What an Alaskan Furniture Company Tells Us About Tariffs

Summary

Odd Lots Podcast Episode Summary
Title: What an Alaskan Furniture Company Tells Us About Tariffs
Host/Authors: Joe Weisenthal and Tracy Alloway
Release Date: August 11, 2025

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Introduction

In this episode of Bloomberg's Odd Lots, hosts Joe Weisenthal and Tracy Alloway delve into the unique challenges and insights from the Alaskan furniture industry. By interviewing Dave Cavett, CEO and founder of Furniture Enterprises of Alaska, the conversation explores how extreme climates, logistical hurdles, and evolving economic policies like tariffs shape the business landscape in one of the United States' most remote states.

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Meet Dave Cavett and Furniture Enterprises of Alaska

Dave Cavett shares his personal journey and the inception of his business in Alaska. Having transitioned from various odd jobs, including a stint as a commercial fisherman, Dave founded Furniture Enterprises of Alaska, which operates 14 stores under six different brand names. These brands cater to different market segments, from mid-market options like Sadler's Furniture to high-end retailers like Ultimate Mattress Store.

"We segment the different demographics in the marketplace and then combine the operations back behind it to be able to deliver the furniture at a lower cost than other companies."
[04:11] - Dave Cavett

Dave’s background of hitchhiking to Alaska and surviving a boat mishap adds a compelling personal narrative to the business discussion, highlighting his resilience and adaptability.

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The Cyclical Nature of Alaskan Business

Alaska's economy is heavily influenced by the oil industry’s boom-bust cycles. Dave explains how the construction of the pipeline in the mid-1980s led to a surge in infrastructure development and population growth, which subsequently increased the demand for furniture. However, when oil prices plummeted, many businesses and residents left the state, causing dramatic declines in sales.

"Revenues dropped, like 70% type of things. We had to do workouts with the banks and the FDIC and people along that line."
[06:33] - Dave Cavett

This cyclical economy poses significant challenges for maintaining steady business operations and forecasting demand.

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Logistical Challenges and Shipping Costs

One of the primary hurdles for furniture businesses in Alaska is the high cost and complexity of shipping. Unlike the contiguous United States, furniture must often be shipped from ports like Seattle, incurring substantial freight costs.

"We're paying currently $1,900 China to Seattle. Then we have to reload that onto a carrier that can bring it up to here. And it's about $9,000 from Seattle to here."
[10:32] - Dave Cavett

The Jones Act further complicates logistics by limiting the types of ships that can transport goods between U.S. ports, increasing costs and reducing shipping flexibility.

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Impact of Tariffs on the Alaskan Furniture Market

Tariffs present a significant challenge for Furniture Enterprises of Alaska, exacerbating the already high costs of importing goods. Dave discusses how tariffs on Chinese goods have led the company to shift some of their imports to India, though this transition comes with its own set of uncertainties and costs.

"Tariffs are troubling to me... we've had to switch over some of our imports to India."
[19:19] - Dave Cavett

The volatility of tariffs forces the company to absorb some costs while passing others onto consumers, making pricing strategies more complex and potentially pricing out parts of their market.

"We're having to look at those and some of them we go hard back onto the manufacturer... some of it is too price sensitive. We're just having to eat that for right now."
[20:59] - Dave Cavett

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Labor Supply and Workforce Challenges

Finding and retaining workers in Alaska is another significant issue. The remote location and competitive labor market make it difficult to hire staff, especially for non-skilled positions essential to the retail and delivery aspects of the business.

"With us, we're a very non-skilled labor force... it's very difficult."
[24:21] - Dave Cavett

Wages have had to increase significantly to attract and retain employees, pushing operational costs higher.

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Market Trends and Consumer Demand

Dave provides insights into the current state of the Alaskan housing market and its direct impact on furniture sales. With a declining population and minimal new home construction outside specific areas like the Matanuska Valley, the market remains constrained.

"Home building in Anchorage has been very slight. Only a 25 to 50 homes a year been built in the past decade."
[17:16] - Dave Cavett

Consumer confidence also plays a crucial role. Soft demand due to economic uncertainties leads to deferred large-ticket purchases, affecting overall sales.

"A large portion of that softness I do believe goes back to consumer confidence... we see that right now."
[23:00] - Dave Cavett

Additionally, segmentation in consumer demand shows that higher-end furniture remains relatively insulated from economic downturns, while budget segments suffer more.

"The higher end is more insulated from that... it's where we're seeing it hit us the hardest."
[23:38] - Dave Cavett

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Competition from the Used Furniture Market

While there is some competition from the used furniture market, particularly through platforms like Facebook Marketplace, it primarily affects younger or more transient populations. For most segments, new furniture remains a steady demand.

