Kmart Buys Up a Dozen Department Stores in Czechoslovakia
“Pozor, Kmart shoppers!”
Russians are eating Big Macs, Hungarians are reading by General Electric light bulbs and soon Czechoslovaks in Prague and other parts of the country will be shopping “blue-light specials” as the Americanization of post-communist Eastern Europe gathers steam.
Kmart, the Michigan-based discount retailer, announced Thursday that it is buying majority interest in a dozen big department stores in Czechoslovakia. It said it will give its acquisitions the look and merchandising approach of its 2,500 stores in this country, where budget-minded shoppers can pick up tape players for as little as $9.99 and tennis shoes for $2.99 a pair.
Purchase of the Czechoslovak stores and conversion costs will run about $100 million over three years, said Joseph E. Antonini, Kmart’s chief executive. He did not say how the firm will adapt the typical four-story, ornate retail buildings of the region to the wide-open, single-floor style of Kmart stores in the United States.
Kmart will be the largest U.S. retail investor in Czechoslovakia, said Tomas Jezek, the country’s privatization minister.
Two other American firms have bigger investments there--Philip Morris with $413 million and Dow Chemical with $250 million. Other big U.S. firms have also made large investments in Czechoslovakia, where such quintessential products as American Standard toilets, Procter & Gamble soaps and the ubiquitous Coca-Cola are now sold.
Total American capital in the country since the Communists were ousted in 1989 is about $1.4 billion, a U.S. Embassy statement said. American money--28% of all foreign capital--is second only to German investments of about $2.5 billion, or 50% of all foreign capital, it added.
Jezek, who appeared with Antonini as the Kmart official made the announcement, said that the first wave of privatization in his country--selling or converting state-owned enterprises to private hands--is nearly complete. All told, 1,446 large companies and 20,000 small firms have been placed in private hands or soon will be, he said, with 180 foreign investors involved.
Jezek was visiting Washington this week to thank the U.S. government, on behalf of Czechoslovak President Vaclav Havel, for what Havel called “the prompt and effective technical assistance” in free enterprise and open markets given to his country by the State Department’s Agency for International Development.
AID teams have helped advise the Czechoslovak government, among other things, in setting prices on firms being sold to private interests. Havel said in a letter to Secretary of State James A. Baker III that continued AID help is “essential . . . during the critical year that lies ahead” as a second wave of privatization begins.
Czechoslovakia’s approach, including its “coupon system” in which every adult member of the population is eligible to receive stock in the firms being sold, is of interest to Russia, and perhaps Ukraine. The Russians see the model of Czechoslovakia, which was more thoroughly communized, as more appropriate to their situation than those of Poland or Hungary, according to Russian officials and legislators.
Antonini said that Kmart already has bought the huge MAJ department store in the heart of Prague and will buy another 11 stores across the country. The stores will retain their local names and add a Kmart logo later on.
This global expansion, Antonini said, comes as Kmart’s $3-billion store-modernization program in the United States, scheduled to be completed in 1995, is producing results “exceeding our expectations.” As it begins to “saturate” the U.S. market, he said, Kmart is looking to Eastern Europe for new growth opportunities.
The discount giant will modernize and refurbish the Czechoslovakian outlets, Antonini said, and bring its retailing expertise, technology and modern distribution methods to the stores. It will introduce American products there and also bring Czechoslovakian products into this country.
Based on market surveys, Kmart anticipates significant demand in Czechoslovakia for American-made wearing apparel, do-it-yourself building supplies, auto repair items, sporting goods and household goods.
It will bring to its American stores such Czechoslovak products as glass and cooking wares, Christmas ornaments and textiles, Antonini said.
