The Thursday Show: A New Year's tariff reversal. Plus: Bankruptcy for Food52 and Schoolhouse

0:06This is Business of Home. I'm Dennis Scully and welcome to The Thursday Show. Today we'll be catching up on the biggest news in the design industry, including a pullback on furniture tariffs, bankruptcy for Food52 and Schoolhouse, and a creative new use for AI in real estate. To do all that, I'm joined by Business of Homes Executive Editor, Fred Nikolas. Hi, Fred. Hi, Dennis. How's it going? Great. How you doing? Doing good. Back in action for 2026. This is always a little bit of a rough re-entry week, but I think I remember how to do my job. How about you? I am feeling free of the flu at last, Fred, so I'm very excited to be kicking off our first show of the new year, hopefully without a coughing fit in sight.

0:54How is California real quick before we get going? California was fantastic. Why we don't all live in that great state, Fred? I don't know, because it is surely a beautiful place. Because every house costs$10 million is the very simple answer to that question. Sadly, I know the answer. But yes, California native, the lovely Mrs. Scully was pretty darn excited to be there. And always hard to get her back to New York after a trip in California. But it was great. And San Francisco is a magical place. as is a small town of Jenner where we spent some time. Beautiful. Love it. Well, California came to me.

1:30My family from the Bay Area came here, and they're Thursday show fans. I think they were a little disappointed we didn't record while they were here. They were hoping to make a little cameo on the show, but it didn't happen. Let's quickly look back on Monday's episode, a conversation with Stacey Wagoner of Studio 4, someone who has spent their entire career in textiles and brought all of that wisdom to bear for us on the show. What'd you make of the conversation? It was great to talk to Stacey, as you say, a much beloved veteran of the industry. I've spoken with so many people who talked about Stacey and Studio 4 in the context of helping them to start their business or just being great counsel along the way.

2:12And it was really great to hear her perspective on how the industry has evolved and including some of her own opinions about digital printing. And her early skepticism has now turned to a great deal of respect, it sounds like. And a great deal of business, too. I think she was an early hater. And now a huge percentage of her stock is digitally printed, which is interesting. I also love the kind of observation about how tariffs have made the price of high-end fabrics go up, but guess what? People are still buying them. I mean, it's really, it's kind of the story of 2025 is that even though prices did go up, the high-end was still rocking, and Stacey is living proof of that.

2:55Very much so. And as we've often talked about on the show as well, the rug business and that side of her business has grown to be about half of what she sells now, remarkably. So that's also an interesting statement about the times that we're living in despite those tariffs on India. And we're going to talk about those more in a second. Indeed. We wouldn't have a show without talking about tariffs, Fred. In fact, why don't we take a quick break and then we'll get into the news.

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4:13And we're back. New year, Fred, but that's right. We're going to talk about tariffs right out of the gate. Happy New Year. On January 1st, duties on upholstered furniture, cabinets, and bathroom venues were all scheduled to go up. Instead, the White House announced last week that the rate hike would be paused for a full year. So this is a tariff story, Dennis, but the tariffs are going in the opposite direction they normally are when we talk about these things. Look at us delivering a positive tariff story as the new year starts. I think it's great. I don't know if the industry feels it's as positive as they would like, but let's remind people what all of this was about and what we might have been facing that it sounds like we're not going to for a while.

4:56Sure, yeah. So this fall, I think they were announced on September 29th, there was this kind of surprise announcement from President Trump that there was going to be tariffs specifically on upholstery, cabinetry and vanities. And the numbers were going to be 25 % right off the bat, but then they were going to go up on January 1st, 2026 to 30 % in the case of upholstered furniture and a whopping 50 % on imported kitchen cabinetry and vanities on January 1st. So these were kind of, you know, big tariffs in the fall, but they were scheduled to be even bigger when the new year turned over. And it looks like the administration has had a change of heart.

