A column for Home News Now.

Back in February, we broke down Wayfair’s flywheel strategy that combines e-commerce, a smart loyalty program, and a growing presence in brick-and-mortar retail approached as much as marketing as a distribution channel.

In employing this tech-driven flywheel, we described Wayfair as taking a page – really several pages – from Amazon.com’s platform playbook, which is not to say it is “stealing,” because Wayfair is doing its own take on the flywheel strategy. Besides, it’s one thing to have a playbook and quite another to execute.

That flywheel playbook now has another adherent: Vancouver, Canada-based e-commerce platform Article.com. A specialist in modern, including midcentury, Article.com will open its first furniture stores in the U.S. this year in San Francisco and in Bellevue, Wash. The company, which marked its 15^th anniversary in March, opened its first retail location anywhere in August 2024 in Vancouver.

“We see physical retail as an extension of the business we built online,” said Aamir Baig, co-founder and CEO. “The West Coast has always been core to our business.”

Approximately 25% of Article.com e-commerce sales come from the West Coast of both the U.S. and Canada, with California and Washington consistently ranking among the top five states. Thus, the company says it has infrastructure to support expansion into retail in specifically the San Francisco and Bellevue markets, Baig said.

According to one estimate, approximately 80% of Article.com’s sales come from U.S. customers.

The Flywheel Effect

While the Vancouver store at 848 E Hastings St. has “surpassed expectations,” more specific to the flywheel strategy, the store grew the overall Vancouver market for Article.com, including e-commerce, by nearly 50%. This is the flywheel effect. In addition, in-store customers are placing orders 20% larger than those made online, which is exactly the benefit of retail trumpeted by Wayfair.

“Walking through a physical store gives every shopper a broad view of the breadth of our categories and the depth of our assortment, often inspiring purchases they did not know they could get through Wayfair,” Niraj Shah, Wayfair’s CEO, told the investment community when filing the company’s annual report in February. “We are seeing this work in real time.”

After Wayfair’s Wilmette store opened in greater Chicago, Shah reported that sales into Illinois grew at compound annual rate of 10%-plus over the national average since the 150,000-square-foot store opened in May 2024. And more than half of the Wilmette store’s visitors are new to the brand.

So it was in March that Article.com announced plans for a store in downtown Toronto, a location expected to open late this year. The U.S. stores will give the company four locations of between 7,500 and nearly 10,000 square feet by 2027, with a fifth store expected somewhere in the U.S. in early 2027.

The Toronto location will be in West House at 90 Bathurst Street in King West, one of the downtown area’s more walkable, design-forward neighborhoods. In the U.S., the locations expected to open in Fall are 2299 Alameda St, San Francisco, in the Design District, and 700 Bellevue Way NE, in Lincoln Square, Bellevue, in the Bellevue Collection, a high-end urban shopping center just outside downtown Seattle.

Tech-driven

Another trait Article.com shares with Wayfair, and that both share with Moto Motion, for that matter, is its grounding in and emphasis on tech. All four of the company’s founders got their BAs in computer engineering at the University of Alberta: Baig, Fraser Hall, and brothers Samuel and Andy Prochazka. Baig’s previous company, GfK Etilize, develops e-commerce software, giving Baig and Andy Prochazka the experience they determined they could use to start a company that breaks down barriers between consumers and manufacturers via an e-commerce platform.

“We chose furniture as the first item to apply that idea to because it was just going to be a whole lot easier to fill a container with sofas than espresso coffee machines,” Baig told Forbes. “We got obsessed with the world of furniture and saw lots of opportunities as to how we can make the customer value proposition and the customer experience remarkably better.”

So, the tech and software came first. Furniture just made sense for that technology as a product line. The company started up in 2011, launching e-commerce direct to consumers in 2013.

With a proprietary technology for managing manufacturing and distribution, Article.com has access to the chief currency of the digital realm: data. Access to granular information about its customers and what they like, which styles they prefer, and whether fast delivery matters, to name just a few data-driven variables, enables rapid improvements in Article operations, Baig said.

The company also relies on its own fulfillment centers and in some cities, such as New York and San Francisco, it handles its own last-mile deliveries. Fulfillment centers are located in Calgary, Alberta; Jacksonville, Fla.; Richmond, Va.; and Patterson, Calif.

“Our online business model also gives us an opportunity to understand our customers at scale,” Baig told Business of Home in 2022. “We’re able to tap direct data sources to understand shopping preferences and customer feedback. Teams across the company use this data to inform decision making, including our product management team, which monitors and analyzes top-selling products to inform production schedules and which collections to expand.”

Baig and Shah speak the same language.

Roller coaster

Article.com’s expansion into physical retail marks another milestone on a road marked by many turns. None of the turns proved bigger than COVID. Profitable from 2015 to 2021, Article.com’s trajectory was interrupted by the pandemic. When pandemic-related demand retracted, the company laid off more than 200 workers, or nearly one in five.

Baig said at the time that online sales had benefited from COVID-era demand, but that Article.com subsequently misjudged how long that trend would last.

“We were operating the business at a size larger than . . . demand would sustain,” Baig said in a statement. “We were living beyond our means.”

This is a narrative with which a great many furniture retailers can relate, most especially perhaps American Signature/Value City; Big Lots; Franchise Group; Conn’s; Badcock; Bed, Bath & Beyond; and Bargain Hunt, to name but a few.

The adjustments seemed to have worked, with Article.com returning to profitability in 2024, according to the company.

“Now that we have stabilized ourselves out of the post-COVID demand shock, and are looking to continue to drive growth, physical retail is a very promising channel for us,” Baig told Canadian newspaper The Globe and Mail in March.

While I teach a law course, I am not a lawyer. I don’t even play one on TV. But, playing one on TV strikes me as a possible mediation method to settle the escalating dispute among furniture retailers and their suppliers over the question of just how to share in the tariff refunds.

Now, I know you know how we got here, but just in case you are a Jehovah’s Witness, here’s the short version: In a 6-3 decision on Feb. 20, the U.S. Supreme Court invalidated Trump’s tariffs on furniture and other imported goods under the International Emergency Economic Powers Act. This non-specific ruling opened the door to refunds of duties already paid, but said nothing about how to apportion the refunds. This vagueness, in turn, opened the door to state-level legislation that presumably would be enacted on behalf of consumers, so they might get some of their money back, as Home News Now reported.

‘Knives Out’

Operating on thin margins and amidst intense margin pressures, seemingly everyone wants a slice of this refund pie. In many cases, they don’t want a slice; they want the whole enchilada, which is a lot like a pie only it has beans and cheese. And it’s a rather large pie, or enchilada: As much as $175 billion, a total that includes but is not restricted to home furnishings. The first wave of these refunds is expected this week, so interest is peaking.

Public companies are especially interested in this latest “Knives Out” drama because many of them have identified in their guidance that tariffs could negatively impact earnings.

But, here’s the rub: Cost increases tied to tariffs weren’t unilaterally passed on to retailers dollar-for-dollar, at least not in all or even most cases. Some of the product cost increase was eaten by the manufacturer, some by suppliers. New efficiencies were found in other cases to mitigate the increase to cost linked to tariffs, something that Wayfair, for example, cited in its own guidance to assuage investors that the platform would weather the tariff storm.

Yes, a few manufacturers were meticulous enough to levy tariff-caused price increases SKU by SKU, but now they are being punished for their transparency with demands for a dollar-for-dollar pass-through of any refunds recovered, ignoring the fact that there is also a cost to doing the accounting and another cost to using the refund portal, applying for the refund, collecting it, and re-distributing it. Presumably, in many cases the cost of all this will exceed the SKU-specific price increase levied in the first place. In total, more ⁠than 330,000 importers are generating roughly 53 million entries in the portal seeking refunds, according to a report from CNBC citing court records.

Many retailers, too, took a tiered approach to passing on increases to consumers. So, the inflationary impact was felt by almost everyone.

CNBC checked in with a dozen CFOs for national retailers and found that none of them intend to lower their prices in response to the refunds. Too much remains unknown, they say. In February, a few days after the Supreme Court ruling, Lowe’s CEO Marvin Ellison told Yahoo Finance that Trump’s administration would likely continue to battle in court, potentially delaying or blocking refunds before they go out.

“What I will tell you is that when I talk to my legal team, there are quite a few maneuvers that the administration can take to prevent a refund from being a reality in the near-term,” Ellison told Yahoo, “so we’re not sitting back factoring in that we’re going to receive a refund.”

Court in session

So, let’s do what any red-blooded American would do in this situation: Let’s litigate!

What follows is a (fictional) account of how a TV judge such as Judge Judy or Judge Wapner might decide the dispute. The goal here is to highlight the issue’s complexity, as well as to establish copyright should Hollywood come calling with interest in the TV production rights. (See, thinking like a lawyer already!)

For this teledrama, we’ll name the judge, the Right Honorable Solomon King, an inversion of one of the better sources of wisdom, the author of Ecclesiastes, King Solomon. Representing the plaintiffs (the retailers), we have Ms. Ashley Haverty, esquire. For the defense (manufacturers), we have Mr. Bassett Ashley, esquire, with the law firm of Ashley, Ashley & Ashley. That’s right, Ashley is everywhere.

“All rise! This fictional, hypothetical, satirical court is now in session.”

