BBB Foods Inc. Form 6-K Summary
Filing date: April 25, 2024. The filing presents unaudited IFRS consolidated results for the fourth quarter and fiscal year ended December 31, 2023. Amounts are in nominal Mexican pesos unless otherwise stated. BBB Foods operates the Tiendas 3B grocery hard-discount chain in Mexico and listed on the NYSE in February 2024 under ticker TBBB.
Business Context and Reporting Period
- Tiendas 3B opened 153 net new stores in 4Q23 and 396 during 2023, ending the year with 2,288 stores and 14 distribution centers.
- The business model emphasizes private-label products, limited assortments, high inventory turns, and negative working capital.
- Private-label products represented 46.5% of merchandise sales in 2023, up from 42.8% in 2022.
Financial Results and Key Metrics
| Metric | 4Q23 | Change vs. 4Q22 | FY2023 | Change vs. FY2022 |
|---|---|---|---|---|
| Total revenue | Ps. 12,316 million | +30.8% | Ps. 44,078 million | +35.3% |
| Gross profit | Ps. 2,011 million | +40.6% | Ps. 7,040 million | +42.9% |
| Gross margin | 16.3% | +114 bps | 16.0% | +86 bps |
| Operating profit | Ps. 228 million | +6.2% | Ps. 794 million | +52.6% |
| EBITDA | Ps. 559 million | +32.9% | Ps. 1,883 million | +44.3% |
| EBITDA margin | 4.5% | +7 bps | 4.3% | +27 bps |
| Net income/(loss) | Ps. (97) million | From Ps. 19 million profit | Ps. (306) million | Loss improved 45.8% |
- FY2023 same-store sales increased 17.6%, compared with 21.9% in 2022; 4Q23 same-store sales increased 14.9%.
- FY2023 transactions increased 30.2% to 534 million, while average ticket size increased approximately 4.0% to Ps. 82.5.
- Sales expenses increased 39.4% in 2023 and rose to 10.9% of revenue from 10.6%. Administrative expenses increased 45.7% and rose to 3.1% of revenue from 2.9%.
- Financial costs increased 30.7% to Ps. 1,527 million in 2023. A foreign-exchange gain of Ps. 606 million, primarily from Mexican peso appreciation against the U.S. dollar, partly offset financing costs.
- Cash and cash equivalents were Ps. 1,220 million at December 31, 2023, compared with Ps. 985 million at December 31, 2022.
- Operating cash flow was Ps. 3,140 million, up 48.4%. Investing cash outflow was Ps. 1,779 million, principally for property and equipment supporting new stores and distribution centers. Financing cash outflow was Ps. 1,096 million, principally lease payments.
- Negative working capital was Ps. 4,559 million, or 10.3% of revenue, compared with 9.8% in 2022.
Debt, Liquidity, and Balance Sheet
- At December 31, 2023, reported total debt with related and third parties was Ps. 5,662 million, including Ps. 872 million of pay-in-kind promissory notes and Ps. 4,790 million of convertible notes.
- The Company stated that the pay-in-kind promissory notes and convertible notes were repaid in full using proceeds from the February 2024 IPO. The release contains one apparent typographical reference to “February 2004” in this discussion; other sections identify February 2024.
- The balance sheet reported total liabilities of Ps. 19,599 million, including Ps. 6,244 million of lease liabilities, against total assets of Ps. 14,964 million.
- Reported stockholders’ equity remained negative at Ps. 4,635 million at year-end, although IPO proceeds occurred after the reporting date and the filing does not provide a post-IPO balance sheet.
Material Changes, Outlook, and Unusual Items
- Gross margin improvement reflected supplier negotiations and higher scale, while expense ratios increased because of store expansion, wage inflation, new regional offices, public-company costs, and non-recurring IPO expenses.
- Hurricane Otis had an estimated Ps. 80 million total impact in 2023, including higher cost of sales, sales expenses, and impairment charges affecting Acapulco stores.
- IPO-related expenses totaled Ps. 37 million in 2023, including Ps. 28 million in administrative expenses and Ps. 9 million capitalized as advance payments. Fourth-quarter IPO expenses were Ps. 14 million.
- Capitalized building lease payments were Ps. 1,072 million in 2023 and Ps. 293 million in 4Q23. These amounts are not treated as operating expenses under IFRS 16.
- Management believes Mexico could support no less than 12,000 Tiendas 3B stores and intends to continue investing in stores, distribution centers, and operating capabilities.
- 2024 guidance calls for same-store sales growth in the mid-teens, revenue growth of 28% to 32%, and 380 to 420 new stores.
- Guidance depends on prevailing expectations for the Mexican economy and may change if economic performance deviates from those expectations. The filing does not provide a clear 2024 EBITDA margin target in the guidance table and states that a forward-looking IFRS reconciliation cannot be provided without unreasonable effort.
- Key stated risks include economic conditions, competition, regulation, execution of expansion plans, capital expenditures, financing, labor and wage costs, lease obligations, foreign-exchange movements, and other risks described in the Company’s Form F-1 and forthcoming Form 20-F.
Important Facts for Investors to Verify
- Confirm the effect of the February 2024 IPO on debt repayment, cash balances, and post-IPO stockholders’ equity.
- Assess whether negative working capital and supplier-finance arrangements remain sustainable as store count and revenue grow.
- Monitor gross-margin gains against wage inflation, store-opening costs, distribution-center investments, and lease-related cash obligations.
- Evaluate the normalization of results after the Ps. 80 million Hurricane Otis impact and non-recurring IPO expenses.
- Compare 2024 performance with guidance of 28% to 32% revenue growth, mid-teens same-store sales growth, and 380 to 420 new stores.
- Reconcile the release’s narrative debt figures with the detailed balance sheet and clarify the apparent “February 2004” date error.
- Review the company’s Form F-1 and Form 20-F for detailed risk factors, related-party obligations, supplier-finance arrangements, and lease commitments.