5:33And now we're sticking with, you know, just 25 percent, which is still pretty darn high, but certainly less than 30 and 50. So this is kind of the rare tariff pullback from the Trump administration. What do you make of it? So is this the is this the outcome of last November's elections? Is this the affordability buzzword that everyone was talking about at the end of the year? Is this the administration softening their stance on all of this, Fred? I don't know. Well, Stephen Miller is not returning my calls. It's honestly, this story is actually sort of underreported. I mean, I think the political media has, you know, other fish to fry and they're not as focused on the kitchen cabinetry tariffs.

6:12But, you know, in the official announcement, there was sort of some language about how, you know, negotiations are ongoing and they're positive and we're going to give this some time to really play out, which I'm sure is true. I mean, I'm sure they are negotiating with various countries and, you know, trying to get favorable conditions. So I wouldn't doubt that. But I also think there's no denying, you know, the broader political climate right now. You know, we're coming into an election year. Affordability is the buzzword that everyone's talking about. I know that the president is a huge fan of tariffs, but I think most people acknowledge that tariffs do not make things more affordable.

6:41So I think maybe there's a kind of a sense of let's not add on to that at this particular political moment, especially because, as we all know, the Supreme Court is set to rule in potentially days on the other tariffs, the sweeping global tariffs. So we're kind of in a weird little tariff twilight zone at the moment. I think the administration didn't want to make any big moves. Is that your read as well? Well, very much so. And I think the administration sees that all of the betting sites and the prediction markets are suggesting that the Supreme Court looks likely to roll back some of the tariffs.

7:19And I don't know how that will alter the tariff landscape and how the administration will respond to that. But I think many in the market are believing that that is almost a fait accompli, that somehow these are going to be rolled back and we'll have to see what the administration's response is. So we're certainly not done talking about tariffs by any means, and we might get some really big news that might impact the industry a great deal in just a few days. Yeah, no, for sure. I mean, I think talking about sort of like how the industry should react to this news, you know, I mean, like, keep in mind, these are, you know, for let's talk about the upholstery side first, you know, this is 25 % that is currently in place, it was scheduled to go up to 30, and it didn't.

8:02Now, that's obviously good news for people who import upholstery, but I don't necessarily think that's going to be a game changer. I think 25 % is a big number. You know, it not going up an additional 5%, I don't think is going to make anyone's year. I'm sure there are some people who are happy about this. I'm sure there are, you know, fans of, you know, protectionist trade policy that are a little bit sad about this, but I don't think this is like, you know, groundbreaking news necessarily. On the kitchen cabinetry side, this is significant because they were going to double, they're going to go up to 50%.

8:27And there, it's really kind of a different story because, you know, while you have all the people who import, you know, cabinetry and Vanities are no doubt cheering this news wildly and are very happy about it, especially people who bring it in from Canada. That's a that's a big market for U.S. designers. You know, the whole apparatus of American kitchen cabinetry manufacturers, it's a big trade group. They lobbied very hard. I spoke to somebody about it at the time who said that 50 percent wasn't even enough. It really should be 100 percent. So I have to imagine that they're a little disappointed that, you know, this number isn't going up to 50.

8:58So I'm sure you'll see a somewhat mixed reaction as this news trickles out. Yeah, I mean, it looked as though the Association of Home Builders and some other trade organizations were celebrating this news. But but as I say, we're not out of the woods on all of this. So, I mean, I think this announcement was was a bit of a relief for many. But it's too early to to celebrate. The outcome is still very unclear. Yeah, and too early to bemoan for the people who didn't want this to happen. I should be clear that I think, unlike the upholstery tariffs, which didn't seem to have a huge constituency, there were a lot of people who were rooting, you know, the domestic manufacturers were rooting really hard for the kitchen cabinetry tariffs.

9:39And, you know, they haven't put out an announcement yet. I did reach out to them and say, like, hey, how do you guys feel about this? But no word yet. So we'll see. In the meantime, we're going to move on and talk about Food 52. The owner of Schoolhouse and Dansk filed for bankruptcy and put themselves up for auction last week. Now it looks like America's test kitchen is the likely buyer. Yeah, this is very sad news. I guess just to sort of set the table a little bit, I think most people probably know Food52. It was this recipe site that blossomed into something much more. It became this hub of this content meets commerce concept.