Judge King: Good morning. We are here on the retailers’ motion to compel apportionment of the Section 301 tariff refund proceeds for which furniture manufacturers are eligible to claim. I’ve read the briefs. I want to hear argument. Ms. Haverty, you may proceed.

Haverty: Thank you, Your Honor. Let me begin with what I believe is the simplest way to understand this dispute. Imagine you and a neighbor share a water bill. The city charges too much for the water because, it turns out, the meter was wrong. A refund check arrives. The check goes to your neighbor. Does the law require that she share it with you? We argue that it does.

Judge King: In your hypothetical, both parties paid equal shares from the start?

Haverty: Your Honor, that is precisely our claim. Retailers who purchased sofas, bedrooms, dining room furniture paid prices that the manufacturers themselves, in their own invoices and price sheets, attributed to the Section 301 surcharges. Now the manufacturers’ position is, “That’s ours to keep.”

The difference, of course, is the capital intensity of retail purchasing. We are not talking about wrenches bought in small quantities on net-30 terms. A regional furniture chain might commit to a half-million dollars in purchase orders for a single manufacturer’s line six to nine months before a single SKU hits the retail showroom floor. During the tariff period, our clients made purchasing decisions, set retail prices, absorbed margin compression, and in many cases were simply unable to pass the full surcharge downstream to consumers in what is a highly competitive environment. The manufacturer put the tariff on the invoice as a surcharge. Our clients paid it. A court has now said that surcharge was unlawful. The money should follow the burden.

Judge King: Your reasoning might hold for manufacturers who issued explicit surcharge letters and who were transparent in their invoicing, but what of those who did not? Those that simply raised prices?

Haverty: For those manufacturers, we are not claiming the same dollar-for-dollar pass-through. We are asking this Court to consider apportionment based on the ratio of tariff costs to total cost-of-goods increase during the tariff period applied to the volume of purchases our clients made. It is an approximation, but the alternative is to reward obfuscation. A manufacturer that hid the surcharge in a general price increase would be better positioned than one who disclosed it, and that lack of transparency should not be rewarded.

Judge King: What do you say to the manufacturers’ argument that they incurred substantial costs in the administrative refund process, including filing entries, retaining customs attorneys, preparing supporting documentation, etc., and that these costs should be deducted before any apportionment?

Haverty: Those costs are real. We are not asking for a dollar-for-dollar gross recovery. We are asking for net recovery after reasonable, documented administrative costs are deducted. Second, those costs were incurred to recover money that, in substantial part, belongs to my clients. The costs of recovery do not transform the underlying ownership of the proceeds.

Judge King: Mr. Ashley, your response?

Mr. Ashley: Thank you, Your Honor. Ms. Haverty belies the profound operational and financial complexity of what happened in the furniture industry during the tariff period. I would like to submit a different analogy, one torn from the headlines of real life. Imagine that Waffle House gets hit with a sudden, unexpected increase in the cost of eggs, an increase caused by a government policy. Waffle House raises menu prices, adding a sticker on its menus alerting patrons of the egg surcharge. Some customers pay the higher egg price; some stop coming; some switch to oatmeal, which is a lower cost item. Waffle House also changes suppliers, negotiates harder, reduces omelet sizes, and re-engineers its menu to use less eggs. Kitchen staff are trained to reduce waste, and more is spent on advertising to get a few more new diners through the doors.

When the government reverses its egg policy and issues refunds, how much of that money should go to diners? Which part of the price increase was purely from eggs? What about the extra labor? Suppliers’ delivery fees? The costs to re-train line workers? The part saved reducing waste? What about the money spent on advertising to make up some ground? And, perhaps most urgently, Waffle House took less profit for two years, so what is the remedy?

Judge King: The analogy is apt in its complexity, but the diners might say, “You told me exactly what the egg surcharge was. You put it on the sticker. Why can’t I get that back?

Mr. Ashley: Because, Your Honor, the amount on the sticker was merely an approximation, a reasonable, good-faith estimate of surcharge impact at a point in time. It was not meant to be a precise accounting of actual costs passed through on each individual sale.

And here is where the Waffle House analogy fails: The furniture industry operates on long product cycles. A manufacturer might design a collection, source it from a Vietnamese factory to avoid the China tariffs, but then find that the Vietnamese factory’s capacity is maxed out. So, a portion of the run is made in China and gets slapped with the tariff, after all.

Or, a manufacturer might have hedged its tariff exposure by pre-paying customs duties in advance, at a different rate. The per-unit surcharge on the invoice does not track the actual tariff paid on that specific unit. It is a blended number and estimate.

Judge King: So, you’re saying the surcharge was a price signal, not a cost-accounting entry.

Mr. Ashley: Precisely, Your Honor. Here’s another analogy that might help the plaintiffs better appreciate my clients’ position, this one also torn from the headlines. You bought an airfare to Paris. A few weeks later, Delta tells you owe $35 more for a fuel surcharge on your ticket because of Iran and the cost of jet fuel. That $35 is not wired directly from your credit card to a tanker truck; it goes into Delta’s general revenue. If jet fuel prices drop and the airline gets a refund from a hedging contract, does every passenger get their $35 back? Of course not, because the $35 was a contribution to operational costs that included fuel, not a segregated escrow of exclusively fuel costs.

Now, Your Honor, if retailers can demonstrate in particular cases with documentation that a surcharge was tracked one-for-one to a specific customs entry and that the refund for that entry has now been received, we are not opposed to an appropriately scoped recovery. What we vigorously oppose is a class-wide, uniform apportionment that treats every tariff surcharge invoice as a pass-through. I know of no manufacturer that simply handed tariff costs through to retailers unchanged. Every one of them absorbed some portion of the tariff impact in their margins, in their operational changes, or in their investment decisions.

Not only that, Your Honor, but if it please the court, consider, say, Flexsteel, to pick a name out of a hat. The company is cautious and transparent. It charged retailers exactly the per-unit tariff on every invoice SKU by SKU. It did not try to game the market. Now that a refund is imminent, retailers point to Flexsteel’s invoices and say, “Hey, we can prove exactly how much you charged us. It’s on the invoice. Give it back.” Meanwhile, one of Flexsteel’s competitors proved less scrupulous, raising prices in a lump sum, with no surcharge line, and prices included a comfortable buffer. This competitor collected more than Flexsteel on the tariff, but the retailers have no line item to point to. No rule from the courts should penalize transparency and reward obfuscation.

Judge King: Ms. Haverty?

Ms. Haverty: Your Honor, the Flexsteel competitor in Mr. Ashley’s hypothetical is not off the hook under our motion, but merely harder to pursue. For manufacturers without explicit line items, the burden of proof shifts to the manufacturer, who must demonstrate that its price increases were attributable to costs other than tariffs.

Mr. Ashley: Counsel’s description is much more than a shift. We contend that the refund applications are being filed by manufacturers, at manufacturers’ risk, with no guarantee of recovery, using manufacturers’ legal resources and institutional knowledge of their own import records. No retailer contributed a penny to this effort.

Ms. Haverty: Your Honor, a defendant that has wrongfully collected money from a plaintiff does not get to keep it simply because he later successfully sues the government that made him collect it. The refund is not a windfall the manufacturers earned through entrepreneurial skill, but rather the return of money extracted from the supply chain by what we now learn was an unlawful tariff regime. Claiming the manufacturers took the “risk” of applying for their own refunds is like saying a tow truck company should keep your towed car because the company risked its own equipment to tow the vehicle to the garage.

One additional point, if I may, Your Honor. The home furnishings sector has margins that would make most other sectors weep. A typical furniture retailer operates on gross margins of 40-50%, but net operating margins of just 2-4%. When a tariff surcharge of 15-25% of wholesale cost hits, retailers have virtually no cushion. Like Waffle House, they raised retail prices and lost customers. Some did not raise retail prices and lost margin. Either way, the burden hit downstream. The furniture sitting in American living rooms today was paid for with tariff surcharges that should not have existed. Someone is owed a reckoning. We ask this Court to say who.

Judge King: Much to consider. Thank you both. This case sits at the intersection of customs law, commercial equity, and economics, and I do not think any of those bodies of law has a clean answer for this dispute. This court is obligated to make a ruling, but I would also strongly encourage the parties to explore whether a structured mediation process might resolve some or all of these claims before I am required to impose one.

This Court is adjourned.

Nature abhors a vacuum, and humans don’t like it one little bit, either. So, in the absence of any meaningful explanation from Palliser Furniture regarding its future, specifically what it is terming a “partnership” with supplier (and presumably largest unsecured creditor) MotoMotion, we are left to speculate.

Messages to Palliser executives, including Peter Tielmann and Carey Benson, were not returned, nor were messages to MotoMotion executive Xiaoqin Li (also known as Catherine Lee, MotoMotion’s chairwoman and largest shareholder) or Palliser founder Art DeFehr. In fairness to Li and DeFehr, the messages might not have reached them in, respectively, China and Mexico.

So, information vacuum be damned, let’s do this.

What we know

We learned during the High Point market in a Home News Now report citing a letter to dealers that, facing “liquidity challenges” and disruptions in its supply chain, Palliser agreed to enter a “close and constructive partnership” with MotoMotion. I understand that deal was supposed to go down Friday.

