The Thursday Show: Williams-Sonoma's surprise acquisition. Plus: Design center drama

0:07This is Business of Home. I'm Fred Nicholaus in for Dennis Scully and welcome to the Thursday show. Today, we're going to be catching up on the biggest news in the design industry, including the latest on tariffs, Williams-Sonoma's recent acquisition, and a spotlight on Midwestern design. To do all that, I'm joined by Business of Homes Editor-in-Chief, Caitlin Peterson. Hi, Caitlin. Hi, Fred. How are you doing? I'm doing pretty good. How are you? Good. How does it feel to be? You're in the same seat, but how does it feel to be on that side of the microphone? I don't know. The big mic, the big chair, yes.

0:37Eagle-eared listeners may have noticed that someone is missing. Dennis Scully is in London trying to evade tariffs on pocket squares and bespoke shirts. It's leaving me and Caitlin here alone to do the Thursday show, but we got it. We got it. Yeah, I'm doing fine. It seems like everybody's traveling so much. Dennis is in London. He's been in London twice over the past week. You're headed where next week again? So I'm going to be headed to Chicago next week. The Design Social pop-up has its next outing in Lake Forest, Illinois. So I'll be there with a couple dozen bespoke and boutique interior design brands and doing a fun chat with Tom Stringer about – he's going to be showing off his design presentation to the audience.

1:17So that should be pretty fun. And I'm going to Copenhagen, which is the Chicago of Europe, as we all know. I should really love that. Yeah, I'm sure they love that too. Speaking of the Midwest, I'm curious, what's been your favorite trip of the year? I feel like you've been out and about a lot. I guess we all have, but what's been your favorite trip so far? You know, I went to San Sebastian in Spain with leaders of design in April, and it was just an extraordinary, immersive trip, both in that corner of the world where the architecture is incredible. You know, we went to Bilbao and saw the Guggenheim there.

1:50The food is off the charts. But also, it was a really intimate group of, you know, principals sort of at the top of their game, getting really candid with one another about the challenges and triumphs in their businesses, which is always a rewarding way to spend a couple of days. I love to get candid in San Sebastian. If you're going to get candid about the challenges of your business, might as well be in Spain. You should be in a beach town in Spain. Exactly. Cool. Well, quickly looking back on Monday's episode, a conversation with Staline Volandes and Elisa Lipsky-Karaz of El El Decor. It's kind of a fun one, like a fun media conversation with the editorial leaders of El Decor.

2:31I mean, they're very upbeat about design media. I think you kind of have to be when you're leading El Decor. Surprise, surprise. But they seem very engaged by the challenges that we all know about. They're very multi-platform. They want El Decor to be good, on its website to be good, on its Instagram feed. They want it to be good, of course, in the pages of the magazine. And I think Staline has been so good at making Town & Country, which is like a, what, 170-year-old publication, feel very fresh and irreverent. I guess I'm curious, like, it is always interesting to talk to people who are, like, really optimistic about design media because you get used to being very doomy about it.

3:06Like, what do you think of that? Is there reason to be optimistic? I think you can find reasons to be optimistic amid maybe market forces at large that are not incredibly favorable for how media brands have typically made money and found success. But, you know, I think listening to Staley and listening to Elisa, they're focused a lot on the Elle Decor audience and really on what makes Elle Decor singular in the way that it talks about design. And I think so many media companies are coming back around to that idea that instead of millions of eyeballs on the internet, if we focus on people who are passionate about the stories we're telling, there are really avenues to success.

3:45Yeah. I mean, I think they're rightly focused on let's just make cool stuff with the right voice and the right perspective. They're not as focused on what's the click, blah, blah, blah. But that's a big – sorry to interrupt. I think that's a huge departure for some of the big media brands who really did kind of put their heads down and say, how can we maximize clicks for a really long time? Yeah, and I think Staline definitely has like the juice at Hearst to push through ups and downs of revenue. So excited to see what they do with it, and I'm sure we'll probably hear from them again in the not-too-distant future.

4:15But in the meantime, we're going to take a quick break, and then we'll get into the news.