10:15The idea that you write about something, you can sell stuff to people. And it was a really big company. at one point they brought in, I don't know, was it 160 million in investment and they were valued at$300 million. And they of course bought Schoolhouse, the Portland home brand. They bought Dansk, the tabletop company, and they were kind of on this rocket trajectory of growth. And ever since the COVID home boom ended, it's been one bad story after another. There was all these leadership changes and layoffs and scandals. And one employee ran away with tens of thousands of dollars. And now here we are with this kind of sad news that they're filing for bankruptcy and looking to sell themselves off for a remarkably small amount of money.

10:58This was a really kind of sad story that happened over the holidays. I should say also they laid off 75%, maybe more of their staff. So a lot of people lost their jobs right around the holidays, which is very sad. What did you make of all this? It's just a sad story from start to finish. And I was such a huge fan and admirer of the founders, Amanda Hesser and Merrill Stubbs, both of whom came on the show shortly after they had received that$83 million from the churning group. The business of home podcast bump wasn't enough to save them. No, but it was such an exciting time. As you say, the company at the time was being valued at over $100 million, and the churning group would put in tens of millions of dollars more in investment.

11:45And at one point, the valuation was over 300 million. It's a remarkable story of just how overly enthusiastic people can get when there seems to be a great concept, which this clearly was, when there seems to be a great community and there's product sales and people were coming to the site for all sorts of different reasons. It just had all of these great elements to it. Then along came COVID and everyone was baking banana bread and people somehow thought that would last forever. I mean, it was really just a classic tale of everything from what can happen when private equity comes along, what happens when everyone gets overly enthusiastic about things, and then when things just slow down dramatically.

12:33Yeah, I mean, there's a lot to the story and there's plenty of blame to go around for why this happened. I think one of the kind of tragic parts about it is that they, of course, you know, it wasn't just Food52. They also bought Schoolhouse. We've had Sarah Fritsch, the former CEO of that company on the show a couple of times, a great, you know, very beloved, cool brand that manufactured a lot in Oregon. And, you know, they were acquired by Food52 and, you know, they've had the majority of their staff laid off. They were, you know, a very steady, cool brand that is now, you know, I don't know what the future is for them now.

13:07So it's, you know, it's, as you said, it's like, I don't know. I try to be agnostic around private equity because I know it just certainly helped some very cool companies grow quickly. But this is a clear example of how you pump tons of money into something. These crazy high expectations, you just start acquiring companies at the end of the day. so many people have lost their jobs. And, you know, as I mentioned that, you know, the bankruptcy fire sale is for$6.5 million. I don't know if that'll actually go through, but you know, this is a company that, you know, food 52 alone did over 26 million in revenue.

13:36And last year schoolhouse brought in 44 and a half and change last year. So this is not like some tiny entity and it's just really too bad that it's, it's getting sold off. I don't know. I mean, what do you, what do you think happens next? You know, if let's say America's test kitchen, they're the stocking horse bidder. They're funding the company while it goes through bankruptcy. They'll likely acquire it. What do you think happens next for this little trio of brands? And does it remain a trio of brands to your point? I mean, it makes a lot more sense to acquire Food 52 for America's Test Kitchen.

14:06And that's an incredible operation. They're housed in the same building as the design center in Boston. Exactly. And I remember getting a tour of that whole operation when I visited the design center. It's an incredibly impressive operation that they run. And you can see them finding endless synergies with Food 52. So that I can completely understand whether or not they're really going to want dance and schoolhouse. I'm not really sure, which makes the story even sadder in a way, because what do you do there? Yeah, well, OK, so America's Test Kitchen is also it's itself owned by this company called Marquee Brands, which is this big, they buy brands and kind of license them out in a variety of ways.

14:50And so it's possible that, you know, they'll spin off Schoolhouse and Dansk to their parent company and who knows what happens then. It's possible they'll sell, you know, Dansk and Schoolhouse to somebody else. I'm sure they're, you know, interested buyers for those two companies. But, you know, it's also like, keep in mind, the vast majority of the employees of these companies have been laid off. So there's this big interruption. So it's not like, you know, If a transaction happens, it has to happen soon to sort of capture all of the, to bring it back, to bring either of these companies back to where they were.