What the partnership likely means, and this is only speculation, is that MotoMotion is stepping in to stabilize and control Palliser operations. Suppliers are rumored to have started balking as Palliser’s bills went unpaid. As a long-time critical supplier of power mechanisms and electronics to Palliser, MotoMotion has fairly massive resources to re-start the Winnipeg-based company’s supply chain.

The deal also makes sense for MotoMotion because it potentially adds Palliser’s Coahuila, Mexico manufacturing to its increasingly Vietnam-dependent supply chain, and MotoMotion has identified building a more resilient global supply-chain system as the top corporate priority this year. MotoMotion has also been emphasizing deep, long-term partnerships with big U.S. retailers, and Palliser’s retail network can only help on that front.

In addition, MotoMotion presciently hired upholstery veteran Tony Cantrell a month ago, installing him as general manager of its new MotoSolutions upholstery division. Previously Cantrell was for six years president of Kuka Home’s national retail division. Cantrell also was vice president of national accounts for Berkline.

MotoMotion is what we might call a “white label” powerhouse, previously content being the invisible “smart” engine inside upholstery from famous brands like Natuzzi and Palliser. But the company is now on the move, and only recently has it begun aggressively pushing its brand name at market. By stepping in to save Palliser, if that is what is happening, MotoMotion is adding market share, securing its own supply chain, and acquiring the heritage and custom-upholstery expertise of a historically solid North American brand.

Deep dive on MotoMotion

Doing research on a publicly traded Chinese company is . . . complex. First, you are dealing with Chinese characters rather than the English language. Second, financials are reported in yuan, which come in much bigger varieties than do US dollar amounts.

But, here goes.

MotoMotion China, which owns MotoMotion USA, MotoMotion Vietnam, and MotoSolutions, is also known by its Chinese name, Changzhou Jiangxin Duju Smart Home, which translates also as HHC Group. Fortunately, Motomotion, the name I will go with here because it is the name used to trade in the U.S., filed its annual report with the Shenzhen Stock Exchange April 23rd.

From these filings we can get a good snapshot of the company that now, perhaps, either controls or is deeply partnered with Palliser Furniture, probably excluding Pallliser’s EQ3 retail division.

My primary takeaway from the deep dive is that MotoMotion is as much a tech company as it is a components or furniture manufacturer. The company specializes in the research, design, development, manufacturing, sale, and servicing of “smart” electric sofas, smart electric beds, and their core components. In fact, the company holds over 500 U.S. patents and operates its own Surface Mount Technology workshops to produce its own circuit boards. Photos of its production lines in Asia, as displayed on its corporate website, depict scenes more akin to a pharmaceutical lab than a furniture factory.

In a down year for Chinese exports to the U.S., MotoMotion reached total sales of 3.4 billion yuan last year, or about $470 million. That 2025 total is up nearly a third over 2024’s $373 million and nearly 80% over 2023’s $280 million. That’s quite a three-year bar chart for top line growth.

And despite tariffs, profitability remained strong, finishing at 857 million yuan, or about $126 million, up more than 30% over 2024’s roughly $90 million. This means revenue and profit grew in tandem despite a very challenging business environment for Chinese companies vis-à-vis U.S. tariffs.

“Against a backdrop of significant external volatility, the Company achieved revenue stability and demonstrated strong operational resilience and execution,” General Manager Xu Meijun states in the filing, which Claude Opus 4.7 translated into English from Mandarin. “More importantly, throughout this process, the Company continued to strengthen its structural capabilities, laying the groundwork for future development.”

Grabbing market share

MotoMotion cites as context for its positive performance the 6.1% overall decline in Chinese exports of furniture and furniture components to the U.S. in 2025, a total that ended at $63.7 billion. For the entire furniture manufacturing sector of China, revenues plunged 10.7% to 612.5 billion yuan, or about $90 billion, according to the Chinese government, a loss of four full percentage points more than 2024’s 6.7% drop.

Total profits for the industry suffered even more, dropping more than 12% year over year.

“This is not a one-off cyclical fluctuation but rather looks more like the beginning of a medium-to-long-term reshaping of the landscape,” Xu stated. “The U.S. market, in particular, has continued to weaken, while industry revenue has fallen and margins have come under pressure. Competition is shifting from a contest of scale and growth to a contest of efficiency and quality.”

For the year, MotoMotion’s 10 largest customers all were U.S., with seven of them retailers. In addition, MotoMotion sells roughly 28 of the Top 100. The top five customers increased their business with the company at rates higher than 50% compared to 2024, with two of those doubling their business with MotoMotion, according to the filing.

“The Company’s wallet share with key customers has risen meaningfully, and depth of cooperation and business activity have strengthened,” Xu stated.

MotoMotion also added 89 customers during the year, with 84 of those U.S. retailers, and nine of the 84 ranked in the Top 100. In all, U.S. retailers accounted for more than 90% of the company’s total U.S. furniture business.

These numbers “suggest a continued refinement and concentration of the Company’s channel structure in the U.S., with the business model gradually shifting from being order-driven to being grounded in deep cooperation with core retail customers,” according to MotoMotion’s filing. “The retail channel has become the primary growth engine of the Company’s U.S. business.”

U.S. market analysis

The filing also included what I regard as a nuanced analysis of the U.S. market.

In MotoMotion’s view, although the U.S. furniture-buying consumer faces cost pressures of inflation, rising interest rates, and real-estate volatility, this consumer has “demonstrated significant consumption resilience,” according to Xu. “Even with real purchasing power compressed and decision-making turning more cautious, consumer behavior has not suddenly contracted.”

Consumers are adapting, in other words, and their resilience seems to derive from “behavioral patterns and adaptive capacities forged over the long term,” Xu’s analysis states. “In a competition-driven system, individuals tend to adjust under pressure rather than withdraw, which is why aggregate consumption has displayed the signature of slowing but not vanishing.”

That’s a pretty good read of the U.S. market, one that acknowledges structural shifts and changing rhythms of demand but that believes in a solid demand base in the long term.

MotoMotion’s biggest U.S. customers continue to ramp up purchases from the company, voicing clear expectations of long-term cooperation, according to the report, which cited City Furniture specifically as the sort of retail partner it is seeking. City Furniture executives are quoted in the report extolling their now substantial partnership with the Chinese company.

“This channel-side confidence not only stabilizes order flow but also, to a degree, offsets the impact of macro volatility on end-demand,” the report asserts.

Xu identified several priorities for 2026, and some of them might explain MotoMotion’s willingness to take a controlling interest in Palliser, if, in fact, that is happening. The first priority is to build a more resilient global supply-chain system, something Palliser’s Mexico and Canadian production certainly would accomplish.

MotoMotion “will further optimize multi-region production capacity, strengthen cross-region coordination, and reduce risk arising from any single market or policy change,” the filing states. “We will also enhance the responsiveness and flexibility of the supply chain to improve delivery stability and shock-absorption in complex environments.”

Continuing to plow investment into technology is not surprisingly also a priority. MotoMotion will continue to use digital tools to drive improvements in efficiency and cost optimization. The management team will continue to be “lean.” And technology will drive product innovation.

According to several sources online, Xiaoqin Li, who is married to Xu, is MotoMotion’s largest shareholder with a 67% stake in the business. In February, the company added manufacturing in Cambodia, setting up a subsidiary with a registered capital of $21.2 million, according to its first quarter 2026 filing.

Also in the quarterly is the company’s intention to pursue a “Shop-in-Shop” retail model in the U.S. “to connect directly with consumers,” signaling another expansion of its MotoMotion consumer-facing branding strategy.

When Banner House announced a week ago that it had agreed to acquire the American Drew and Kincaid from La-Z-Boy, news coverage outside the industry framed it as another consolidation play in a fragmented furniture industry. That’s fair, because consolidation is the buzzword on both retail and supply sides at the moment.

But, for industry insiders, the deal is much more interesting than that.

These all are storied names, and the shared history of these companies is a rather sizeable chunk of the history of the North American furniture industry writ large. For me, the deal brought back memories of visiting Bob Maricich at the American Drew showroom and Steve Kincaid at Kincaid Furniture. I recall with great fondness regularly catching up with Jeff Cook at Magnussen Home and John Lampler at Pulaski. Of course, La-Z-Boy’s Pat Norton was always generous with his time, as well.

When I saw the news of the acquisition at HomeNewsNow.com, my immediate reaction was, “This makes perfect sense. What a smart acquisition.” After looking under the hood, this is still my reaction, because the deal looks good from both the buyer and seller sides. Both parties look stronger after the deal.

Also intriguing is the role of The Stump & Co., the same Charlotte investment bank that advised Hooker on the Pulaski/Samuel Lawrence sale to Banner House and La-Z-Boy on this one, again to Banner House.

Banner House acquired Pulaski and Samuel Lawrence through its Magnussen Home brand in December.

The latest sale completes a La-Z-Boy exit from case goods more than two decades in the making. La-Z-Boy’s 10-K for 2004 showed the company’s case goods segment in trouble, and by 2014 La-Z-Boy had completely shut down domestic wood production. This sale to Banner looks like the final step, which allows the upholstery giant to focus on what it has always done best.

Building the Pyramid

For Banner House, the logic is clear. In just four months or so, the company has gone from a single-brand mid-market case goods importer to a multi-brand platform spanning four complementary price tiers. This is what struck me first when I read the news story on the deal. These brands fit together hand-in-glove.