"It's off our radar for the most part."
[30:52] - Dave Cavett

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Lessons and Reflections

In a personal reflection, Dave shares his journey overcoming learning disabilities and building a successful business in Alaska. His love for the state's natural environment and community resilience shines through, despite the economic challenges.

"I love living here. I love the mountains, I love the animals... I'm staying here. Love it."
[29:19] - Dave Cavett

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Conclusion

This episode of Odd Lots offers a deep dive into the niche yet revealing world of the Alaskan furniture industry. Through Dave Cavett's experiences, listeners gain an understanding of how remote locations, economic volatility, and policy changes like tariffs intricately affect businesses. The discussion underscores the importance of logistics expertise, adaptive pricing strategies, and market segmentation in navigating the unique challenges of operating in Alaska.

The conversation also highlights broader economic themes such as the impact of tariffs on small businesses, labor market constraints in remote areas, and the long-term effects of population decline on local economies. For anyone interested in the intersections of geography, policy, and business strategy, this episode provides valuable insights.

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Notable Quotes:

• "We're paying currently $1,900 China to Seattle. Then we have to reload that onto a carrier that can bring it up to here. And it's about $9,000 from Seattle to here."
  [10:32] - Dave Cavett

• "Tariffs are troubling to me... we've had to switch over some of our imports to India."
  [19:19] - Dave Cavett

• "The higher end is more insulated from that... it's where we're seeing it hit us the hardest."
  [23:38] - Dave Cavett

• "I love living here. I love the mountains, I love the animals... I'm staying here. Love it."
  [29:19] - Dave Cavett

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For more insights and detailed discussions on finance, markets, and economics, visit Bloomberg Odd Lots.

Transcript

[Karen Moscow]

Bloomberg Daybreak is your best way to get informed first thing in the morning, right in your podcast feed. Hi, I'm Karen Moscow.

[Nathan Hager]

And I'm Nathan Hager. Each morning we're up early putting together the latest episode of Bloomberg Daybreak US Edition. It's your daily 15 minute podcast on the latest in global news, politics and international relations.

[Karen Moscow]

What's special about Bloomberg Daybreak is the immediacy of the news we bring you each day in your podcast feed by 6am Eastern Time.

[Nathan Hager]

This isn't a deep dive on yesterday's news. Instead, you get the latest stories with.

[Karen Moscow]

Context, and that's something you don't get from other news podcasts. So join us for the best from Bloomberg's 3,000 journalists and analysts around the world, with reporting backed by data and journalists at the center of the stories we cover.

[Nathan Hager]

Listen to the Bloomberg Daybreak US Edition podcast each morning for the stories that matter with the context you need.

[Karen Moscow]

Find us on Apple, Spotify or anywhere you listen.

[Tracy Alloway]

Bloomberg Audio Studios Podcasts Radio news.

[Joe Weisenthal]

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

[Tracy Alloway]

And I'm Joe Weisenthal.

[Joe Weisenthal]

And I'm Joe. Can I start this conversation with what will seem like a random story, but I swear I have a point.

[Tracy Alloway]

Go on.

[Joe Weisenthal]

Okay, so a long, long time ago when I was visiting my mother in Beijing one winter, she was working out there. Beijing winters are really cold, they're really dry. And I was sat in her apartment and all of a sudden I hear this giant crack. And I run downstairs and it turns out the console that the TV was on had just like completely split in half because the air was so dry and it was so freaking cold. And I had never considered that you could have weather locations where the weather was so extreme that you actually had to factor that into your furniture.

[Tracy Alloway]

I never thought. I mean, I do have one sort of connection to that, which is we're gonna start bragging about our international experiences, et cetera. You know, I've mentioned my family lived in Malaysia for a year and we bought this big round table that we brought back with us to Illinois. And I do remember now that there was some discussion about like, oh, this was designed for the humidity of Malaysia, et cetera, maybe have some natural give, et cetera, but is fine. But it's funny you say that because, yes, now I would not have remembered that otherwise.

[Joe Weisenthal]

All right, well, the reason I bring it up, we're so sophisticated and internationally sophisticated. I hope everyone's factoring in climate considerations into their furniture, but There is actually a reason that I'm bringing that up, which is we are in Alaska.

[Tracy Alloway]

Yeah.

[Joe Weisenthal]

And Alaska does have cold, very, very dry winters. And it's also very, very large. It's very hard to get things even into and out of the state. And so I think it would be really interesting if we actually talked about the furniture industry within Alaska.

[Tracy Alloway]

We need no more introduction, we need no more. Let's do it.

