Canadian consumers are still buying furniture, appliances and mattresses, but Leon’s Furniture Limited is seeing a widening divide in how much different shoppers are prepared to spend.

The retailer’s latest results provide a window into a consumer market where affordability pressures remain significant, particularly through the middle of the market. While Leon’s saw retail unit volumes increase during the second quarter, customers generally gravitated toward lower price points, pulling down average selling prices and contributing to weaker revenue.

At the same time, higher-income consumers have continued spending at the premium end. That resilience has been particularly evident in mattresses, where Leon’s expanded its premium assortment after recognizing that demand from more affluent shoppers remained strong.

The combination provides another indication of an increasingly polarized Canadian retail market, where value and premium offerings can perform relatively well even as consumers who traditionally shop in the middle become more cautious.

LFL Group, which operates Leon’s, The Brick and Appliance Canada, reported second-quarter revenue of $631.2 million, down 2.0 per cent from a year earlier, while same-store sales declined 2.2 per cent. Retail Insider reported separately on the company’s second-quarter financial results following their release.

The behaviour beneath those figures reveals considerably more about what is happening with the Canadian consumer.

Canadian Shoppers Move Toward Lower Price Points

Retail units delivered by LFL increased from a year earlier even as revenue declined, while average unit prices were lower across most categories other than mattresses.

Furniture sales declined 4.2 per cent against a particularly strong comparable period a year earlier, when the category grew 6 per cent. Furniture unit volumes were only slightly lower. Appliance sales declined by low single digits, but the number of appliances sold increased.

The numbers suggest consumers have not simply stopped making major household purchases. Instead, many are changing how much they are prepared to spend when those purchases are made.

Mike Walsh, President and CEO of LFL Group, provided further detail during the company’s earnings call, describing its assortment in terms of “good, better, best.”

At the premium, or “best,” end, Walsh said customers are still spending. The more pronounced shift is occurring among consumers Leon’s traditionally targets around the middle of its assortment.

“We’re seeing that customer lowering down to more of the opening price point,” Walsh told analysts, adding that the company is selling more units at a lower average sale.

Lower dollar sales therefore do not necessarily mean consumers have withdrawn from the market altogether. Some shoppers are remaining active while substituting a less-expensive sofa, appliance or other household product for what they might previously have purchased.

Affordability Continues to Shape Spending

The behaviour is occurring against a Canadian economic backdrop where households continue to be cautious about discretionary purchases.

The Bank of Canada’s second-quarter Canadian Survey of Consumer Expectations found that high prices and economic uncertainty continued to hold back household spending plans. Consumer spending intentions edged lower during the quarter, while households continued to report affordability concerns tied to the high cost of living.

Recent Statistics Canada data also point to softer real spending in categories relevant to Leon’s. Inflation-adjusted household consumption expenditures on furniture, furnishings, carpets and other floor coverings declined to an annualized $20.88 billion in the first quarter of 2026 from $21.25 billion in the final quarter of 2025. Real household spending on appliances declined to $11.38 billion from $11.63 billion over the same period.

Those pressures are particularly relevant to Leon’s because much of what the company sells represents a sizeable discretionary expenditure. Furniture purchases can often be postponed, while consumers replacing an appliance or mattress can reconsider how much they are prepared to spend.

Walsh said consumers remain highly value-oriented and constrained by disposable income, with affordability presenting a significant challenge.

“Discretionary purchases are always going to be challenged,” he said.

LFL’s experience shows how that caution can play out at store level. A household may still need a new sofa, mattress or refrigerator, but the purchasing decision increasingly involves finding an acceptable product at a lower price point rather than abandoning the purchase entirely.

Premium Consumer Tells a Different Story

The experience at the upper end of the market has been notably different. Walsh told analysts that LFL continues to see premium customers spending, a trend that has become particularly visible in the company’s mattress business. Mattress sales increased by mid-single digits during the second quarter, with unit volumes also higher. Management attributed the improvement partly to changes in the assortment and stronger merchandising across the category.

Research from Stifel provides additional insight into the shift.

Stifel Managing Director and analyst Martin Landry said Leon’s had previously weighted its mattress assortment more heavily toward value products as it responded to consumers trading down. The retailer subsequently reassessed that approach and added more premium products during the second quarter after identifying continued demand among higher-income consumers.