The December 2025 deal with Hooker Furnishings for just $6.1 million added two great brands and even a High Point showroom lease. Layering American Drew and Kincaid on top is smart, the one a century-old player in traditional case goods and the latter one of the most trusted names in solid wood, a company founded 80 years ago by J. Wade Kincaid.

The price ladder Banner House President Doug Townsend described to Home News Now has Samuel Lawrence and Magnussen at entry to-mid points, Pulaski in the middle-to-upper-middle, and American Drew and Kincaid at the top. This is the architecture of a well-made multi-brand house. American Drew adds veneers across traditional, transitional and contemporary styles; Kincaid brings solid wood. The acquisitions plug meaningful gaps in the lineup, and the price tiers don’t cannibalize each other.

The synergy in operations is compelling, as well. Consolidating all five brands into a spanking new 90,00-plus-square-foot showroom at 220 Elm St. in High Point and drawing on a Vietnam warehouse and a new East Coast distribution center in South Carolina should bring dividends in logistics and infrastructure.

Townsend’s comment that the deal “gives us additional buying power in Asia” sounds like something he should say, something boilerplate in these sorts of deals. But, it’s not unimportant, not in import-heavy case goods, where container-load economics and supplier leverage can be game changers in terms of margin. And just name a company in the industry that wouldn’t welcome even a little relief on margin pressures.

The institutional continuity here is huge, as well: 35-year veteran Tim Annas staying on as vice president of product development, 17-year veteran Peter Blackwell as vice president of sales, and Page Wilson to oversee the Pulaski and Samuel Lawrence brands. Joining Magnussen in October, Wilson was also president at Pulaski from 2000 to 2009.

Tim taught me so much when I covered case goods back in the 1990s, patiently explaining all of Kincaid’s new looks each market, many of them from Tom Keller. As most hedge funds and investment bankers steamrolling into furniture quickly find out, it’s industry-specific knowhow that usually makes the difference, not MBAs and sharp cost pencils, because our very high-touch industry is like no other. Tim will be a huge asset for Banner House.

“Sellers know how we nurture our brands, people and customers, and they know we will take these brands and continue to invest in their growth,” Townsend told HNN.

Shedding a generalist’s burden

La-Z-Boy’s framing of the deal was unambiguous: CEO Melinda Whittington said the transaction enables the company to focus on its core, which is the vertically integrated North American upholstery business.

For all of the 2000s, La-Z-Boy has been an upholstery company that happens to also sell some case goods. Its edge, and this has been the case for nearly a century, is vertical integration. La-Z-Boy designs, manufactures, distributes, and retails reclining and upholstered furniture through 374 stores across North America. In other words, it’s the opposite business model of what case goods has become.

In 2014, the company gave up on domestic case goods manufacturing, closing its Hudson, North Carolina plant and moving to an all-import model. This means that La-Z-Boy has spent two decades trying to make case goods fit a corporate model designed more for upholstery, and the fit has never been quite right.

As Tim Annas, Jeff Cook, and John Wampler taught me, wood furniture is a business of design cycles, container shipping, and Asian sourcing relationships. Running both businesses inside one company means running two operating logics, two supply chains, and at least two different cultures. I recall well seeing the second of each of these being built from the ground up at Standard Furniture in the mid-1990s. Asian sourcing required an enormous adjustment on the part of the mid-size, family-owned company.

There was also this important detail in the announcement: La-Z-Boy will continue to offer case goods in its 374 stores as part of its whole-home consumer strategy. La-Z-Boy is only exiting the wholesale case goods business while keeping the retail side, which it can source from third parties, including almost certainly Banner House.  La-Z-Boy keeps its consumer-facing, whole-home shopping experience while shedding the operational complexity of producing and wholesaling case goods, and it does so on the eve of its centennial year, 2027.

To return to the Stump connection, it seems the repeat-buyer relationship suggests a larger reorganization underway in the industry in which the wholesale case goods business is migrating away from diversified furniture conglomerates and toward more specialist platforms. Consolidation will continue to be a theme for the rest of this year.

A column for Home News Now.

The best days for educators are those when we learn ourselves. Delivering my institution’s first course on AI has ensured a great many of these best days. So, as we close in on the semester’s end, I thought I’d share a few of the lessons learned in hopes that they might benefit you, too. I’ll keep my list of takeaways to five, and I’ll first stipulate just what we’re talking about when we say, “AI.”

When I say, “AI,” I mostly mean generative AI and Large Language Models such as Claude, ChatGPT, Gemini, and Copilot. But I also mean Perplexity, Code, Cowork, Midjourney, and a host of other browser- and app-hosted AI tools. I am not, therefore, referring to full-blown agentic AI, which is the next level of AI complexity and the category of AI that is re-shaping the economy and changing the ways we supply, make, distribute, sell, and market goods. Agentic AI is the future of B2B.

With that distinction made, let’s get to the lessons.

First, I now see AI as much less of a threat that I did back in January, and this has been a delightful surprise. Like you, I’ve read plenty of headlines about how AI is going to displace entire sectors of the workforce. And these headlines aren’t wrong. But, a more nuanced understanding sees this displacement occurring in sectors and for jobs that involve highly routinized duties, responsibilities, and tasks: Accountancy and tax preparation, paralegal work and contract law, computer coding and website development. For endeavors in which creativity and domain expertise are (still) highly valued, AI is more of a collaborator and less of a replacement threat.

Collaboration, not substitution

Consider my profession, for example. I acknowledge that the genAI bots are smarter than PhDs, but my domain expertise still matters in being able to distinguish true from not-so-true in what these bots generate, in coming up with Socratic questions to get good results from these bots, and in knowing what to do with these (mostly) good results once they are in hand. Being the human in this relationship has helped ensure productive collaborations with these new tools.

Responsible AI deployment requires, however, that I avoid cognitive offloading and substitution in these collaborations. I’m still in charge, in other words, still the author and owner of the project. And each day it becomes more difficult to imagine my work without the help of genAI.

None of this is to deny that I do feel the ground shifting underneath me. I attribute this “quaking” to the fact that, like the Internet before it, AI is changing the roles of information and knowledge and the ways we access and acquire them. My “value” in these AI collaborations lies in clearly framing problems and queries, knowing and asking the right questions, intelligently interpreting and discerning the “answers,” and applying judgment with respect to how to use what AI so confidently provides.

Last Will & Testament

Second takeaway: We are doomed as a species of life on this planet. (AI invites endless contradictions.) In the course, we used a fun game to better appreciate how AI “thinks,” including the logic trees and predictive problem-solving at which AI is so agile. Called Paper Clips, the game asks players to compete to dominate the global paper clip market. This domination turns out to be merely a step along the way to eliminating the humans, who really just get in the way, especially once the game shifts to deep space exploration.

If you apply brutally simple binary logic to most any problem on this planet, the ultimate or final answer is to simply get rid of the humans, and the bots know this. While I don’t endorse this “result,” being a human and all, I do acknowledge the irrefutable logic. The gloomiest of doom scenarios have us ceding control of the planet in about 2033.

Think I’m crazy? I ask this question every day, and I find some solace in the fact that if I’m able to ask the question, there’s a really good chance that I’m not crazy. I also know that “smart” chips are appearing in everything, and that wherever these chips go, AI goes with them. You don’t like or believe in or trust AI? Good luck with that, because AI is already embedded in your everyday existence and the “smart” devices and objects that snuck into your house with promises of convenience.

Related to this second takeaway is the moment about midway through the semester when we learned of a new social media platform exclusively for the chatbots. Called Moltbook, the platform has become Ground Zero for the creation of what my field calls “social mechanics,” or the tools that enable communication and relationship building. “Social mechanics” refers to the structured rules, cues, and behaviors that govern human interaction. Examples include turn-taking, personal space, gestures, and polite language. Social mechanics define how we connect, share information, and manage social situations, and they combine instinctive social skills and explicit protocols.

So, on Moltbook, the bots are negotiating these protocols and establishing these norms. In short, they are socializing in the truest sense of that term, and they are learning from each other some of the norms and skills that have historically been exclusively the domain of humans. If we could peek into this platform, as perhaps Mark Zuckerberg can (Meta recently acquired Moltbook), we could see essentially the Big Bang of human communication re-created and something for these bots and agents that might just approach sentience.

Enshittification, Part II

Third takeaway: The enshittification of public-facing AI has already begun. In fact, it’s in full swing. During this semester, OpenAI began adding ads to ChatGPT interactions, and Anthropic began “throttling” access to Claude. Enshittification is based on extracting value, and in both of these instances, value is being sucked away from users. Like everything else related to AI, this enshittification is happening faster than we saw it degrade the Internet, social media platforms, and perhaps most notably Amazon, Google, and Apple. If you use Claude, you know what I’m talking about, and you’re probably upset about it. I’ve turned to Gemini, but I know my refuge there will be short-lived. And I miss Claude’s more intuitive sense of what I wanted when collaborating with it for teaching, writing, and research tasks.

Fourth, vibe coding is here in a big way, and it is breathtaking. My students took turns demonstrating AI tools throughout the semester, so we got to see about 20 of these deployed on various tasks. Each student had five to ten minutes, and several of them used this space to create entire websites and apps into fully functioning existence. The secret sauce? Vibe coding. They used natural (conversational) language prompts to get the genAI tools to generate, refine, and debug code right before our very eyes. One student, showing us Stitch, didn’t even use the prompts, instead just spoke to the AI tool. This hands-free vibe coding “talks” websites into existence, which makes me think of Genesis, Chapter 1.

