How tariffs wreak havoc on margin — and how one furniture brand is fighting back.
Tariffs can strike like an economic tsunami, sweeping into supply chains, digging into margins and leaving brands scrambling for cover. But for The Lovesac Company, a bold four-step playbook is turning the tide.

Who they are

Based in Stamford, Connecticut, Lovesac is a direct-to-consumer furniture brand known for its modular couch system called “Sactionals” and its bean-bag heritage with “Sacs”.  Founded in 1995 by Shawn Nelson (who manufactured his original foam-filled bean bag in his parents’ Utah basement) the business has evolved into a specialty furnishings player. With retail showrooms, e-commerce traction and a focus on modular, washable, reconfigurable furniture, Lovesac sits in a niche of higher-end home furnishings.

The tariff blow

Furniture sourcing is global—and tariffs have targeted the very nodes Lovesac relies on. According to the company’s earnings call, sourcing out of China remains significant, and other key supply countries (Vietnam, Malaysia, Indonesia) have seen tariffs escalate—e.g., up to ~20% in some cases.

The effect? A lowered gross-margin guidance as higher duties squeezed costs. “We believe that this four-point plan will mitigate the majority of the current tariff pressures,” said President & COO Mary Fox during the call. 

Compounding this is headline risk: U.S. policy announced a 25% tariff on upholstered furniture (rising to 30 % by Jan 1) which could ratchet pressure further. In short: Lovesac’s global sourcing model exposed it to elevated duty layers, squeezing margin and forcing strategic action.

The four-step plan

Lovesac launched this strategy in April and is now reporting “strong progress from all fronts”.

Here’s the breakdown of the playbook:

1. Negotiate concessions with long-term vendors
   The first lever: to go back to trusted suppliers and secure more favorable terms (either absorbing cost increases, spreading them, or shifting sourcing footprints). Mary Fox described this as “initial priority”.
   
   
2. Diversify the sourcing footprint beyond China
   Recognizing China’s tariff exposure and cost escalation, Lovesac is cutting back China’s share of output to the “mid-teens” for the fiscal year ending February 2026.
   The company is shifting greater production to Vietnam, Malaysia, Indonesia, but those countries are not entirely immune—tariffs there doubled in many cases.
   
   
3. Raise pricing (selectively) after competitive analysis
   Lovesac evaluated how its pricing compared to competitors and determined that selective price increases could help absorb tariff cost without unduly impairing demand. The company added this as the third leg.
   
   
4. Cut costs throughout the business
   The fourth step centers on operational savings: inbound transportation improvements, optimizing warehousing, reducing last-mile shipping costs. CFO Keith Siegner noted tests are underway.
   The goal: offset tariff headwinds via efficiency, logistics improvements and cost discipline.

How’s it going so far?

Lovesac reports “strong progress from all fronts”. 

Here are key markers:

• The sourcing diversification is underway: reducing China output share to a target mid-teens level for the fiscal year ending Feb 2026.
  
  
• Vendor negotiation has taken priority, which suggests the brand is leveraging its longstanding supplier relationships for better terms.
  
  
• Operational cost initiatives are active: inbound transport, logistics and last-mile shipping optimizations are “in the works”.
  
  
• They remain cautious: the tariff landscape could worsen—and they know more pressure may arrive between now and January 2026. 

Why this matters for other brands

While Lovesac operates in furniture, the playbook holds lessons for any import-heavy business facing tariff headwinds:

• Don’t treat tariffs as an external shock you ignore—build a structured response.
  
  
• Supplier negotiations matter: long-term relationships yield better flexibility.
  
  
• Sourcing diversification reduces exposure to one country/one set of duties.
  
  
• Selective pricing can help—but you need discipline and competitive benchmarking.
  
  
• Operational cost control (logistics, shipping, warehousing) provides a margin buffer when duties bite.

Final thoughts

Tariffs can feel like a destructive force—but they don’t have to leave you powerless. Lovesac’s four-step plan shows how a combination of supplier strategy, sourcing diversification, pricing discipline and cost control can create a buffer. If you’re running a brand with global sourcing, this sort of playbook should be high on your radar.