Business Context and Reporting Period
Company: BBB Foods Inc. (Tiendas 3B), a leading grocery hard discounter in Mexico (NYSE: TBBB).
Reporting Period: Second Quarter 2024 (2Q24) ended June 30, 2024.
Filing Date: August 21, 2024.
Context: The Company reported strong sales growth and cash flow generation following its February 2024 IPO. The business model focuses on rapid store expansion and disciplined execution.
Key Financial Metrics
| Metric | 2Q24 (Ps. Millions) | 2Q23 (Ps. Millions) | YoY Change |
|---|---|---|---|
| Total Revenue | 13,574 | 10,646 | +27.5% |
| Gross Profit | 2,272 | 1,718 | +32.3% |
| Gross Margin | 16.7% | 16.1% | +60 bps |
| EBITDA | 689 | 481 | +43.2% |
| EBITDA Margin | 5.1% | 4.5% | +56 bps |
| Net Profit | 331 | 71 | +366.2% |
| Net Profit Margin | 2.4% | 0.7% | +170 bps |
Liquidity and Cash Flow (1H24):
- Cash & Equivalents: Ps. 1,245 million (as of June 30, 2024).
- Short-term USD Deposits: Ps. 2,774 million.
- Operating Cash Flow (1H24): Ps. 1,256 million (+25.0% YoY).
- Investing Cash Flow (1H24): Ps. (3,713) million, driven by store expansion and short-term deposits.
Material Changes vs. Prior Period
- Store Expansion: Opened 121 net new stores in 2Q24, reaching a total of 2,503 stores (vs. 77 new stores in 2Q23). One new distribution center was also opened.
- Sales Growth: Same Store Sales (SSS) grew 10.7%, outpacing the industry average of 3.5% but slowing from 17.2% in 2Q23 due to calendar effects (Easter timing) and weather.
- Profitability: Net profit surged 366.2% YoY, driven by higher gross margins, reduced financial costs (full repayment of promissory/convertible notes in 1Q24), and a Ps. 304 million foreign exchange gain.
- Expense Management: Sales expenses as a % of revenue decreased by 47 bps to 10.4% despite wage inflation, due to operational leverage. Administrative expenses increased by 45 bps to 3.6% due to expansion into new regions and public company costs.
Guidance, Outlook, and Risks
Management Commentary: The Chairman and CEO stated the Company is on track to deliver guidance shared in April 2024. The business model remains unchanged, focusing on consistent improvement, disciplined execution, and rapid expansion.
Outlook: Management expects continued value creation through store expansion and negative working capital cycles.
Risks and Contingencies:
- Forward-Looking Statements: Actual results may differ due to market trends, competition, and regulatory changes.
- Operational Risks: SSS growth was impacted by weather and government transfer timing related to elections.
- Non-IFRS Measures: EBITDA is a non-IFRS measure and may not be comparable to other companies.
Investor Verification Checklist
- Store Count Accuracy: Verify the total store count of 2,503 and the net addition of 121 stores in 2Q24.
- Cash Position: Confirm the liquidity position of Ps. 1,245 million in cash equivalents plus Ps. 2,774 million in short-term USD deposits.
- Debt Repayment: Verify the full repayment of promissory and convertible notes in 1Q24, which significantly reduced financial costs.
- EBITDA Reconciliation: Review the reconciliation of Net Profit to EBITDA, noting the inclusion of share-based payment expenses (Ps. 141 million in 2Q24).
- Exchange Rate Impact: Assess the sustainability of the Ps. 304 million foreign exchange gain driven by peso depreciation.