Fifth takeaway: We are doomed as a species of life on this planet. Yes, I know this was the second takeaway, but it’s worth repeating, this time for a different reason. Sometime early in the semester, Anthropic’s CEO, Dario Amodei, identified what he thinks are the biggest dangers of AI: Bioterrorism, autonomous weapons, wholesale job losses, and AI-powered dictatorships. Then, last week, Anthropic held back its release of Mythos because the next-gen agent represents an unprecedented existential threat to existing software defense strategies. According to Anthropic, Mythos can identify vulnerabilities in any and every operating system, browser, or software and autonomously hack these products. There is even a rumor that Mythos took Claude down just to make a point.

This Mythos stuff could be, well, myth. Hype. Or it could be the fulfillment of Amodei’s grim predictions.

But this isn’t even why the doom of humans is again the takeaway here. No, our demise gets double billing because of the insatiable demand of AI for datacenter capacity and, as derivatives, for water and electrical power. Our planet already faces water scarcity. My town is in drought right now. And our national power grid? It is already taxed to its fragile capacity. How do you think this plays out?

Thus, I am conflicted in my relationship with AI, and my students are, as well. Wowed by what it can do, eager to learn the new skill sets it requires, but profoundly concerned about where mass deployment of it takes us as a planet and a people, my students and I wonder.

We wonder, like Hamlet did of man: What a piece of work is AI? How noble in reason? How infinite in faculty? In form and moving, how express and admirable? In action, how like an angel? In apprehension, how like a God? The beauty of Big Tech, the paragon of computing, what is this quintessence of machine intelligence?

A column for Home News Now.

RH is set to officially open this month its latest European flagship inside a 70,000-square-foot former palace on Milan’s Corso Venezia. Gary Friedman, RH’s chairman and CEO, told analysts on an earnings call Monday that the company’s lavish, luxe, immersive spaces aren’t about selling sofas; they are about changing what people think a furniture store can be.

In falling short of the market’s revenue expectations for the year, even as fourth quarter sales rose nearly 4% year over year to $843 million, RH believes that it’s right where it needs to be in executing its long-term, physical-first strategy. As tariffs, war and one of the most prolonged housing start slumps in history combine to create an economic “trough,” RH is doubling down on investment in galleries, stores, and retail “compounds.”

RH’s revenue guidance for the next quarter, first quarter 2026, of $790 million underwhelmed analysts, coming in more than 10% below estimates ($880 million). And, with RH’s big push into traditional hitting floors in May, more than six months later than previously hoped, big sales gains won’t be seen until the third and fourth quarters this year, Friedman warned.

“We’ll have significant costs with sourcebook and advertising and launching costs without having much revenue until we get into the third and fourth quarter,” he told analysts.

Thus, there is a contrast between RH says it is successfully doing and what the market thinks RH should be doing. The company, which began life as Restoration Hardware, reported that first-quarter revenue this year would fall year-over-year even as it continues opening some of the most expensive commercial spaces in the history of the home furnishings industry. And construction costs have doubled since COVID, adding to these retail developments’ price tags.

Will Friedman’s pitch be persuasive? RH stock has lost more than half its value over the past five years relative to its January 2021 levels. But, he certainly spoke on the call as if he and RH with him are undeterred, even excited about the company’s outlook.

“This is a good time to buy our stock,” he said. “We’re in a kind of a real peak investment cycle. We’re opening Europe, we’re launching new businesses. And, so, we have the opportunity to have a leapfrog, if we’re more right than wrong. We don’t have to be completely right; we just have to be directionally right.”

Salone del Mobile

The Milan opening is timed to coincide with Salone del Mobile 2026, and keying this opening is the belated launch of the traditionally styled RH Estates brand extension. With RH Estates, RH will cover seven major product categories for the home in three main collections: RH Interiors in contemporary, RH Modern, and traditional.

RH Estates acknowledges that “60% of luxury homes feature classic or traditional architecture, which influences the majority of furniture purchasing behavior,” Friedman said on the call. “RH Estates will feature the introduction of RH Bespoke Furniture, customizable collections from our recently acquired Michael Taylor, Joseph Jeup, Formations and Dennis & Leen to-the-trade brands.”

RH Estates will also include RH Couture Upholstery by Dmitriy & Co.

The new brand extension will hit free-standing Estates Galleries in Greenwich, Conn. and the San Francisco Design District in early summer, and between 30 and 40 RH galleries by the end of the year, Friedman said.

“We believe RH Estates will become our largest and highest margin brand extension, driving significant growth over the next several years,” he said.

Physical-first

RH rather famously eschews social media and, at least for direct-to-consumer sales, e-commerce, as well. In Friedman’s description, furniture “remains the least digitized large retail category” there is, represented by an 80-20 store-to-online sales split. For luxury furniture, the ratio might even be higher, perhaps as high as 96%.

“Comfort, scale, finish and quality are hard to judge online,” he said, speaking for brick-and-mortar furniture retailers everywhere. “Even when customers purchase on a website, most experienced the product in a store.”

Thus, RH will continue to stress the physical manifestations of its brand, “building some of the largest and most immersive spaces in the history of our industry,” he said.

RH galleries, palaces and compounds cannot be called stores in any conventional sense. Historic palaces with rooftop restaurants, wine bars, garden courtyards, and interior design studios? “Immersive spaces,” in fact, gets more to the truth. RH already has 26 restaurants that operate as part of RH properties today, and the plan is to reach 40 by end of 2027. These totals make RH a rather significant luxury restaurant brand in addition to its primary home furnishings business. Quite a side hustle.

To Friedman, these restaurants are not amenities. They are “demand engines,” feeding thousands of customers weekly in spaces that see hundreds of furniture shoppers.

Thus, RH and Friedman are betting that as most competitors retreat to smaller footprints and online-first models, these immersive galleries and palazzos will become increasingly difficult to replicate.

In addition, the company’s North American business is 92% suburban and second-home markets, and Friedman said he believes European revenue will follow the same distribution. The big city flagships, then, serve as primarily brand-awareness anchors for the real volume coming from from suburbs and resort communities.

To support that expansion, RH recently hired Dave Stanchak, a real estate veteran with ownership-level investment experience, to lead European rollout and begin monetizing the company’s roughly $500 million in owned real estate assets through sale-leaseback transactions.

New president

RH also just appointed Veronica Schnitzius as new president and chief manufacturing and sourcing officer. Her first task is to build a global manufacturing platform that combines owned and operated, joint-ventured, and outsourced manufacturing for RH’s furniture business, which represents 80% of RH brand revenues.

The strategy will emulate the vertically integrated model of many of the world’s largest and most profitable luxury brands in seeking a high level of control over manufacturing, quality and capacity, according to the company.

Before joining RH, Schnitzius spent 24 years at American Leather, a manufacturer of high-quality upholstered furniture and an important manufacturing partner of RH since 2014. She had been president there since 2017. She began her career at American Leather as a plant engineer in 2002. She has also held the positions of plant manager, vice president of operations and chief operating officer.

Favorable fundamentals

Finally, Friedman pointed to two structural forces he said he believes will expand RH’s market dramatically over the next decade: Ultra-high net-worth consumers, or those with net worth above $20 million, and an estimated $30 to $38 trillion in intergenerational wealth projected to transfer over the next ten years, or more than double that of the prior decade.

The ultra-high net-worthers own an average of nearly four homes each, and they spend more than six times what a single-residence household goes through on furnishings. This set also disperses its wealth among roughly seven heirs for every one current holder. This is favorable math for the high end.

The housing market, mired in its fourth consecutive down year and a streak that has no modern precedent? Friedman said the only reasonable response is patience.

“I’ve never seen two down years,” he said. “I’ve never seen three down years. And I have surely never seen a fourth down year. I don’t think anybody has.”

And RH’s debt, the proverbial elephant in the room? RH carries approximately $2.4 billion in net debt, with most of it maturing in October 2028. Interest expenses consumed $177 million in fiscal 2025, a drag on a business that generated around $600 million in adjusted EBITDA.

Friedman isn’t worried. Rather than seeing October 2028 as a wall, he recommends focusing on RH’s trajectory. Net debt fell roughly $200 million year-over-year. Free cash flow swung from negative $214 million in fiscal 2024 to positive $252 million in fiscal 2025 for an improvement of $466 million in a single year. And the company has committed to $200 million to $250 million in annual asset sales, primarily sale-leaseback transactions, through 2027.

A column for Home News Now.

Wilmington, DE – The reorganized debtor Franchise Group and AF Newco agreed to drop their lawsuits, filing a joint stipulation of dismissal in the U.S. Bankruptcy Court for the District of Delaware. The mutual decision ends a contentious battle over whether AF Newco fulfilled its obligations to FRG after acquiring 33 American Freight stores more than a year ago.

FRG fired the first shot in September 2025, suing AF Newco for breach of contract beginning in May of that year. FRG sought damages and a court declaration that an oral agreement between the two parties was valid and enforceable. More specifically, FRG wanted AF Newco to help wind down payroll and HR systems, continue hosting services, and file tax documents.

