal year ending February 2026.
U.S. tariffs also impacted Lovesac’s other key sourcing countries, Fox said. Vietnam, Malaysia and Indonesia were at 10%, but recently "pretty much doubled with most of them at 20% or 19%," which contributed to the company lowering its gross margin guidance for the current quarter.
The third step of the company's tariff strategy, price increases, followed an analysis of how Lovesac's prices compared to competing products, Fox said. The strategy's last leg included cutting costs and continuing to identify more cost savings across the business.
Keith Siegner, EVP and CFO, expects some cost savings from logistics. The company has made improvements to inbound transportation and is focusing on outbound logistics, Siegner said.
"We can optimize warehousing, we can optimize last-mile shipping," Siegner said. "Tests for these things are in the works and they're underway."
The tariff headwinds Lovesac and other furniture retailers face could increase between now and January 2026. President Donald Trump unveiled plans last month to impose a 25% tariff on upholstered furniture on Oct. 14, raising it to 30% on Jan. 1.