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5:06And we're back. Where else can we start but tariffs? In back-to-back rulings last week, federal courts struck down President Trump sweeping Liberation Day tariffs. Then, a day later, an appeals court temporarily reinstated them. So as you were. But meanwhile, the administration also unveiled even higher levies on imported steel and aluminum. The numbers are up to 50 % now. More tariff madness. Caitlin, how have you been keeping track? I haven't. I feel like I found out that these tariffs got repealed, whatever, they don't count, and then they do count kind of in the same breath. I was like, oh, that happened.

5:43It didn't happen. Okay. I think it kind of speaks to just how fast all of this is happening and how hard it is to keep up. Exactly. Yeah, it's funny because last week I think Dennis and I were talking about the EU tariffs, which already feel like a year ago. And we didn't put a timestamp, which we normally do, and it came back to bite us because, you know, so much happened in the next 48 hours. I'm going to put a timestamp on this. It's Wednesday, June 4th at 2.50 p.m. So we'll see what happens in the next 24 hours. And I think the EU is meeting with U.S. trade representatives legitimately right now or earlier today.

6:14Maybe they can call into the Thursday show and let us know what's going on. Yeah, I mean, just to sort of briefly sort of explain what happened here. So late last week, two federal courts, the U.S. Court of International Trade and the U.S. District Court in Washington, essentially struck down all of the Liberation Day tariffs, saying that the legal justification, this thing called IEPA, or the International Economic Emergency Powers Act, which I'm sure we were all familiar with, could not be applied to tariffs the way that Trump was applying them. So it seemed like, oh, my gosh, it's all over.

6:43And then, of course, an appeals court overturned it and allowed or at least temporarily put a stay on it and allowed the tariffs to stay in place. So that the suspicion is that it will work its way up to the Supreme Court and they'll have their say as to whether Trump can actually put in, you know, these so-called Liberation Day tariffs on. You know, these are the 145 percent on China, the global 10 percent on everybody that's getting negotiated right now. But meanwhile, as I said earlier, the industry specific tariffs like steel and aluminum, Trump still has control over. So that's why those numbers just went up.

7:12I'm curious, in terms of the Liberation Day tariffs, how are brands reacting to this? When you have conversations with people in the industry, how are they reacting to this information, Kaylin? There's no real timeline for clarity, I think, here. And I think that's maybe the thing that's most clear. This specific will-they-won't-they ruling on tariffs could stretch on for a year or more before it makes its way to the Supreme Court. I think if you're waiting for that level of, like, is this allowed? Will this happen? And, you know, the world is going to pass you by before you start moving. And I think, you know, if you haven't come to this realization already, I think a lot of the brands that I'm talking to are saying, like, we just have to start moving forward whether or not these are informed decisions.

7:53If you celebrated for the 45 minutes that there were no tariffs, the party's over. Yeah, you celebrated too soon. It's funny because it just adds like another layer of uncertainty. It was like before the uncertainty was how big are the numbers going to be? Now the uncertainty is does he even have the authority to do this? And when will that become clear? Also, do you get a refund if the Supreme Court says no in two years? Exactly. Well, that's been a big topic of conversation is will there be refunds issued? Certainly a lot of listeners are hoping yes, but that information is not clear. It just makes it very, very difficult to operate.

8:26You know, it's interesting. I think because we're all a little bit exhausted of these tariffs, I think people are like, I don't want to hear about how brands are reacting to this. But people do have to make real decisions around this. I was having a conversation with someone from Regina Andrew Detroit back when 145 % was still on. And by the way, they made the point very clearly that these tariffs, even though it's only 30 % on China now, that's on top of the tariffs from 2018. You have the steel and aluminum tariffs in there as well. So it's not just 30. It's 30 plus a whole bunch of other stuff.

8:54But the guy was making the point that they had to sort of reorganize their whole inventory around, well, what was the stuff we brought in before the tariffs? Are we going to sell to all these random e-commerce sites when we really want to have control over our inventory? Can we start moving sourcing around? Can we start making more one-of-a-kind bespoke items? So brands are really having to make decisions whether they have clarity or not. I think it's also worth noting that the Liberation Day tariffs that maybe panicked the design industry the most, separate from China, all got paused pretty immediately for 90 days.