15:20So this is kind of like an emergency situation, and it's really just too bad. But this is sort of an unfortunate story over the holidays. Yeah. And as you say, we don't want to lay the blame at private equity feet, Fred. Well, many people would, and they would not be crazy wrong in this case. Many, many will be pointing that finger. But not us, Fred. No, no. We'll just put the facts out there and let people make up their own mind about that. Moving on, we're going to talk about Sandow's latest acquisition. Indeed. Just a few weeks after scooping up Canadian design magazine Azure, Sandow Design Group has made another purchase, this time acquiring Architonic.

16:00I understand you have history with Architonic, Dennis. Do you want to explain what it is? It's sort of a European company. I'm sure not everyone is super familiar with it. No. I mean, it's interesting. So back in, I want to say, 2016, Interior Design Magazine was packaging Architonic with their product find database and offering you Architectonic, this European database that was used by architects and designers in Europe. And you could put up your product offerings. I was helping to run Avery Boardman at the time. And so we were putting a bunch of sofas up online. And and getting inquiries from from Europe as a result of the of the connection.

16:45But it was it was part of the advertising package. Interestingly enough, that interior design was offering advertise some pages, get on the product find, get on Architonic and and be searchable from this big European database. Yeah, that's what I mean. I think big European database is kind of kind of what Architonic is. It's you know, it's this enormous repository of product information. You know, you if you're an architect or designer, you can log on, you can find, you know, sofas from Avery Boardman. You can find, you know, windows. You can find all kinds of building materials. They have something like 400 ,000 products or something like that.

17:21So like a centralized library for browsing product. And they make money by charging, you know, brands to list their goods with Architonic. So that's kind of what it is. And I think that the rationale behind acquiring it is not dissimilar from what you just said. You know, I think, you know, you fold it into the broader Sandow library. You know, you can sell a brand advertising through interior design. You can say, hey, if you sign up for Material Bank for this amount of time, we'll also put you on Architonic. There's all kinds of synergies in that regard. If you own a lot of international design brands, you can sort of sell across them.

17:53And I think that's what Adam Sandow wants to do, at least in the short term. That's kind of the thesis here. Yeah. And I think that the I think that the partnership years ago certainly got a lot of wheels turning at Sandow. And I think a lot of the idea behind Material Bank was very much informed and influenced by this by this partnership with Architonic. So, I mean, it makes it makes sense to fully acquire it. And I I get the sense that that Adam Sandow, who, as we know, likes to acquire businesses. he does he likes to acquire them but honestly i i think he likes learning from them and and sort of better understanding how they operate and what they do in as much as he likes the actual end result of whatever the product is i think he's always just interested to get under the hood of a lot of these companies and and learn from them so it's always as much a scientific lab and a place where experimentation is happening with Sandow.

18:51And then I think the scale is another big part of what he's doing. And as you and I were talking about before the show, many are starting to believe that we're seeing a bit of a resurgence in Europe. You're certainly seeing the financial markets in Europe have been very strong this past year. And many are starting to think that maybe some of the European business is coming back. Many in the industry had somewhat given up on Europe as being a big driver for them. And while the business isn't run away yet, I think we're seeing definitely more than just green shoots coming out of Europe recently.

19:28Yeah, him and Gary Friedman can get together and RH Paris and sort of divide up the continent. Adam and Gary. Yeah, it's really interesting. You know, as you say, you know, Europe is definitely there's some energy there. And I think that like, you know, Adam Sandow opened up Material Bank Europe a couple years ago. We should say, by the way, he's back as CEO of Material Bank. There was a sort of very impressive former Amazon executive who is no longer there. Adam's back at the back at the home of Material Bank. And, you know, according to him, it's grown like 80 % over the past year. So clearly there's a lot of opportunity for material banks.

20:02So, you know, why not while you're growing in Europe with your sort of big, cool tech company? Why not acquire, you know, media brands along the way, data information services? Why not? You know, you put together kind of a cool portfolio. And as you said, he's kind of an experimental acquirer. There's sort of this, it's not like this like hyper perfect plan that's 3D chess. I think Adam just likes to bring a lot of like like minded businesses together, get a big network and kind of see what happens. And, you know, I think some of them will work. Some of them won't. And, you know, but I think there's there's there's some logic to that.