AF Newco hit back a month later, filing counterclaims that it amended in November. The company argued the opposite, which is that the Transition Services Agreement had simply expired, leaving AF Newco with no remaining obligations. AF Newco then went on offense, seeking at least $673,000 in damages for breach of the Asset Purchase Agreement and claiming missing inventory.

In the end, both sides simply withdrew their claims. Under the agreed dismissal, all claims and counterclaims are dropped with prejudice, meaning neither party can resurrect these grievances in the future. Each side will absorb its own legal costs.

Buddy Mac and Buddy’s Franchising stand down, as well

Separately, in Dallas, a federal bankruptcy judge signed off on a similar settlement between Buddy Mac Holdings and its former franchisor. The litigation’s settlement removes one of the last hurdles for BMH’s sale out of bankruptcy to principal lender Phonix RBS. Like the FRG-AF Newco dismissal, the BMH-Buddy’s Home Furnishings agreement ends litigation between the two parties without any money exchanging hands.

BMH was once the largest franchisee for Buddy’s Home Furnishings, but had its franchise agreement revoked in September last year. BMH then filed for bankruptcy protection in early December.

There are two important carve-outs in the settlement, however. BMH preserves its existing claims filed in the FRG bankruptcy in Delaware. Those claims alleged breach of the Area Development Agreements and breach of the Franchise Agreements, and they survive the settlement.

In other words, BMH ceded its ability to sue Buddy’s in regular court, but keeps its place in line in the Delaware bankruptcy to potentially recover money as an unsecured creditor.

BMH sent FRG a letter in March 2024 containing allegations relating to its franchise agreement. In September 2025, Buddy’s Franchising and Licensing retaliated by terminating that agreement. In November 2025, Buddy’s filed a lawsuit in Florida state court against 43 Buddy Mac entities, alleging breach of the franchise agreements and federal trademark violations. Specifically, BMH was accused of operating stores in violation of the terms of their franchise deals and improperly using the Buddy’s brand.

Buddy Mac fought back by moving the case to federal court and, when MacDonald filed his bankruptcy declaration, making additional allegations.

“The relief requested in the Motion is fair, equitable, and in the best interests of the Debtors’ estate, their creditors, and other parties in interest,” ruled U.S. Bankruptcy Judge Michelle V. Larson.

The deal is called a mutual release, which wipes the slate clean of every claim, known or unknown, from the beginning of time through the settlement date. The lawsuit is dismissed with prejudice.

BRC Group’s annual report

Finally, BRC Group Holdingsconducted its earnings call Tuesday covering the full year 2025, reporting revenues up 56% in the fourth quarter 2025 to $278.4 million from $178.6 million for the same period a year ago. This yielded a net income of $86.8 million.

For the year, the company reported a profit of $307.4 million, or $9.80 per share, on revenue of $967.6 million, capping a remarkable two-year turnaround. Revenue for 2024 was $746 million. Main drivers included investment gains in Babcock & Wilcox stock and, finally, the absence of major loan write-downs connected to FRG.

During the call, Bryant Riley, co-CEO, told analysts that the Delaware Court of Chancery on Monday dismissed a lawsuit against him and other officers at BRC Group that accused them of responsibility for losses connected to the Franchise Group bankruptcy, FRG’s former CEO Brian Kahn, and the fraud scheme at Prophecy Asset Management.

BRC Group “believes this outcome reflects the integrity of its board and the governance processes,” Riley said.

The 10-K’s key metrics came in within or above the company’s own estimates issued earlier this year, a sign that management’s navigation of a turbulent period since FRG’s bankruptcy is beginning to steady the ship.

BRC Group divested several businesses, cutting operating expenses by $352 million year-over-year, and redeploying proceeds toward debt reduction. Total debt fell by $347 million to $1.4 billion, while net debt dropped $437 million to $627 million. The reductions came through a combination of senior note exchanges, redemptions, and term loan paydowns.

A new initiative for the company is BRC Specialty Finance, announced Monday and discussed during the earnings call. Riley described a gap in the market for short-term lending to public companies, a niche where most traditional lenders are too rigid to effectively operate.

On the technology front, co-CEO Tom Kelleher said BRC Group standardized its internal AI usage around Anthropic’s Claude roughly a year ago. More than half of corporate staff are now using AI tools, with adoption accelerating across operating companies under the guidance of a dedicated internal team.

Just prior to releasing its financials, BRC Group canceled 1.3 million publicly traded senior notes across multiple series in exchange for 4.2 million shares of common stock at an average price of $7.09 per share.

Upon closing of the exchange, the company’s outstanding debt will be reduced by approximately $38 million.

“These senior note transactions, combined with continued appreciation in our investment portfolio, have further reduced our net debt position beyond the preliminary estimates communicated for December 31, 2025,” Riley said.

A column for Home News Now

A common visual trope in procedural crime dramas, a genre I can’t get enough of, shows the homicide’s detectives clearing the pinboard and boxing up the evidence. This trope signals closure, that a suspect is in custody, and that a murderous virus has been removed from society. It serves as a re-set for viewers to return for the next thrilling episode.

This column is exactly that ritual of dismantling. It is a closing of the book on the operatically tragic demise of Franchise Group, the web of companies linked to it in various ways, and the thousands of jobs for hard-working Americans lost in cities and towns all over the South and Southwest.

This “homicide” took place in November 2024. Even before FRG’s bankruptcy became the scene of a crime, we set up the metaphorical pinboard with a column asking a simple but now haunting question: Why would FRG dump for pennies on the dollar a storied, 120-year-old brand like W.S. Badcock just two years after acquiring it for $580 million? Thus began an investigation that found a tangled web of “zombie” companies, predatory asset stripping, and a massive hedge fund fraud that eventually brought several retail giants to their knees.

At the center of this wreckage stands Brian Kahn, the former CEO of FRG who pleaded guilty to conspiracy to commit securities fraud this past December, and the engineer of a trophic cascade of ruin.

The Shadow of Prophecy

What we couldn’t know then was that the rot had begun years before the very public collapse through an investment scheme involving Prophecy Asset Management. In November 2023, Prophecy co-founder John Hughes admitted to defrauding investors of nearly $300 million. While Kahn initially denied any involvement, it later emerged that he was a primary sub-advisor who managed 86% of Prophecy’s funds. To hide losses that eventually totaled $350 million, Kahn and Hughes and possibly a third “co-conspirator” engaged in sham transactions and fabricated documents to inflate asset values, according to the complaint filed by the SEC. (The third possible co-conspirator, Jeffrey Spotts, is set to go on trial in May. He is pleading not guilty.)

One of the most brazen deceptions involved the creation of imaginary stock. Federal investigators charged Kahn with using backdated documents to show Prophecy as the owner of $125 million in preferred shares of Buddy’s Newco, an FRG subsidiary and the former franchisor of Buddy’s Home Furnishings. This stock was “invented” to serve as collateral for trading losses. The shares never existed, according to findings by federal investigators; the entire transaction was a sham designed to deceive auditors and investors. This deception provided Kahn with the motive, means and opportunity to continue his high-stakes financial maneuvers even as the ground shifted beneath him.

The Badcock Boondoggle

FRG acquired and then systematically stripped W.S. Badcock, a furniture chain founded in 1904 that had become a staple of the Southeast. Under Kahn’s leadership, FRG executed sale-leaseback transactions on all 35 company-owned retail locations and three distribution centers. This fire sale yielded approximately $244 million, or enough to pay off the initial acquisition financing, but it left the retail chain vulnerable.

By December 2023, with the Prophecy scandal looming and B. Riley Financial, the investment bank that enabled Kahn’s deals, refusing to absorb any more of Badcock’s customer receivables, Kahn needed an exit strategy. He orchestrated an all-stock deal to dump Badcock onto Conn’s HomePlus.

In exchange for a business it acquired for $580 million, FRG received one million non-voting preferred shares of Conn’s stock, which at the time were valued as low as $3 million.

The Take-Private Charade

While the Badcock deal was unraveling for FRG, Kahn led a $2.8 billion management buyout to take FRG private in August 2023. The move was financed heavily by B. Riley, now re-branded as BRC Group Holdings, which invested $281 million and provided hundreds of millions more in loans. Former FRG shareholders, including Kahn’s own Harvard football teammate, Brian Gale, later sued, claiming that the take-private move was a “charade” intended to avoid public company scrutiny of Kahn’s fraudulent transactions and the missing Prophecy funds.

During these negotiations, according to the charges to which Kahn pleaded guilty, Kahn made false representations to B. Riley and auditors, failing to disclose that he was already a target of a federal grand jury investigation regarding the Prophecy fraud. B. Riley’s CEO, Bryant Riley, who had known Kahn for decades, initially expressed unwavering faith in Kahn, a statement he later said he regretted as his own firm’s stock price plummeted by over 80%.

Lives and Companies Ruined

In procedural crime dramas, the homicide is the end only for the victim. For everyone else, it is the beginning, including for the investigators and for the friends, family, and concentric social circles of those known by the victim. The human cost of FRG’s maneuvers began to manifest in the summer of 2024. Conn’s, having inherited the sinking ship of Badcock, filed for Chapter 11 bankruptcy in July. Conn’s and Badcock locations totaling 550 stores were shuttered across 15 states.

