By Kelly Cloonan

Furniture-retailer stocks are sliding as investors worry that years of efforts by the industry to avoid tariffs will now be in vain as it looks to be among those hardest hit by the new set of levies unveiled on Wednesday.

Key suppliers for several retailers are located in countries that President Trump labeled "bad actors" when it comes to trade, and will have to pay some of the highest tariffs on products shipped to the U.S. Indonesia and Vietnam, for instance, would be subject to tariffs of 32% and 46%, respectively.

Those are just two of the countries many furniture retailers shifted to in recent years after Trump raised tariffs on China during his first term. Now, those new supply relationships will be subjected to tariffs that are expected to raise costs and damage profits.

RH led the decline with its shares down 41%, at $114.01. The luxury-furniture retailer reported a quarterly revenue miss just before Trump announced the tariffs, accelerating the decline. Shares of Wayfair fell 29%, Williams-Sonoma dropped 16%, and Lovesac was off by 14%.

Office-furniture companies MillerKnoll and Steelcase saw their stocks fall 9% and 7%, respectively.

RH sources a majority of its products from Asia, including 35% from Vietnam. Williams-Sonoma gets 16% of its products from India and 14% from Vietnam. The home-furnishings retailer had cut its sourcing from China to 23%, down from 50% in 2018.

Wayfair Chief Executive Niraj Shah pointed to the industry's increasingly diversified supply chain in an earnings call this year. Cambodia, Indonesia, Thailand, the Philippines and Vietnam all became popular picks for factories and the sourcing of low-cost goods after Trump imposed levies on China in his first term, he said.

Retailers now face the prospect of significantly higher costs from tariffs. RH's merchandise production costs may rise about 38% if the company maintains the same sourcing mix it had a year ago, Wedbush Securities analyst Seth Basham said in a note.

Some companies are already making plans to boost prices. On an earnings call last month, MillerKnoll said its raising prices by around 5% starting in June to mitigate earlier tariff announcements. Steelcase imposed what it called a "tariff recovery charge" last week, which may change as policies evolve, the company said.

"We cannot absorb costs, and I don't think companies across the industry are going to absorb the costs," Steelcase Chief Financial Officer David Sylvester said last month. "I mean, we leverage a lot of the same suppliers around the world, and therefore, are exposed to these tariffs."

For now, having excess inventory may help blunt some of the immediate affect from tariffs. RH said it has up to $300 million in extra inventory. Wedbush's Basham said that represents a cushion of less than one fiscal quarter of sales. "It does give the company more wiggle room than many of its competitors to navigate new sourcing options and potential cost offsets," he said.

The tariffs add another headwind to an industry plagued by a tough housing market. With mortgage rates and home prices still relatively high, buying activity has slumped, weighing on sales.

"The fact is, we've been operating in the worst housing market in almost 50 years," RH Chief Executive Gary Friedman said in a letter to shareholders. He pointed to how there were more existing home sales in the U.S. in 1978, when the country had a population of 223 million, than in 2024, when the population totaled 341 million.

Higher costs and falling consumer sentiment will add further pressure to sales, KeyBanc Capital Markets analyst Bradley Thomas said.

"When the economy catches a cold, the furniture industry gets pneumonia," Thomas said. "That's an easy purchase to hit the pause button on if you're worried about losing your job."

Write to Kelly Cloonan at kelly.cloonan@wsj.com

(END) Dow Jones Newswires

April 03, 2025 15:48 ET (19:48 GMT)

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