[Joe Weisenthal]

All right. So we do in fact have the perfect guest we're going to be speaking with. Dave Cavett. He is the CEO and founder of Furniture Enterprises of Alaska. So really the perfect person to speak to. Dave, thank you so much for coming on. All thoughts.

[Dave Cavett]

Thank you so much for having me here.

[Joe Weisenthal]

So tell us about Furniture Enterprises of Alaska. What exactly are you doing there?

[Dave Cavett]

Yep, we are furniture retailers. We have 14 stores under six different brand names. And so we have, our stores are Sadler's Furniture, Williams and K Home Furnishings, which is more design and custom order products. Sadler's is mid market. We have two Ashley stores that are a licensee of them. We have three Mattress Firm stores, a La Z Boy store and a Ultimate Mattress Store which is a higher end mattress retailer. So what we do is we segment the different demographics in the marketplace and then combine the operations back behind it to be able to deliver the furniture at a lower cost than other companies.

[Tracy Alloway]

And tell us a little bit about. You mentioned the size of the retail footprint. Tell us a little bit about the history. How did you. Are you a native Alaskan? Are you? We learned the term sourdough recently. Are you a sourdough? What's the story of you and your company?

[Dave Cavett]

Yes, I am a sourdough now. I am 69 years old. I grew up in central California in the farming area and it was not the right fit for me. So two weeks out of high school I hitchhiked up here kind of thing by myself. Amazing already that I did several different odd jobs, short term as a commercial fisherman, but we sunk the boat. That was not good. I was a janitor and bed maker on the North Slope during the building of the pipeline. And then I went as a day laborer to a furniture company and stayed there ever since.

[Joe Weisenthal]

This is already really fascinating. So one thing that Joe and I are learning about Alaska in real time is it is incredibly cyclical and sort of you have these boom bust cycles that are tied to what's happening in the oil industry. So you mentioned beds when the pipeline was getting constructed. Is it fair to say that furniture sales follow that boom bust cycle as well, when there's a lot of activity, lots of people moving to Alaska and building stuff, do you suddenly see demand for furniture ramp up and then when it kind of goes bust, do people start selling their. I don't know, their beds on the corner?

[Dave Cavett]

Yes, we definitely have our cycles. They're not as extreme as that they once were. The largest of those booms and bust was the building of the pipeline and then the first years of the oil revenue for the state that came in. And then the state built a lot of infrastructure, and those were booming times. And there would be whole subdivisions built on spec and that type of thing as it was growing. And then the oil prices dropped to around $8 a barrel, and the construction stopped and the people moved out of the state. So back in the mid-1980s, Alaskans knew all the terms of your house being underw and people mailing their keys back to the bank and that kind of thing. And about a third of the homes in Anchorage at that time were walked out on, vacated by the owners. So that was worst of the bust.

[Tracy Alloway]

How did the furniture. How did you. At that point, had you already started your furniture operations? Like, where were you in your career at that point?

[Dave Cavett]

Yes, I was then half owner of the furniture company that I'd gone to work for, and it was just terrible. I mean, revenues dropped, like 70% type of things. We had 14 banks and savings and loans at that time, and half of them were closed by the FDIC or whatever the Savings and loan one is called again at that time. And so we ended up having to do workouts with the banks and the FDIC and people along that line.

[Tracy Alloway]

Sorry, before I forget, were you really on a commercial whaling or.

[Joe Weisenthal]

Sorry, were you really listeners? Yeah, no.

[Tracy Alloway]

Listeners need no further context.

[Joe Weisenthal]

Does everyone know that Joe is obsessed with Moby Dick and whaling at this point? To the point where you accidentally introduce.

[Tracy Alloway]

Into sentences, you're on a commercial fishing boat. Did it really crash? And were there any sort of.

[Dave Cavett]

Did that.

[Tracy Alloway]

You know, when is there lessons from business that you could take from the allegory of going down on a ship?

[Dave Cavett]

Yeah, I think it would be to. It didn't go down with us on it. It did go down, and I think it would be to interview the person leading that. I just got up to Alaska. I met another fellow who was the same age I was, but we were Both just turned 18. But he had a fishing boat and said that I could work on it. He wouldn't pay me, but I'd get experience. And we went out and he Ended up not knowing what he was doing. And we got caught into a storm, heavy seas. And that boat took on a lot of water and the engines died. And we were hailing a mayday out in the Gulf of Alaska, and luckily another ship, a tanker, heard it and said, do you want us to call the Kodiak Coast Guard for you? We said, absolutely, because we are sinking. And they came back and said, boys, we got bad news for you. It's too rough. They're not coming.

[Joe Weisenthal]

And they came out and got you.

[Dave Cavett]

That tanker did? Yeah, the Coast Guard. It was too rough.