9:25And that 90 days is coming up. Yeah, July. You know, the big numbers that sent a lot of design industry businesses into a panic on places like Vietnam and Indonesia and the Philippines aren't settled. And that's still going to be coming in the next couple of weeks as well. Yeah, exactly. They said they wanted to do 90 deals in 90 days. And there was a headline at the time saying, 60 days in, we might have one. So the clock is ticking. Whatever happens with the Liberation Day tariffs, clearly Trump likes tariffs. And he has the ability, I think, through the various laws to, you know, levy them on industries like steel and aluminum.

9:59And now we're up to 50 % on all imports. I'm really curious about that because that is a number that seems much more fixed. My immediate thought is home builders. You know, so much of the cost of, you know, building a home is steel and aluminum. When those prices go up, the overall cost of a home goes up. There's so much pressure on, you know, home sales already. I'm sure this just adds fuel to the fire and does nothing to loosen up the frozen real estate market. But what do you think? When you spend twice as much on rebar or duct work and kind of the unsexy stuff that you don't see that's kind of inside your house, that's probably coming out of your decorating budget.

10:33And I think the costs that slowly chip away at the cash that you hope homeowners have left over to spend furnishing their homes is where our designer audience is going to feel the biggest crunch. I know. It's always like, well, why can't we afford to buy new pulls? It's because we insert a giant beam in the middle of the house that no one can see that allows it to not slide down the hill. So that's why we can't have nice pillows. Anyway, we will stay tuned and talk about tariffs next week, I'm sure. But in the meantime, let's move on to more Charles Cohen drama. This time it's in Houston. Last week, the Real Deal reported that the Decorative Center in Houston was headed for foreclosure.

11:10If Cohen didn't work out a deal with his lenders by June 3rd, shall we do a spoiler and say whether it happened or not? Was it foreclosed? That was yesterday. That was yesterday. I was recording. It did not happen, at least to the best of my knowledge. I spent all morning digging through government websites and talking to people who track Houston foreclosures. It apparently did not happen, so it is my belief that Cohen still owns the Decorative Center in Houston. But certainly this is another design center in some kind of flux or some kind of lending issue belonging to Charles Cohen. So more fuel for that fire.

11:44It's interesting to watch that empire sort of slowly get sliced apart. I know Cohen Brothers has been such a force in the design industry, as you guys have talked about here too, for so long. Even if this foreclosure didn't happen yet, it's kind of interesting to see lenders really starting to pick apart all of the holdings that he's got. Yeah, I know. It's tough. We only have so much time on the Thursday show. And there's a lot of Charles Cohen drama. I'm sure listeners will remember that last November, he lost control of the Dakota because he was being sued by this company called Fortress, which loaned him hundreds of millions of dollars, which he didn't pay back.

12:21That drama is still ongoing. He still owes Fortress money. They're still trying to claw it back. Apparently, Fortress, I don't think, is involved with the Decorative Center in Houston, but there was this company called Ladder Capital Financing. They may have sold the loan to other people, but essentially someone loaned him$50 million in 2014. And apparently, allegedly, Cohen wasn't making payments, probably because he was tied up with a bunch of other drama. And so they moved to foreclose the building. Now, this probably, my guess, would be some sort of negotiating tactic to let Cohen know that they were serious.

12:50You have to imagine, if this foreclosure auction did go through, it would be at a convention center auctioned off next to a shack that's worth$10 ,000. The Decorative Center in Houston is worth$54 million. It would be very weird if that was the final chapter, if it just went on the block there. We don't know what's going to happen next. It's possible he'll be able to pay back this loan. We don't really know anything about it. But it seems, you know, every day that goes by, it seems like, okay, well, he might lose the decorative center in Houston. And then, you know, that leaves, of course, only the PDC and the design center in New York, the D &D building.