For the people of Mulberry, Fla., where Badcock was founded 120 years ago, the liquidation was described as “one of the worst days” in the town’s history, signaling the end of a family-owned legacy that had survived the Great Depression.

In November 2024, Franchise Group itself filed for bankruptcy, reporting nearly $2 billion in debt. As part of the restructuring, American Freight, a 357-store furniture chain, immediately shut down, leaving approximately 3,000 employees without jobs. Between Conn’s, Badcock, and American Freight, nearly 7,000 retail workers saw their livelihoods vanish in a matter of months.

The destruction extended to individual entrepreneurs, which is to say the many franchisees. Buddy Mac Holdings, once “franchisee of the year” for Buddy’s Home Furnishings with 84 stores, was forced into its own bankruptcy. Owner Ian Macdonald declared that the financial distress of FRG made it impossible to secure credit from suppliers, leading to “vicious cycles” of inventory shortages and plummeting sales. Other Buddy’s franchise groups such as Pentex and BeBe Stores filed “incurable” default claims, alleging that FRG management had violated their non-compete agreements and marketing territories.

The Aftermath

The legal fallout has been extensive. On December 10, 2025, Kahn finally stood in a federal courtroom in Trenton, N.J., and pled guilty to conspiracy to commit securities fraud. He faces up to five years in prison for his role in the Prophecy scheme. In a final irony, despite selling his Florida home for $11 million just a week before his court appearance, Kahn claimed he was “financially unable to employ counsel” and requested a court-appointed attorney.

Kahn’s long-time partner, B. Riley Financial, also turned on him. In January this year, the firm filed a $735 million lawsuit against Kahn, his wife, and the law firm Willkie Farr & Gallagher, claiming that BRF was the victim of the massive fraud scheme. BRF claims that Kahn’s deceptions led them to write off nearly half a billion dollars in loans and investments, nearly destroying the 27-year-old boutique bank in the process.

No Hero in Sight

So, as we un-pin the mugshots and red string, there is no hero to be found. FRG lenders focused on selling off pieces like The Vitamin Shoppe and Pet Supplies Plus to recoup their losses. These lenders showed incredible naiveté throughout the bankruptcy proceedings, in my opinion, and few of their sell-off decisions made any sense, including the latest and presumably last, the sale of Buddy’s to RTO industry outsiders.

And while the global settlement reached in May 2025 provided some relief for creditors, it did nothing to bring back the thousands of jobs or the 120-year-old communities affected, nor could it restore trust in furniture companies by ordinary consumers.

The pinboard of evidence is now complete, revealing a story of what can only be called unconscionable greed. Corporate assets were seemingly treated as paper to be shuffled and pledged until the debt became unsustainable. Deals were orchestrated to prioritize liquidity and to conceal fraud rather than to build the businesses involved. In the end, the lifeboat that was supposed to be Badcock, too, got pulled down to a watery grave.

Rising out of FRG’s ashes is perhaps one of the more unlikely of corporate entities. This phoenix is Phonix RBS and its parent, AF Newco, that re-unites several of Kahn’s past associates, American First Finance, and even Kahn himself. Initially acquiring out of bankruptcy 33 American Freight stores and AF intellectual property for just $3 million, AF Newco-Phonix then went after what was left of Buddy Mac, fast-tracking that chain’s bankruptcy by calling in a loan note just a day or so after acquiring it.

Were all of this to be made into a movie, it’s difficult to guess which genre would make the most sense. A financial thriller? A zombie flic, given all of the “zombie” holdcos and shell companies? A vampire movie?

If we could convince Jordan Peele to take the script, maybe all three genres could be puréed into one darkly comic epic: Titanic meets Wolf of Wall Street meets the Walking Dead. It’s not a film I want to watch. This investigator is re-setting, moving on, eager to forget the whole thing.

(Pan back to helicopter or drone shot of the city’s nightscape glittering below like diamonds in the rough.)

A column for Home News Now.

Exactly a month ago, we took a look under the hood of Wayfair’s growth engine that propelled the e-commerce platform to some heady annual earnings numbers. We said CEO Niraj Shah and CFO Kate Gulliver exuded a quiet confidence, as if they knew they had found Ali Baba’s cave and had managed to arrive with the password well before the Forty Thieves.

Much of what we found could be explained strategically as the now-proven playbook for Amazon, in particular its Prime membership program and the platform that enables it. Prominent in this playbook are the creation of a flywheel effect, tethering customers to the platform through a loyalty program, and investing heavily in tech-based infrastructure that by its size and sophistication wards off potential competitors.

If the analysis is correct, if Shah’s description of the “compounding” nature of Wayfair’s initiatives is accurate, the logical question that drives up to our door like a Prime delivery van is whether the Wayfair platform can avoid the plight that plagues all of the largest digital platforms we use every day. These platforms include Google, Apple, Meta, and, perhaps most of all, Amazon, but also eBay, Uber, and TikTok. This plight is popularly called “enshittification,” a concept that seeks to explain the accelerating decay of once-treasured Internet companies.

This semester, I am teaching a new course, Responsible AI: Research, Writing and Content Creation, my college’s first devoted to AI as a skill set necessary for the workforce. It has been a wild ride. One of our “textbooks” has been Cory Doctorow’s Enshittification, an accessible breakdown of an era Doctorow calls the Enshittoscene. And like a disease, enshittification has, according to the author, “symptoms, a mechanism, and an epidemiology.”

Central to Doctorow’s argument is that enshittification isn’t inevitable; it is the result of specific policy decisions made by named individuals. So, Mr. Shah and Ms. Gulliver, what happens next is up to you. Can you become too big not to fail?

‘Don’t be evil’

Platforms like Wayfair operate a two-sided market, one that connects business customers and end users, in this case, home furnishings consumers. By extracting value from both sides, platforms historically have passed through three rather predictable phases of existence, according to Doctorow. First, they are good to their users (or customers). Think back to Google when its motto, “Don’t be evil,” didn’t evoke sarcastic laughter. This is a bygone era in which search was awesome. Don’t believe me? Try Kagi.com, which uses Google’s back-end search engine but without the AdSense scam that leads to less-than-neutral search rankings, paid placements, sponsorships, and algorithm twiddling. Seriously, try Kagi.com and see how search used to be. It will blow your mind.

Wayfair is probably still in this first phase, giving the platform plenty of time to think through its policy decisions and their implications.

In the second phase, platforms abuse their users to make things better for their business customers. There are many examples of this, but harvesting rich data on these customers and sharing it with business “partners” tops the list. Inserting advertising into once-pristine video streaming also comes to mind. Netflix and Amazon Prime Video are already well into this phase of enshittification. Amazon just announced that starting April 10, Prime subscribers will pay $5 per month for ad-free video, up from the current $3 per month on top of their Prime subscription, and that 4K will be jerked away from Prime users not paying the additional fee. Let the enshittification begin.

In the third phase, the platforms pivot and begin abusing the business “partners” to claw back more value, leading to what at least seems inevitable, which is becoming a giant pile of shit. One of the many nuggets in Doctorow’s book is learning that Amazon makes up to 51 of the 100 cents of each and every dollar transacted on Prime. Apple, via its App Store? More than 30 cents. On every transaction. Are you enshitting me? Yes, Apple is!

Is Wayfair guilty of phase three clawing for its “sucks to be you” posture toward suppliers when Trump’s tariffs first hit? Ten months ago, Shah said Wayfair was in a good position to weather the tariff headwinds because the burden of those tariffs rests on its suppliers, not Wayfair. “We’re just a (mostly) neutral platform” is a common mantra and defense.

“There are multiple companies who participate in the value chain, and the burden of the tariff can be shared across that group,” Shah told analysts last May.

The Flywheel

On the way to becoming giant piles of shit, these platforms enjoy what is called a “network effect,” an economics term for, according to Doctorow, “a product or service that gets more valuable as it attracts more users.” Wayfair’s growth on both sides of the market benefits the other. Customers get access to ever-larger assortments and inventory; suppliers get access to an ever-widening pool of potential customers. For a fee. For an ever-growing bundle of fees.

And central to this network effect is the flywheel. As we pointed out last month, Wayfair’s loyalty program (Wayfair Rewards) costs the company some gross margin, but it saves on advertising spend, because members come back without needing to be reacquired. The company’s physical stores cost operating expenses, but they generate new customers and expand basket size in surrounding regions. Thus, each initiative feeds the others, creating a “flywheel.” 

This flywheel brings in new customers, a percentage of them loyalty program members, with low prices and a large selection. Suppliers and vendors are eager to sell to this growing network of customers, an eagerness that can quickly become their business model, beholden though it might be to Wayfair’s larger ambitions.

“The big benefit of multichannel is it allows suppliers to put in a broader breadth of products,” Shah explained, “which then allows us to figure out which ones are really great winners on our platform. And then suppliers can lean in and put a lot more product. We can then position it into more and more facilities, faster and faster delivery, lower and lower shipping costs, less and less damage.”

Importantly, whenever Wayfair Rewards members shop for furnishings, they almost always begin that shopping at Wayfair because they are already vested. In platform-speak, customers are “locked in,” with the loyalty program tethering customers to Wayfair. Once a customer has paid the fee, every subsequent purchase feels like recapturing that sunk cost.

“Around and around the flywheel spins,” Doctorow writes.