[Joe Weisenthal]

Coast Guard couldn't.

[Dave Cavett]

But, yeah, couldn't do it. And so they came out and it took us a little while of the boats bumping together. They were 550ft long. We were 42ft. And it slapped together at one time. And they'd hung a ladder off the edge of that boat. And I saw that and I scrambled up to the.

[Tracy Alloway]

Must have been the most satisfying ladder you've seen in your whole life.

[Dave Cavett]

Absolutely. We thought we were. We thought we were goners, you know, because the only last half an hour in that cold water.

[Joe Weisenthal]

Okay, so no more fishing. From fishing to furniture. What should people know about furniture sales in Alaska? What are the special considerations versus, say, furniture sales in the lower 48?

[Dave Cavett]

Yeah, the biggest thing that separates us from the lower 48 is the additional freight costs to Alaska. You know, we're a long ways by road. We only have the one road, the Alaska highway, which goes through Canada and up to us. And only heavy equipment really gets shipped over that. Everything else is shipped to the port of Seattle and then put onto ships. And it takes three days for those shipments to arrive to us. And it's. We pay more for that freight from Seattle to Anchorage than we do from the containers that we bring in from China, Vietnam, Malaysia in those areas. Yeah.

[Tracy Alloway]

So explain that more intra. US Shipments are costlier than Trans Pacific shipments.

[Dave Cavett]

Yes, I just checked because I figured it might come up. We're paying currently $1,900 China to Seattle. Then we have to reload that onto a carrier that can bring it up to here. And it's about $9,000 from Seattle to here.

[Joe Weisenthal]

Wow.

[Tracy Alloway]

Is there a Jones Act? Sorry, but I have to. Is there a Jones act angle of this story?

[Dave Cavett]

Jones act is a part of that for sure.

[Joe Weisenthal]

Jones act everywhere. Can you not get shipments direct from China? Could that happen?

[Dave Cavett]

No, there is nowhere near the volume out of the Anchorage area. And where the port goes, there's maybe 650,000 people. We have about 760 in the state, I think. And so we just don't have no economies.

[Joe Weisenthal]

So I have to imagine that one of the keys to running a successful furniture business in Alaska is you have to be really, really good at shipping and logistics. And to some extent it sounds like you're basically running a distribution center for furniture, right? Is that the thing that you're sort of competing on or is that the area of expertise that you really have to have in order to be successful in this business?

[Dave Cavett]

I would say yes. We are good at the merchandising, we're good at the market segmentation, the advertising. We're good at everything. But we excel in logistics. We have a full time person and we're not that big a company, but a full time person that puts together those and is always negotiating the rates and trying to make sure that every container is filled to the maximum that can be. We can't pay for dead air space and containers.

[Tracy Alloway]

What was 2021 like? So, you know, we as a podcast first started getting really interested in, you know, shipping and logistics. And freight is very important because like everyone else, we, we didn't think about it much in the 2000 and tens when there was plenty of excess capacity. And then what was 2021 and 2022 like during those sort of extreme levels of both inflation and, you know, just bottlenecks in the supply chains?

[Dave Cavett]

You know, those were trying times for us, but at least everybody was in that same boat kind of say. And we had to put out our orders where we usually try to put them out a few months in advance. We were having to put them up, out up to eight to 10 months in advance. And of course the freight rates were coming in. We had been paying about $1,700 a container, trans Pacific before that. And I think our peak was around 22,000 for a container. But the demand was there, you know, and during that time it was the biggest boom for the furniture industry that's ever been because as people in Covid times could not go to the bars and the restaurants, they weren't traveling and decided to take that money that they usually spend other places and put it into furniture. And so we had to pass on those costs to the consumers, of course, but it happened and it worked at times like that.

[Joe Weisenthal]

How does it work in terms of getting inventory? Because I imagine it's not just Alaskan residents that want a whole bunch of new furniture because they're stuck inside and everyone feels like redecorating their house at that particular moment in Time, people In the lower 48 are doing the exact same thing. It's probably not enough furniture stock to go around at that particular moment. How are you actually placing orders? And I guess how does it work in general when you're buying inventory from big brands like a La Z Boy or like a mattress firm?

[Dave Cavett]

Right. That's really two different things. One, if we're talking about during the COVID times, we had to align ourselves and ensure that the people that we're placing the orders with would actually ship them. And we put a lot of focus into that. We did narrow down our selection to people that could get it shipped to us. Finally, even though there was rolling delays on that at all times, and then along with the manufacturing delays, then they would go and put the containers into the Vietnam or China ports and you couldn't get the bookings on the shipping. It was overburdened type of thing. But it's different now. It's back to closer to how it has been in the past. And we go to the furniture markets, we go to four of them a year and we select the items and then when we bring something into our showrooms, we start the backup process and ordering and what we think demand is going to be. We do keep those items on our showrooms and then we sell our back stock and we sell into incoming stock. So we're keeping a close hand on when the arrival dates are going to be so that our sales staff can say, this is out of stock right now, it's coming in in three weeks. And we can even book a delivery date from that point.