13:24And then it's kind of like, well, is Charles Cohen one of the biggest industry landlords anymore? I don't know. That's speculating a little far afield. But every day that goes by, it seems more and more likely that that might happen. I think for the tenants in all of those buildings, there becomes even greater uncertainty. I think certainly there have been in recent years complaints about lack of funds spent on maintenance, lack of funds spent on upkeep, lack of funds spent on amenities. It's hard to deal with when there's not toilet paper in the bathroom on your floor. However, the greater uncertainty of who becomes our new landlord, do they still care if this building is filled with design businesses?

14:02Do they want my business to succeed here? And do I have a long-term home here alongside businesses that are beneficial to me to be next to? I think those bigger existential questions have to be weighing quite heavy on the folks who have leases in all of these remaining Cohen buildings. Now, we should say a little bit of late-breaking news. Because we found out just before we started recording that actually there is a new Boston town at the Dakota in Florida. Apparently, Jamestown, co-owners of the Boston Design Center, are taking over leasing and admin for the Dakota in partnership with Fortress, the company that now owns it.

14:39And they announced an investment in the property. It does seem like they want to keep it as a design center, which certainly will be welcome news for everyone there. What was your read on that news? You know, I've been talking to the company that has been doing the operating at Dakota, and I believe they still will continue to do so even amid this deal. And they had been really excited when I talked to them a couple months ago about the investments that Fortress was making in their building. You know, they said, we have a flower budget again so that we can make this a welcoming place to be in.

15:09We have music in the halls again. You know, we've reopened the cafe. they were really excited about these infrastructure improvements that can sound pretty insignificant on their face, but that really dramatically transform your experience of wanting to go to and then stay in a design center once you're there, wanting to get work done there instead of just breezing in and out. And so if this is sort of a sign of continued management and investment on Fortress' part, you know, really keep things going, revitalize the building, bring in new tenants. That seems like great news. This has definitely been a building to watch in terms of like Fortress did not have a lot of time, I believe, to put a plan in place.

15:51There are tenants with leases that are expiring. They wanted to kind of roll them back in and make sure they were going to stay in the building. South Florida already has a lot of big and significant brands who are in other big design centers, but who have defected to something called the South Florida Design Park. And so, you know, I think they had real competition literally right across the highway and had to put something in motion here if they were going to really keep some of their flagship tenants. So it's interesting to see that this is the route they're going and that they're going to stick it out.

16:22Yeah. I mean, I had assumed they would turn it into like, I don't know, like a Bitcoin data mining center. Like I had no idea what was coming, but I'm delighted and surprised to find out that they're sticking with the design center and that they have toilet paper, flowers, and music. Those are all very important elements for a successful design center. Well, let's leave that there and move on to Williams-Sonoma, which has made an acquisition a surprising one. Absolutely. So just a few months after college decor company Dormify filed for bankruptcy last year, the brand's intellectual property has now been purchased by Williams-Sonoma.

16:54Fred, did you see this one coming? I did not see this one coming. Funnily enough, little indulgent trip down memory lane. One of the very first articles I wrote for Business of Home was about Dormify. So if you want to go back into the archive and find out young Fred's thoughts on Dormify, you can dig that up. I believe you reported at the time on the fact that Sherpa Everywhere was the top trend for teens that year. Yes, one of my classic observations. But I was actually reporting on the fact that American Eagle Outfitters had made kind of like an investment in them, like 3.5 million. At the time, it made a lot of sense.

17:29Dorms are a hot market, which we'll talk about in a little bit. And they were selling a lot of American Eagle stuff. So it was kind of a fun little story. But here we are seven years later. Now, what most of the news coverage of this acquisition does not cover for some reason is the fact that Dormify had gone bankrupt. They're pitching it as like, oh, William Sonoma was acquiring Dormify. But just six, seven, eight months ago, Dormify was basically out of money. So I think that's sort of the backdrop of the story that we really need to talk about. They were going nowhere fast. And I think William Sonoma bought this company because they were able to get it on the cheap.

