MEXICO CITY -- Kmart Corp., the United States' No. 3 retailer, Monday announced a tentative agreement with retail-developer El Puerto de Liverpool to jointly build and operate combination grocery and general-merchandise stores in Mexico.
'With more than 80 million people in Mexico, a rapidly developing economy and a stable political environment, we welcome this joint venture opportunity,' Kmart Chairman Joseph Antonini said.
In a joint statement, Kmart and El Puerto said they planned to pattern their new stores after Super Kmart Center prototypes in the United States. Each such U.S. store employs 200 to 300 people, Kmart said.
The giant retailer and El Puerto announced that each company planned to invest equal amounts of money into the new operation, although they had not yet finalized how much to collectively put into the venture.
Joseph Thomas, Kmart's executive vice president of international operations, said negotiations on such matters remained ongoing.
Thomas also said Monday's agreement remained subject to approval from both companies' boards of directors, as well as from applicable government regulators.
But he said Kmart had 'every intention of creating a retail infrastructure in Mexico (through the joint venture) that will leverage the expertise and retail leadership of both of our companies.'
El Puerto Chairman Enrique Bremond added that his company planned to use the new alliance to 'introduce a modern, high-quality discount retail format that will offer unprecedented value to the consumers of Mexico.'
The Kmart-El Puerto deal comes just days after President Bush and his Mexican and Canadian counterparts signed the North American Free Trade Agreement, opening up trade channels between the three nations.
Kmart spokeswoman Shawn McGee Kahle said that if all goes according to plan, the joint venture expects to cut the ribbon on its first new store late next year.
Speaking from Kmart headquarters in Troy, Mich., Kahle said the U.S. retailing giant had been interested in the Mexican market for some time.
She said that from 1980 to 1987, Kmart had been involved in a Mexican retail venture called Astra S.A.
But Kahle said her company ultimately divested itself of the venture at 'a time when economic and political change was going on in Mexico... that negatively affected cash flow and earnings.'
Kmart's existing international operations include 127 stores in Canada, 13 in Czechoslovakia and a 22-percent equity in Coles Myer Ltd., Australia's largest retailer.
El Puerto is a major Mexican retail developer, and owns 17 full-line department stores south of the border.