Daugherty's Hardware & Appliances, a fixture in Duluth for more than a century, will permanently close in May, its owners said Friday.
SMDC Health System has agreed to buy the property for an undisclosed price after being approached by store owners Scott and Terry Lundberg, and is considering using the 52,000-square-foot building as office space for nonmedical functions.
Although he declined to reveal sales revenue, Terry Lundberg said declining sales and rising expenses for several years prompted the decision to close.
The Lundbergs have a number of business interests, including the Canal Park Lodge and other local hotels; Polar Gas Co. of Poplar, Wis.; Poplar Hardware and Daugherty's Appliance in Superior. The Poplar and Superior stores will continue to operate, Terry said.
Daugherty's appliance service also will continue to operate under the ownership of Scott Boedigheimer, the current appliance service manager. He doesn't yet have a location, but will offer over-the-counter parts sales, as well as repair service, probably under the name Daugherty's Appliance Service. Boedigheimer said he would employ five or six of the service employees at the store.
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But many of the store's 32 employees, nearly all of whom are full-time workers, will lose their jobs. They will, however, receive severance packages, Terry said. The employees receive benefits including health insurance and 401(k)s. More than half the workers have been with Daugherty's for more than 20 years, Scott said.
"We're trying to make the transition as easy as possible for them," Terry said.
Since 1999, the store has seen incremental, but steady, declines in sales, Terry said. "It was just small, slow erosion of customer base," he said. "If you look at it year by year, it doesn't look like much. But when viewing sales over the years, clearly it is time to close."
The business had reached "break-even status," as Terry put it.
Big box stores in the Twin Ports, including three Wal-Marts, three Menards and Home Depot, are a big part of the reason for the decline, Scott said. Furthermore, the population has remained steady so the amount of money available to spend has not increased substantially, he added.
The store already has reduced its hours, but will continue to stock new merchandise until March.
Hardware history
Daugherty Hardware Co. opened its doors around the turn of the 20th century, founded by L.K. Daugherty, who in 1912 built a store on East Fourth Street. The first years of the company's existence are not well-documented, but a history provided by the Lundbergs says Daugherty and later his son, Bertil, ran the company until the mid-1930s. Home appliances became a large part of the business in the late 1930s and '40s and, in the 1960s, the company occupied space in a number of buildings near the store.
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In 1965, owner Martin E. Olson sold the store to employee Robert Lundberg, whose sons now own the business. Robert Lundberg, now 89 years old, built the current store at 517 E. Fourth St. in 1978.
The Lundbergs decided to close the store and then offered the property to SMDC, both parties said. Although the health system hasn't made a final decision on what to do with the property, it probably will be office space for information technology and public relations, SMDC spokeswoman Mary Thompson-Bode said.
The parking space Daugherty's now provides to customers of neighboring businesses in the store's parking lot will remain reserved for those customers, according to an e-mail sent to SMDC employees Friday morning by Chief Administrative Officer John Smylie.
Closing hits hard
Bruce Wyman, executive director of the Hillside Business Association, said the store closing will be a big loss for the neighborhood. "It's been a tremendous asset for the Hillside and a draw for us," he said.
He added that it has been at the center of $20 million in development during the past decade, including the Village Place apartments, Fourth Street Market and Whole Foods Co-op. "We certainly would prefer to see a retail operation that would provide continuing customers to the area," he said.
Wyman said at one time the association offered to build SMDC an office complex and ramp, but officials decided to expand south to First Street. "It was a little bit of a shock to see them move up the hill," Wyman said.
Wyman wasn't the only person who was shocked by the news.
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Daugherty's employee Robert Flick said he wasn't surprised when he learned his employer of 12 years was closing. "It was more of a shock," he said. "It's not a fun thing to have this happen."
At age 58, he said he can't retire. He has an 11-year-old son at home, and he can't touch his 401(k) for more than a year.
"It's a sad day for Duluth. ... The customers were more friends than people spending money," Flick said.
"It was a blow when he said they're closing," said customer Colie Campbell after talking with Scott Lundberg on Friday afternoon. "What are we going to do?"
A 41-year patron of the store, Campbell said he is concerned about staff members. "They are losing friends, co-workers, job security," he said. "My loss is a minor inconvenience compared to theirs."
"What the hell are we going to do?" asked Rodney Tryon, who's been shopping at Daugherty's for 27 years. As a maintenance employee of the Voyageur Lakewalk Inn, he said he shops at the store frequently because it's close by and the service is good. "It's going to be tough to replace," he said.
Even a competitor said he's sorry to see the store close. "I'd much rather that Daugherty's would still be there," said Mark Jeronimus, owner of Ace Hardware Downtown.