[Joe Weisenthal]

I didn't realize there are furniture markets, but I guess that makes sense. So the idea is these are big, like wholesale furniture markets where you have the wholesalers sort of unveiling what they might have available to the retailers every year.

[Dave Cavett]

Yes. There's two in High Point, North Carolina, and then two in Las Vegas that we attend. The ones in High Point where you should find out a little bit about it. Yeah, we should. It is just a massive market that's tens of millions of square feet, manufacturers displaying the new products foreign.

[Karen Moscow]

Bloomberg Daybreak is your best way to get informed first thing in the morning, right in your podcast feed. Hi, I'm Karen Moscow.

[Nathan Hager]

And I'm Nathan Hager. Each morning we're up early putting together the latest episode of Bloomberg Daybreak US Edition. It's your daily 15 minute podcast on the latest in global news, politics and international relations.

[Karen Moscow]

What's special about Bloomberg Daybreak is the immediacy of the news we bring you each day in your podcast feed by 6am Eastern Time.

[Nathan Hager]

This isn't a deep dive on yesterday's news. Instead, you get the latest stories with.

[Karen Moscow]

Context and that's something you don't get from other news podcasts. So join us for the best from Bloomberg's 3,000 journalists and analysts around the world with reporting back by data and journalists at the center of the stories we cover.

[Nathan Hager]

Listen to the Bloomberg Daybreak US Edition podcast each morning. For the stories that matter with the context you need.

[Karen Moscow]

Find us on Apple, Spotify or anywhere you listen.

[Tracy Alloway]

I want to talk about the contemporary economy a little bit. One angle that strikes me is very furniture relevant is housing. And due to interest rates, there's a lot of perceived stagnation. I mean, there is a lot of stagnation in the housing industry in general. A lot of people aren't moving due to mortgage lock in. There's not a lot of new construction happening right now due to financing costs. What are you seeing? Like, I don't know much about the Alaska housing market, but you know, what are you seeing in the Alaska housing market right now? And I have to imagine whatever is happening feeds into the impulse to buy new furniture or not.

[Dave Cavett]

Yeah. Unfortunately in 2015 Alaska, the oil prices took a dip and when that went down, then the oil companies laid off their people and a lot of them. And since then we've not recovered. So we're now in the 10 years of a recession. In my opinion, home building in Anchorage has been very slight. Only a 25 to 50 homes a year been built in the past decade. And so each one of those is an opportunity for us to furnish. But it's been pretty slow. We've had a decrease in our population from about 305,000 to about 285,000 maybe somewhere in that right now. Home building in the rest of the state has been slow. The only place that is happening is in the Matanuska Valley, which is about 35 miles outside of Anchorage. Land is less expensive there. There's less municipal regulation and that kind of thing. So they're building several hundred homes out there a year and that's our hotspot right now.

[Joe Weisenthal]

Talk more about that. So when you see a particular area of Alaska booming or when you hear that, I don't know there's going to be some new oil project built in one particular town or city, do you immediately start thinking like, well, maybe we need to open a store over there? Do you sort of direct your business to where that oil money is going.

[Dave Cavett]

No, it's a good question, but no. Where the oil is developed is on the north slope of Alaska and there is no town there. It is just the oil camps. The closest to that are some native villages like Barrow, which is now called Yupjavik, and there's another native village up there, but those are a few hundred people kind of thing. So no market. All the infrastructure is through the Anchorage area.

[Tracy Alloway]

Talk to us about tariffs. What substantively are you seeing on that front?

[Dave Cavett]

Tariffs are troubling to me. I lean as conservative. I'm not really. I'm not a Democrat nor a Republican. I'm an independent. Nonpartisan kind of thing. It's troubling, you know, because we buy product from China, but now there's all the tariffs that are happening there that can price out that product to the marketplace. Today I heard that India is doubling from 25 to a 50% and we have now switched over, just had recently switched over some of our imports to India. And I was looking at those yesterday and thinking, oh, those are a couple of good bedroom sets.

[Tracy Alloway]

So planning must be brute. I mean it's brutal. Setting aside cost and cost, just the idea of like any sort of forward planning, it's brutal.