The expanded assortment helped drive higher premium mattress sales and increased average pricing compared with the same period last year, according to Stifel.

The value and premium dynamics are therefore occurring within the same company and, in the case of mattresses, within the same merchandise category. Middle-market shoppers are becoming more price-sensitive while sufficient demand remains at the premium end to justify expanding the assortment available to those customers.

Canada’s ‘Barbell’ Consumer Takes Shape

The pattern aligns with a broader shift that has been emerging across Canadian retail.

Retail Insider reported earlier this year on JLL research describing a more pronounced “barbell” structure in the market, with growth concentrated at the value and premium ends while the middle faces greater pressure.

Leon’s shows how the same polarization can occur inside an individual retailer.

Consumers do not necessarily have to abandon one retailer for another for trade-down to occur. A customer who previously selected a mid-priced product can remain loyal to the same banner while moving toward an opening-price alternative. At the other end, a higher-income shopper may continue purchasing premium merchandise from the same retailer.

For national retailers serving a broad range of customers, assortments increasingly have to accommodate both behaviours. Leon’s experience with mattresses illustrates the balancing act: moving too heavily toward value can leave premium demand underserved, while an assortment weighted too heavily toward higher price points risks missing customers whose purchasing power has weakened.

Marketing Has to ‘Scream Value’

The shift in consumer behaviour is also changing how Leon’s and The Brick communicate with shoppers. Walsh said promotional intensity across the furniture industry has become significant as retailers compete for a consumer who is still shopping but expects a compelling reason to make a purchase.

“You need marketing to be super value-oriented,” Walsh said. “Your marketing has to scream value to the consumer to attract them into your stores.”

LFL has been responding through targeted promotions, assortment management and deeper inventory positions behind products that are performing well. Rather than relying solely on broad discounting, the company is attempting to meet demand at different price points while protecting profitability.

That task becomes more difficult as customers’ expectations around price collide with rising costs elsewhere in the business.

LFL began experiencing delays on some Asian shipping lanes during the second quarter, while spot freight rates and other transportation costs increased. Management said some inventory now arriving carries higher costs, including costs related to fuel, and shipping delays could affect product availability during the third quarter.

Passing all of those increases directly to consumers is not the company’s preferred response. Walsh said LFL does not want to raise prices across the board and will instead be strategic about where increases can be made, reflecting management’s recognition that consumers remain highly sensitive to affordability.

Shoppers are demanding stronger value at the same time freight, fuel and other operating costs can make delivering it more difficult.

Early Signs of Improvement

There were some indications after the end of the quarter that conditions may be improving. Walsh said LFL saw “green shoots” during July, including improving traffic and some recovery in average sale values. The comments are particularly notable given that lower average selling prices were one of the defining characteristics of the second quarter.

Management remains cautious about reading too much into the early numbers. July is the smallest month of the third quarter, and the improvements were based on written orders rather than delivered sales, meaning those purchases still need to move through the company’s fulfillment system before being reflected in reported revenue.

Comparisons also remain difficult. LFL is up against a particularly strong furniture performance in the third quarter of 2025, when furniture sales increased 11 per cent.

Stifel has consequently remained cautious despite the early improvement. Landry acknowledged the positive indications emerging in July but reduced the firm’s revenue forecasts for 2026 and 2027 while cutting EBITDA estimates by three per cent for both years. Stifel cited continued consumer trade-down, higher fuel costs and lower inventory availability among the pressures facing LFL.

Management expects comparisons to become easier later in the year, particularly during the fourth quarter.

A More Divided Canadian Consumer

Whether the improvement seen in July develops into a sustained recovery remains uncertain, but Leon’s second-quarter experience provides a clear picture of how affordability pressures are changing consumer behaviour.

Many Canadians remain in the market for major household purchases but are putting greater emphasis on price. At the same time, higher-income consumers continue to support demand for premium merchandise in selected categories, leaving retailers that serve a broad customer base to address both behaviours within their assortments.

The tentative improvement in traffic and average selling prices during July will provide an early indication of whether some of the pressure on discretionary spending is beginning to ease. For now, Leon’s experience suggests that one of the defining features of Canada’s consumer market is not simply weaker spending, but a widening difference in how and where Canadians are choosing to spend.

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