20:32Yeah, no, I agree. We know that he that he loves data and he loves insight into lots of different markets. And this certainly provides him with that. So it'll be it'll be interesting to see how all of these pieces fit together. And if there's one thing that we've learned is they don't have to, to your point, fit together seamlessly. I think they can do as much to just inform him as the direction of where things are going as anything else. And it'll be interesting to talk to him now that he is back at the helm of Material Bank to hear what's happening with that operation, where that's all going and how this all fits in with the media empire of lux and interior design and all the other titles.

21:13It is impressive. So we'll look forward to that conversation and hopefully learning a great deal more. In the meantime, we're going to move on and talk about AI in real estate. For the Wall Street Journal last week, Jessica Flint wrote about a pair of California real estate agents who are employing AI to add larger than life graphics, including knights and dragons, to their listings, Fred. How do we even show this place off? What's the angle? A$70 million estate made for a king. This place really does have it all. Maybe we just show off the lifestyle. I've got it. Let's have a full-blown medieval battle on the polo field.

22:02Infantry, archers, cavalry. This is going to be insane. Soldiers splashing around in the pool, playing poker, shooting billiards, working out in the gym. We can even have them watching a movie in the theater room.

22:19This is going to be epic. Can we get them to make a teaser video for the podcast, Dennis? I think we can. It would be money well spent. Obviously, this is an audio medium, but what you can see in this teaser video for this crazy$70 million estate is exactly what those guys were saying. is they used AI or they hired a company to use AI to make a promo video, but it's not just a cool swooping camera through the mansion. It's these AI knights having a battle in the polo field and AI knights hanging out in the movie room. I wouldn't say it looks like a big budget Hollywood movie, but it looks like a pretty good B-grade Hollywood movie.

23:03There's like a dragon flying over the property. It was certainly fun to look at. What would you make of it? I agree. Certainly fun to look at. And at a time where people seem to be feeling a little sensitive about AI and what it's going to do and how it's being used, I think many people feel like, yes, this is what AI should be used for. This is why NVIDIA is worth$5 trillion and why we're reopening Three Mile Island is to generate the energy required to make dragon real estate videos. I mean, I will say, like, yeah, if you're looking for a harmless, fun use of AI, I think we found it here. This is just kind of a, I don't know, just kind of a fun, silly usage of the technology.

23:45Even the video itself kind of acknowledged how ridiculous it was. You've got these two, you know, it's two brothers. And like in the video, they're kind of like jokingly going back and forth each other. Can we really make this video or not? You know, like there's a sort of meta component to it. You know, and I think probably on some level, they also made this video because they knew it would be covered by places like the Wall Street Journal. So there's sort of like a novelty of value in doing this. But I do think that like, look, there's no doubt that AI is making it easier to make this kind of video content and people are going to experiment, maybe not quite as crazily is this, but people are going to do stuff kind of like this, I think.

24:20I agree. And I think the setup here was so interesting. How many customers are there for a$70 million home with 12 bedrooms, 25 bathrooms, and a polo field? I mean, this is a small audience that they're trying to reach, right? But maybe that customer might see himself as a king with an army of knights who are playing pickleball and also swimming in the pool in their full armor. Fred, they didn't even take off the armor to go swimming in the pool. Well, it's AI, but yeah, or herself as a queen, I might add. Yes, well, exactly. Yeah, I mean, I think like, you know, if we can sort of bring this down to, you know, a slightly more sane level.

24:59I mean, I do think, and I wrote about this for Business of Home, I forget if we talked about this on the podcast, but, you know, designers are kind of experimenting with the technology as well. You know, you can make an AI video of a, you know, presentation you give to a client. Now, most people won't put a dragon in it, of course, but like people are doing kind of simulated walkthroughs and kind of interesting little lifestyle videos that they make with AI for their clients experimenting here and there. There's even this I don't know if it's like cool or creepy, but this concept that you could like put your clients into the video so you could be like, here's what I think it'll look like if you are living in this living room, I'm going to design for you.