[Dave Cavett]

Right now, you know, if you're the size of a Walmart or you know, these Home Depot or something, you can probably get the manufacturers to guarantee you prices. We are way under that level and we just have to take what they are going to add onto it. But they're into lack of confidence in how things are working out themselves. They're skittish and so some of them of the manufacturers won't ship if they think that there's going to be a sharp increase in the tariffs because they don't want to ship and then have the people they're shipping to say not pay it. Not pay it.

[Tracy Alloway]

Yeah.

[Joe Weisenthal]

Oh, interesting.

[Dave Cavett]

Yeah.

[Joe Weisenthal]

And what about just in terms of the added price from the tariffs at the moment, are you planning to absorb most of that yourself or do you pass it on to customers in a state where, you know, costs are already pretty high just because it's so remote and everything has to be shipped in?

[Dave Cavett]

Right. We're having to look at those and some of them we go hard back onto the manufacturer saying they're going to have to take on a lot of that and they did originally just absorb portions of that and then started adding some back to the cost and then we're absorbing some again, like retail. We're taking the markups where we can, but in some of it is Too price sensitive. And we're just having to eat that for right now. And it's too volatile.

[Joe Weisenthal]

Yeah, I think I told you, Joe, but I went to. It was like a local British import shop in, I think it was in Vermont recently. And so they import everything from the uk it's like come here to get British candy and British groceries. And they basically just stopped publishing their prices because the tariffs were changing on an almost daily basis. And they were like, you know what, it's too much trouble to try to update all our pricing to take this into account. So we're just like not putting them on.

[Dave Cavett]

Yeah.

[Tracy Alloway]

Say more about. Because this is from the perspective of the Fed. I mean this is the trillion dollar question about the degree to which tariffs can be passed on to the consumer or not, et cetera. And I'm just curious like how you think about like pricing in general and how you sense when there's an opportunity to push price a little bit more, have the customer defray some of those costs or not, like talk just a little bit about what you're seeing on that front.

[Dave Cavett]

Our pricing, even though we're pretty remote and everything like that goes back to national pricing. And if we get too high in our pricing, then consumers will shop in the lower 48 and pay that additional shipping up to here themselves. So that's always something. We always have to make sure that we're negating that difference.

[Tracy Alloway]

Yeah. Do you sense just in terms of the economic cycle right now, setting aside tariffs, how does end demand feel among consumers in August 2025 than it would have been in August 2024? Is there any slowdown in any of the segments that you perceive? Are there some segments that are more robust than others?

[Dave Cavett]

Yeah, it's softer right now. And a large portion of that softness I do believe goes back to consumer confidence. And whenever the consumer confidence wanes, then they push off deferable large ticket purchases. And we see that right now.

[Joe Weisenthal]

Well, one of the reasons we wanted to talk to you is because you have furniture brands that cover a sort of spectrum of consumers. So you have higher end versus maybe more budget. Do you see segmentation in consumer demand between you know, maybe people who are buying slightly more modest furniture versus the people who are buying more higher end or custom?

[Dave Cavett]

Yes, right now. And with my knowledge of the furniture industry nationwide is that of course the higher end is more insulated from that. And when it gets down to the starting price points that we have for people, let's say that are apartment dwellers, renters and stuff like that, instead of homeowners and with the inflation taking a bite out of their incomes, that's where we're seeing it hit us the hardest.

[Tracy Alloway]

What are you seeing on the labor supply particularly, I imagine like movers or people who deliver the furniture, or either retail workers in the showrooms, et cetera. How easy is it to hire right now?

[Dave Cavett]

Not easy at all. It's a little bit better now than it was a couple years ago, but it is very difficult.

[Tracy Alloway]

Why? What's the constraint?

[Dave Cavett]

Well, there's more jobs available than people.

[Tracy Alloway]

What are the sectors that are like, where are they? When you look at like, okay, there's some prospective employee and they can choose to work between you and someone else and you're competing with some other employer. What are these sources of employment demand that you're competing with here in Alaska?

[Dave Cavett]

With us, we're a very non skilled labor force and so we bring in the people. Pre pandemic, we were starting people at about $15 an hour for any position and now we are at 21 to $25 an hour type of thing. And they come into us unskilled and then we have to build the skills with them type of thing. So we're not looking for people with degrees and education and that kind of thing, Just workforce. And again, if they don't like being retail, we need to work weekends. If they don't want to work a week, they can find another job someplace else.

[Joe Weisenthal]

Since Joe brought up constraints on labor, I'm going to ask what's becoming, I guess, a classic question in a lot of these episodes, but what would you say is the biggest constraint on your own business? Whether it's finding enough workers, whether it's sourcing enough furniture, whether it's shipping costs, maybe it's regulation that's limiting the amount of homes that can actually be built around Anchorage. What's the biggest one for you?

