BBB Foods Inc. (NYSE: TBBB) — Form 6-K Summary
Filing date: May 22, 2024. Reporting period: First quarter ended March 31, 2024. Results are unaudited, presented in nominal Mexican pesos, and prepared under IFRS unless otherwise stated. The release covers Tiendas 3B, a Mexican grocery hard-discounter, following its February 2024 NYSE IPO.
Business Context and Operating Results
- Opened 94 net new stores in 1Q24, compared with 74 in 1Q23, reaching 2,382 stores.
- Opened one distribution center during the quarter, increasing the total to 15.
- Same-store sales increased 14.8%, versus 19.2% in 1Q23; management attributed the moderation largely to lower inflation.
- Management reiterated its long-term objective of increasing the store base to no less than 12,000 stores.
Key Financial Metrics
| Metric | 1Q24 | 1Q23 | Change |
|---|---|---|---|
| Total revenue | Ps. 12,684 million | Ps. 9,692 million | +30.9% |
| Gross profit | Ps. 2,062 million | Ps. 1,505 million | +37.0% |
| Gross margin | 16.3% | 15.5% | +73 bps |
| Operating profit | Ps. 323 million | Ps. 133 million | +143.6% |
| Operating margin | 2.5% | 1.4% | +110 bps |
| EBITDA | Ps. 626 million | Ps. 396 million | +57.9% |
| EBITDA margin | 4.9% | 4.1% | +84 bps |
| Net loss | Ps. 231 million | Net income of Ps. 59 million | Year-over-year deterioration |
| Operating cash flow | Ps. 802 million | Ps. 588 million | +36.4% |
Cash, Debt, and Liquidity
- Cash and cash equivalents were Ps. 4,293 million at March 31, 2024, compared with Ps. 1,220 million at December 31, 2023 and Ps. 792 million at March 31, 2023.
- The IPO generated Ps. 7,842 million of net proceeds. The Company used Ps. 4,925 million to repay promissory and convertible notes.
- Reported short-term debt was Ps. 951 million and long-term debt was Ps. 102 million at March 31, 2024. Debt with related parties declined to zero from Ps. 4,340 million at year-end 2023.
- Lease liabilities totaled Ps. 6,740 million, comprising Ps. 570 million of current liabilities and Ps. 6,171 million of non-current liabilities.
- The Company reported a net cash position of Ps. 4,293 million in management commentary; this presentation appears to compare cash with financial debt and may exclude lease liabilities.
- Total equity improved to Ps. 3,075 million from negative Ps. 4,635 million at December 31, 2023, principally reflecting the IPO.
Cash Flow and Margins
- Net cash provided by operating activities was Ps. 802 million, supported by the Company’s negative working-capital cycle and high inventory turnover.
- Investing cash outflow was Ps. 365 million, primarily reflecting capital expenditures for new stores and a distribution center.
- Financing cash inflow was Ps. 2,714 million, consisting mainly of IPO proceeds, debt repayments, supplier-finance activity, and lease payments.
- Sales expenses declined to 10.2% of revenue from 10.9%, despite store growth and wage inflation. Administrative expenses increased to 3.5% from 3.4%; excluding IPO-related expenses, management stated that the ratio would have been 3.0%.
Material Changes and Unusual Items
- Reported EBITDA included Ps. 70 million of non-recurring, non-capitalized IPO-related expenses. Adjusted EBITDA would have been Ps. 695 million, representing 75.5% year-over-year growth.
- Non-cash share-based compensation increased to Ps. 129 million from Ps. 98 million.
- Capitalized building lease payments were Ps. 316 million, compared with Ps. 247 million in 1Q23. IFRS 16 treatment means lease-related depreciation and interest are not fully reflected in operating expenses.
- Net financial costs increased to Ps. 469 million from Ps. 68 million, primarily because 1Q23 benefited from a foreign-exchange gain while 1Q24 recorded a Ps. 129 million foreign-exchange loss caused by peso appreciation against U.S.-dollar liabilities and the post-IPO net U.S.-dollar cash position.
- Income tax expense increased to Ps. 85 million from Ps. 6 million, contributing to the 1Q24 net loss.
Outlook, Commentary, and Risks
Management characterized the quarter as a strong start to 2024, citing store expansion, sales growth, improved gross margins, operating efficiencies, and positive operating cash flow. Management believes the IPO proceeds and cash generation provide substantial capacity to execute the expansion plan toward at least 12,000 stores.
The filing provides no formal quantitative revenue, EBITDA, or earnings guidance. Forward-looking statements are subject to risks including competition, execution of store and distribution-center expansion, capital expenditures, financing plans, regulation, industry conditions, inflation and wage pressures, foreign-exchange movements, and other factors that could cause actual results to differ materially. The release also states that forward-looking statements are not guarantees of future performance.
Investor Verification Points
- Reconcile the reported Ps. 4,293 million net cash position with financial debt, supplier-finance obligations, and Ps. 6,740 million of lease liabilities.
- Assess the sustainability of 14.8% same-store sales growth as inflation moderates.
- Monitor execution and funding requirements for the planned expansion to at least 12,000 stores.
- Distinguish reported EBITDA from EBITDA excluding the Ps. 70 million IPO expense and consider the effect of Ps. 129 million of share-based compensation.
- Evaluate foreign-exchange sensitivity, particularly the effect of peso movements on U.S.-dollar liabilities and cash balances.
- Review the Company’s unaudited IFRS financial statements and the reconciliation of non-IFRS EBITDA to assess comparability with other retailers.