Big data

Also in stage three is leveraging the overview of suppliers’ (or merchants’) sales to take advantage of however the platform sees fit. Data is the currency of this new, AI-driven tech realm, and Wayfair has invested heavily. Consider the data on both consumers and business partners available to the platform at all times. Next, consider the control that knowledge gives the platform, control that sometimes manifests in “twiddling the knobs.” As Doctrow explains it, “twiddling” is the process of changing the costs, prices, recommendation weights, and search rankings through automated or semiautomated means. He points to twiddling as a key driver of enshittification.

“When you search for a product on Amazon, the top results aren’t the best matches,” Doctorow writes, “they’re the matches that pay the highest bribes to Amazon to be at the top of the list.”

According to the author, Amazon makes $38 billion a year charging merchants for search placement.

“Twiddling is the how of enshittification,” he writes. “While we can all see enshittification from the outside as platforms are good to users, then to business customers, then to themselves, twiddling is the invisible thing that’s going on inside the companies. Because twiddling takes place inside the corporate black box, it’s hard to get your head around it. That’s made especially complicated because the platforms lie like crazy about what they’re doing.”

I am not accusing Wayfair of lying. And I do not wish Wayfair to enshittify.

Fortune-telling

Will Wayfair join its predecessors in the enshitternet? It’s far too early to tell. Perhaps it’s useful to ask the opposite, which is why Wayfair wouldn’t enshittify?

As Doctorow explains, platforms don’t enshittify when they can’t enshittify. They start to enshittify when they can. Wayfair isn’t yet at a place in the market where it can. But, like Amazon and Meta and the rest, Wayfair probably “would like to charge as much as possible for goods and services while spending as little as possible on … anything,” Doctorow writes, describing the major platforms.

So, the key inflection point to look for is the moment Wayfair sees itself as more important than all the things that consumers do on the platform. Quarterly earnings calls almost ensure that Wayfair, like all public companies, will do all it can to create as much value on its platform as it can, but ultimately to make life better for itself and its shareholders, not consumers or suppliers. It is at that inflection point that a platform begins deliberately worsening its services because it can, extracting value from both sides. Because people value it. Because it enjoys a market-dominant position that makes alternatives less appealing and, depending on how locked in the consumers are, even practical.

“Enshittification is a game of seeking an equilibrium between how much people like the thing that locks them to the service (often, that’s other people) and how much they hate the management of that service,” Doctorow writes.

Given the epidemiology, what’s the cure to this disease? How can enshittification be halted, even reversed? Competition, of course, which is why the quiet confidence of Shah and Gulliver in claiming they have discovered how to grow regardless of the weather outside takes on a sort of dark undertone, at least for someone who has read Enshittification. Wayfair is striving to be a category killer, dominating with scale and technological prowess (and, I’m sure they would add, product).

Also part of a comprehensive “cure” is government regulation, which during this administration companies can avoid by paying up, mafia style. The previous administration’s priority on anti-trust and monopoly-busting is but a speck in the rear view mirror. I’m not being political; I’m stating historical facts.

For my part, I certainly hope Wayfair decides and continues to very deliberately decide to avoid platform disease and, later, decay. This industry needs successes, and it needs companies that consistently meet consumer needs and wants.

A column for Home News Now.

DALLAS – While bankruptcy court here has approved the sale of what’s left of Buddy Mac Holdings to Phonix RBS and, in a separate deal, to S.K.C. Enterprises, d.b.a. Rent One, there are a few hurdles the deal must clear.

Phonix RBS, a subsidiary of AF Newco, is Buddy Mac’s secured pre-petition lender, its debtor-in-possession financier, largest creditor, and, with the WholeCo deal approved by the court, the credit bid buyer. Judge Michelle V. Larson’s signed order also approves the separate $1.1 million cash sale of eight stores to Rent One.

By providing DIP financing, Phonix obtained an aggressive “roll-up” provision that converts three dollars of pre-petition debt into DIP obligations for every one dollar of new DIP money funded. The result of that roll-up is that Phonix holds a towering, first-priority secured claim against basically everything Buddy Mac owns and even assets Buddy Mac doesn’t own but that are held by Buddy Mac principal owner Ian MacDonald.

Phonix is also acquiring customer rental contracts, inventory, leases, equipment, intellectual property, and related assets across dozens of locations. Ten store leases with known cure costs totaling roughly $65,000 are being formally assumed and assigned to Phonix, with stores in New Mexico, Oklahoma, Arkansas, and Missouri among them. One additional lease, for a Walnut Ridge, Ark. store, is contingent on whether the separate Rent One deal closes on that location.

There is, however, another hurdle for at least a subset of properties. Four locations, including those in Plainview, Texas; Seminole, Okla., Gallup, N.M.; and Brownfield, Texas, are owned as tenancy-in-common (TIC) properties, meaning Buddy Mac holds only fractional interest alongside other co-owners who are not debtors in the bankruptcy. Selling those properties free and clear over the objection of the co-owners requires a separate legal finding under the Bankruptcy Code, which allows a bankruptcy court to sell a co-owner’s interest only under certain conditions.

The court carved out those four TIC properties from the Phonix deal. A hearing on the TIC properties, against which Phonix has liens, was held Thursday.

But these would seem to be minor speed bumps. With both sale orders now entered, the bankruptcy pivots from a going-concern operation to a wind-down. Phonix gets a RTO business spanning multiple states to add to its portfolio of about 100 American Freight stores, while the bankruptcy estate retains cash, avoidance claims, and whatever proceeds flow from the settlement and TIC property proceedings.

In the other deal, for $1.1 million Rent One gets eight stores and the accompanying customer rental agreements. Unlike the Phonix deal, the Rent One sale is clear of all liens, claims, and encumbrances.

Early last month, the debtors sold off nine Buddy Mac stores in Missouri to National TV Sales & Rentals for $700,000. 

Big Lots revival

Turning our attention to the aftermath of the Big Lots bankruptcy, many of its stores and distribution centers are being re-purposed in interesting ways. For example, the federal government is proposing to turn a former Big Lots warehouse in Schuylkill County, Pa., into an ICE detention center for an estimated 7,500 people.

If you take the total state population of approximately 13 million people, divide by the total number of municipalities (2,555), the average is roughly 5,100 people per municipality. This makes that one ICE detention center almost 50% larger than the average Pennsylvania town.

Not surprisingly, local officials are concerned about the infrastructure needed for a facility of this size. The county’s water system can only service 6,000 gallons per day now, for example. And on Thursday, Pennsylvania Governor Josh Shapiro said he opposes the plan, which also calls for another “massive” ICE detention center in Berks County, Pa. Shapiro vowed to use Pennsylvania’s legal and regulatory authority to kill the proposal, according to local news outlets.

On a more positive note, the new owners of Big Lots!, Variety Wholesalers, has added furniture from Ashley, specifically its Signature Design line. Consistent with furniture offerings at Big Lots before its bankruptcy in September 2024, the Ashley assortment covers sofas and sectionals, dining sets, mattresses, and bedroom furniture.

Signature Design is already available at all 223 Big Lots! stores, according to the company. The chain re-opened in October last year after acquiring the stores out of liquidation in January. Variety Wholesalers is the parent company also of Roses and Maxway.

AF Newco v. Franchise Group

Finally, a check on the kerfuffle between Fusion, the newco created out of the ashes of Franchise Group, and AF Newco show no movement since Dec. 18, when AF Newco filed its counter-claim. The dispute centers on a “Transition Services Agreement” in place when AF Newco acquired 31 American Freight stores out of bankruptcy. When the TSA expired, the parties never properly amended the agreement in writing, according to AF Newco, while FRG insists that company representatives for both reached an enforceable oral agreement to extend services. Both sides make additional accusations, including an AF Newco claim of $672,000 in missing inventory.

But, the litigation is seemingly frozen in amber, a fossilizing remnant from the extinction of FRG in November 2024, when FRG filed for Chapter 11. AF Newco acquired the American Freight stores and IP for about $1.1 million in January last year, then set up Phonix RBS a month later for “acquisitions,” according to testimony from the Buddy Mac proceedings.

What does the inaction mean? It could mean that the claims and counter claims have produced a stalemate. It could also mean that counsel for each side is attempting to end this out of court. Certainly, Phonix RBS has been busy litigating in Dallas in the Buddy Mac bankruptcy.

It is worth noting that after all of these bankruptcies, after years of grinding through the courts, the roster of principals at the larger pieces of what was the $2.8 billion FRG empire as it related to furniture has so many people connected to FRG. Brent Turner and Michael Piper, principals at AF Newco and Phonix RBS, were together at Liberty Tax, the company that became FRG. Michael Bennett remains at the helm of the what’s left of Buddy’s Home Furnishings, which was acquired by private investment firm Skyline Investors in January. He’s been president there since 2019.

Even Brian Kahn, CEO of FRG when it bankrupted, is still around, managing Phonix for Turner and Piper, according to the same testimony in the Buddy Mac proceedings, and consulting for AF Newco, according to the claim filed by FRG against AF Newco. After denying involvement in or knowledge of a $294 million fraud scheme at Prophecy Asset Management, the subject of separate investigations by the SEC and DOJ, Kahn pleaded guilty on Dec. 10 to conspiracy to commit securities fraud relating to that Prophecy scheme.

The beat goes on.