[Dave Cavett]

The biggest one for us is the, the decline that we've had in the population. It is now rebounding from that, but it's going to be slow or it is slow. And so it's just the size of the marketplace. We have stores in Anchorage, Fairbanks, the Kenai Peninsula and the Matanuska Valley. And in between that, it's about 550,000 people in our total market that can drive to one of our stores. We do sell some to the people of what we call the bush communities where we sell it to them, but we have to load it into airplanes and that type of thing and it has to be flown out to them type of thing. So it is just the population.

[Tracy Alloway]

Is there a rate sensitivity aspect of your business either towards your own cost of capital or I have to imagine some of the buying is borrowed or the consumer is borrowing money to buy the bed, et cetera. Do you see any sort of clear link between high interest rates right now and how your business operates?

[Dave Cavett]

The amount of consumers that are financing the purchase that we do do like the financing, we have that available for them and then we run the promotions where we do 36 months, up to 60 months without interest, that we pay for that interest up front to the finance company. But that is still. That is slowed way down over the peak that it was pre pandemic as people are just not. They're concerned about getting into too much debt. Sure.

[Joe Weisenthal]

How much of the slowdown in customer demand post pandemic? How much of that has to do with just people bought a lot of stuff in 21, 22 and maybe you don't need, you know, another new bed for a while or another new coffee table or something like that versus actually we are seeing a sort of fundamental structural slowdown in the amount of stuff that people are able to buy.

[Dave Cavett]

Yes. I am not smart enough to understand that during the pandemic what we did was made up for past purchases that they didn't make or if they bought into the future. I really don't know the difference. In maybe a few years from now, some smart people will write something, I'll read it and say oh yeah, that's it kind of thing. But it had to do it. Now furniture, when you buy it, like a dining room table, most people are expecting to get 20, 25 years out of it unless it's splits from too much moisture left in the wood kind of thing. But furniture does last five to 25 years, so it's a very slow cycle.

[Tracy Alloway]

What would you tell your 18 year old self about life in Alaska and doing business and a career in Alaska that is maybe the most surprising or most interesting or the most important lesson for that trajectory you've had.

[Dave Cavett]

All right, so being kind of personal when I was a teenager and stuff, I had no self confidence, that type of thing. I, I didn't do well in school, I didn't understand why, but I have some learning disabilities and that type of thing. I got up here, thought I'd be a laborer, that kind of stuff. So then anyway, I got into the furniture business, turned out to be pretty good at it and I run a good business there still is. The economies come and go to Alaska and that Kind of stuff. But the basic of the state has never lost its luster for me. I love living here. I love the mountains, I love the animals. I mean, we have hundreds of bear and thousands of moose that live within the city of Anchorage and you see them and that kind of thing. I still get all excited about that.

[Tracy Alloway]

Moose walking down the street while I'm here.

[Dave Cavett]

I'm telling you, that can happen more in the wintertime than the summertime. But in the wintertime, yeah, you gotta break and let them go through. Walk through midtown and they're big animals too. Anyway, good times, bad times. I'm staying here. Love it.

[Joe Weisenthal]

Have you ever had a furniture delivery disrupted by wild animals?

[Dave Cavett]

Not that I can think of.

[Joe Weisenthal]

All right, well behaved moose then. I have just one more question, I think, which is the other thing that I think may be unusual about Alaska is again, because it's so remote, because it's quite difficult in some respects to get new materials, new items here. I imagine there must be a lot of competition from the used market. So if you have a bed, a bed's not a great example. If you have a couch or a coffee table, you want to buy something new, you're not just going to throw that coffee table away. You're probably going to try to sell it on Facebook marketplace or something like that. Do you feel a lot of competition from the used furniture segment?

[Dave Cavett]

It's not that much competition for us, except for it is there and it is. The Facebook marketplace is where it is. So probably some of these items get bought and sold a few times. But again, that's usually for younger people just getting started and. Or a temporary. They're just going to get something to, you know, last maybe six months to a year and then buy better quality furniture once they're established. So yes, it is there. It's off our radar for the most part.

[Joe Weisenthal]

All right. Well, Dave, thank you so much for coming on. Ovats. That was really fun.

[Dave Cavett]

Thank you so much too.

[Joe Weisenthal]

Joe. Imagine hitchhiking to Alaska to become a commercial fisherman and then get into the furniture business.

[Tracy Alloway]

Imagine getting into the commercial fisherman business, finding someone roughly your age and experience. You know, it's hard not to be. You know, the mind comes to Ishmael and Kli Quang from the 1851 novel by Herman Melville, Moby Dick and then your boat crashing and then saving your life, et cetera.