18:01However, that being said, it's still surprising. William Sonoma doesn't really buy companies. I think the last company they bought was Rejuvenation, I want to say. But everyone wants to sell to William Sonoma. Everyone thinks, oh, I'm going to sell to William Sonoma. But they just don't have a habit of this. So this is interesting. I was looking at Dormify's bankruptcy. And I think one of the interesting things about it is that its top unsecured creditors were FedEx. But also Google, Meta, Snap. It looks like a lot of what the business was struggling with was that same thing that a lot of e-commerce businesses came up against, which is just that it costs a lot to market your business and find shoppers on the internet.

18:37I feel like 2023, 2024, we said goodbye to a lot of e-commerce businesses that were sort of up against the same headwinds. I mean, yeah, we just talked about Burke-Tagora a couple weeks ago. Same thing, very different paths out. Sure. But yeah, same problems. It became a lot harder to sell home stuff online for a variety of reasons. It's interesting that Williams-Sonoma sees opportunity in the intellectual property, and that their business model can adjust a little bit to account for that. Yeah, that's what's interesting here. So this isn't like a full acquisition. They just bought the brand name and the IP, which is very common in these situations.

19:10They obviously don't want to buy all the debt. It was interesting. I was digging through the bankruptcy filings, too, and I noticed that this wasn't really reported widely either. But apparently, William Sonoma offered, at least in the offer letter, they offered a million dollars for all the IP. Is that a low ball? Is that a high offer? What was your reaction to that number? First, I thought it was low. Then I thought it was high. No, I don't know. Well, it's hard because they're buying like an Instagram account and a website. Yeah, yeah. You know, one of the interesting things to me about Dormify is that you don't keep your customer for very long.

19:44I worked at a bridal magazine early in my career where they sort of fessed up to the fact that you could run the exact same article every three years because your audience wasn't the same anymore. Like, in some ways, Dormify has the same challenge of having to kind of re-find an audience, re-capture that attention. No, it's a real challenge. But I think the thing about it is that it's very lucrative because if you get in with a consumer or, let's just say, a person when they're out there in their college dorm, you develop like a brand affinity really early on. It's like the sheets that you buy for your dorm or the pillows or whatever.

20:17You're like, oh, that's the place where you go to get that stuff. And then when you get your first apartment, you're like, oh, I guess I like those. So I'll go back to that brand. So there really is a power in reaching somebody at that phase of life. And I'm guessing that's why William Sonoma is doing this is because they don't have anything that fits that demographic. They have Pottery Barn kids. They have Pottery Barn teen. They have, of course, stuff for when you get old and you actually have money to spend on your home. but they don't have anything for that sort of crucial 18 to, you know, 21 age.

20:44And I'm guessing that, you know, if it's a feeder into all your other brands. Yeah, exactly. Yeah. So, yeah, interesting deal. Shall we move on to Midwestern design? I think so. This week, BOH's managing editor, Haley Chouinard, wrote about the debut of a new design gallery in Minneapolis where interior designer Victoria Sass aims to highlight regional talent. This was a fun one. What did you make of it? I love this story so much. And, you know, I've just been such a longtime admirer of Victoria Sash. She's one of my favorite interviews. She is creating a gallery space really adjacent to her design firm in Minneapolis to spotlight talent from the region in a really surprising and interesting way.

21:24Yeah, it's interesting because, of course, you know, many designers start, you know, a shop or a studio, and that's like become an increasingly common play. But at least my read on the article is that she wants us to be like a gallery. Like it's like for collectible design. One of the co-founders of Apparatus is one of the first people showing. And so, you know, this is, it's arts here. It's more about crafts. It's more about artisans than, you know, hey, here's my shop with my upholstery. Come check it out. Right. Absolutely. I mean, this is truly a gallery style exhibition. You know, it has a start date.

21:54It has an end date. It has a point of view. You know, Jeremy Anderson, the co-founder of Apparatus, he's been working as a ceramist on his own for the last five years, but he's from Minnesota. So he's based in New York now, but he's got those Midwestern roots. It's a really good first exhibition. But I think, interestingly, maybe her bigger goal is also to export this idea that Midwestern design is good and to really start to be taken more seriously by the powers that be in the design industry. Well, now you occupy a very interesting place here because you are both from the Midwest, originally from the Chicagoland area, but you also are a power that be.