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50 Below's new owner lays off 20 employees in Duluth

The old Harcourt Building on Second Street in Duluth (shown in December) is being remodeled to make a new home for ARI Network Services (which acquired most of 50 Below a year ago) and to establish a downtown campus for Lake Superior College. (2013 file / News Tribune)

ARI Network Services, the new owner of 50 Below in Duluth, recently laid off 20 employees, even as it prepares to move to a new, bigger downtown location that will allow for a growing staff.

"Basically, we periodically review the cost structure and revenues," CEO Roy Olivier said Wednesday. "We felt we needed more efficiency to get the cost structure in line with our revenues."

Milwaukee-based ARI was one of two companies that purchased the assets of bankrupt 50 Below in 2012. Both ARI and the other buyer, Emerald Connect of San Diego, promised to keep most of 50 Below's 225 jobs in Duluth.

ARI kept the 50 Below trademark when it acquired the retail division for $5 million. It hired 133 of the website and e-commerce company's nearly 160 retail division workers, including all the managers. The retail division included 50 Below's powersports accounts that ARI had wanted. ARI moved its own powersports account to Duluth, which boosted the Duluth staff.

The layoffs have reduced the Duluth staff to 121, Olivier said.

The problem was, both ARI and 50 Below had operations and publishing units, creating a duplication. So, as they integrated the two businesses together, they ended up with excess staff in those units, Olivier said.

Moreover, when ARI bought 50 Below's assets, 50 Below was doing

$8.9 million in revenue with 130 employees, while ARI had $29 million in revenue with the same size staff, Olivier said.

"So on Friday, we took action," he said.

Most of the 20 jobs cut are in operations and publishing. He said it was unfortunate that in combining the two companies, job cuts were needed.

Brian Hanson, CEO of Area Partnership for Economic Expansion, was sorry to hear about the layoffs.

"Anytime we lose 20 positions anywhere in the region, it is a concern," he said. "It often happens when a company like ARI and a group like 50 Below are integrated, that they find duplication and

often positions do get eliminated."

The layoffs come as ARI prepares to consolidate its Duluth staff -- currently in two locations downtown -- into one larger location at

130 W. Second St. The build-out, creating a state-of-the-art office space, cost the company $450,000 and is nearing completion. At 25,000 square feet, it's big enough for ARI to grow to a staff of 185 which is one reason the space was chosen.

The move has been hailed as evidence of ARI's commitment to Duluth, in keeping jobs in Duluth and in growing in Duluth.

Olivier said that hasn't changed.

He said the company's 50 Below division will do $10.5 million this year. And as it grows, they will add staff in Duluth.

"We're excited about what they're accomplishing here in Duluth," he said. "We continue to be committed to growing the business in Duluth.

That's good news, Hanson said.

"I think they've just been trying to figure it out," he said. "They've been getting their staff in order, dealing with real estate, getting a new location, so they can grow this business ultimately."