[Joe Weisenthal]

That's where your mind goes, Joe.

[Tracy Alloway]

It's hard not for the mind to drift there.

[Joe Weisenthal]

Can I ask if we go on a whale watching tour? Am I Just gonna hear, like, Captain Ahab references for three hours.

[Tracy Alloway]

I'm just gonna go around to everyone on the boat. I'm gonna say, are you the Ahab, the Ishmael, or the Starbucks? And I'm just gonna ask, and I'm gonna categorize everyone on the boat. But, no, that was a great. Like, he was a great Alaskan character.

[Joe Weisenthal]

Great Alaskan character. And also, I still think the furniture industry is such an interesting one to kind of look at the economy.

[Tracy Alloway]

Yeah, yeah, totally.

[Joe Weisenthal]

It's an interesting lens to look at the economy through. And there were a couple things that I would pick out of that conversation. So one, just on the tariffs.

[Dave Cavett]

Yeah.

[Joe Weisenthal]

There's a theme that we've heard over and over again, which is the big guys probably have the pricing power and the relationship power in order to get a lot of their manufacturers to try to absorb some of the tariff costs in a way that the smaller guys do not have.

[Tracy Alloway]

Well, and to this point, it's really interesting that the manufacturers themselves won't accept certain orders because they're not confident that the economics will make sense at the end and that the customer will just walk away from it, which is just a really interesting dynamic. You could just imagine it's like, no, I swear I'll pay. I swear I'm going to pay. I'm good for it. And that adds another. And then this gets to the idea of not just tariff level, but tariff volatility. Just like, you wake up one day and the tariffs double on India, and then you're, like, rethinking your planning.

[Joe Weisenthal]

Exactly. And I suspect the longer the tariff uncertainty persists, the more behavior like that you're going to see where people are just like, I don't know if we want to strike this contract at all.

[Tracy Alloway]

There's two levels here, because tariffs mechanically raise the cost of doing business. But then on a more sort of abstract level, it's just business gets more costly in this environment. And you always hear of people hate uncertainty, et cetera. And sometimes there's just this cliche that people say, because whatever. But here it's extreme. Extremely, extremely concrete.

[Joe Weisenthal]

The other thing that was really interesting to me, and again, this is a sort of broad theme that comes up quite often on the show. But this idea of if you're a homeowner in the current environment, you kind of. You have it made, right? I mean, I guess, depending on what your mortgage rate is. But if you bought before rates went up, you have a lot of excess purchasing power with which to buy new furniture for Your home versus for instance, if you're a renter and you're paying those higher rents, you don't have that cushion from like pre pandemic rates. And so it feels like there's still this issue of haves and have nots in the housing market that still feeds into something like furniture sales too.

[Tracy Alloway]

I also think like the economics of population decline are just really interesting because, right. Small population, that's very hard to reverse because and we, we've talked about this in other areas which is that you have some capital stock, right? Like you have 100 houses, okay. And then you have people move away. Those houses don't just stay there, they deteriorate over time. You don't, you lose that capital stock. And so like how do you like.

[Joe Weisenthal]

Reverse, especially in Alaska if you're not doing upkeep?

[Tracy Alloway]

Yeah, that's right. And I mean we didn't get into this but like that is just like a sort of like problem of like the sort of negative. It's very hard to reverse the sort of decline in any business or any industry because of just sort of the constriction in supply side capacity that occurs from structural decline.

[Joe Weisenthal]

It's also just broadly amazing how big a deal the 2013, 2015 oil bust actually was. And I guess, you know, we were covering the oil market at that time and so we wrote a lot of stories about, you know, the feed through into the bond market and stuff like that. But a place like Alaska is really feeling it in a very real way. Tilted in still. Right. Like almost a decade later or a decade later I should say. Kind of amazing.

[Tracy Alloway]

Yeah.

[Joe Weisenthal]

All right, shall we leave it there?

[Tracy Alloway]

Let's leave it there.

[Joe Weisenthal]

This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Allaway.

[Tracy Alloway]

And I'm Joe Weisenth. You can follow me at the Stalwart. Follow our producers, Kerman Rodriguez at CarmenArman, Dashiell Bennett at Dashbot and Kalebrooks Al Brooks. For more Odd Lots content, go to bloomberg.com oddlots where we have a daily newsletter and all of our episodes and you can chat about all of these topics 24. 7 in our Discord, Discord, GG Oddlauts.

[Joe Weisenthal]

And if you enjoy Odd Lots, if you like it when we go on field trips to far flung places in Alaska, then please leave us a positive review on your favorite favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg Channel on Apple podcast and follow the instructions there. Thanks for listening.

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