BBB Foods Inc. (Tiendas 3B) — Form 20-F summary
Reporting period: Fiscal year ended December 31, 2023; filed April 30, 2024. This is an annual report, not a standalone 2023 fourth-quarter filing. Financial statements are prepared under IFRS as issued by the IASB. Unless noted otherwise, figures below are in thousands of Mexican pesos (Ps.).
Business context
BBB Foods operates Mexico’s Tiendas 3B hard-discount grocery chain. At year-end 2023, it had 2,288 stores, 14 distribution centers and 21,924 employees. Its limited assortment, low-price model and private-label products serve value-conscious shoppers. Private labels generated 46.5% of 2023 sales, up from 42.8% in 2022.
Financial and operating performance
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total revenue | Ps. 44,078,459 | Ps. 32,580,397 | +35.3% |
| Gross profit / margin | Ps. 7,039,917 / 16.0% | Ps. 4,924,754 / 15.1% | +42.9%; margin +0.9 pp |
| Operating profit / margin | Ps. 793,863 / 1.8% | Ps. 520,269 / 1.6% | +52.6%; margin +0.2 pp |
| Net loss | Ps. (306,153) | Ps. (565,110) | Loss narrowed 45.8% |
| Operating cash flow | Ps. 3,140,349 | Ps. 2,116,335 | +48.4% |
| Cash capital expenditures | Ps. 1,798,019 | Ps. 1,122,877 | +60.1% |
- Merchandise sales increased 35.5%; same-store sales grew 17.6%. Management attributed the sales increase to new stores, higher sales volumes, inflation-related price increases and product-mix changes. The company opened 396 net new stores in 2023.
- Cost of sales was 84.0% of revenue, versus 84.9% in 2022. Sales expenses rose 39.4% and administrative expenses rose 45.7%, outpacing revenue growth; both increased as a share of revenue.
- Net financial costs were Ps. 894,768, including Ps. 1,527,107 of financial costs partly offset by a Ps. 606,270 foreign-exchange gain. The gain reflected peso appreciation against the U.S. dollar and reduced the peso carrying value of dollar-denominated notes.
- Cash and cash equivalents were Ps. 1,220,471 at year-end, versus Ps. 984,976 in 2022. Current assets were Ps. 4,393,160 and current liabilities Ps. 8,951,941; reported negative working capital was Ps. 4,558,781.
- Year-end total liabilities were Ps. 19,598,650, including lease liabilities of Ps. 6,244,222. The company reported negative stockholders’ equity of Ps. 4,634,848, primarily reflecting accumulated losses and accrued note interest.
Material changes, financing and unusual items
- In February 2024, after year-end, the company completed its NYSE IPO at US$17.50 per share and received net proceeds of approximately US$459.0 million (Ps. 7,820,862). Proceeds were used to repay all Promissory Notes and Convertible Notes, approximately US$288.1 million in total; the remainder was intended for other indebtedness and general corporate purposes. The company stated the repayment removed its equity deficit.
- Before repayment, the notes carried annual interest rates of 14%–15%, largely accrued as payment-in-kind interest. Other year-end borrowings included Ps. 744,137 current debt and Ps. 577,318 long-term debt. The company also had supplier-finance arrangements and revolving credit facilities.
- Operating cash flow increased, supported in part by growth in supplier payables. Management identifies negative working capital as an important funding source for expansion and cautions that lower revenue or less favorable supplier payment terms could constrain liquidity.
- Hurricane Otis damaged stores in Acapulco in October 2023. The company recorded Ps. 42,422 of impairment losses, Ps. 7,598 of sales expenses related to theft, debris removal and repairs, and Ps. 30,409 of inventory write-downs. Fifty-one stores were temporarily closed; 12 had reopened by year-end and 43 by April 25, 2024. The company expected the remaining affected stores to reopen by the end of the first half of 2024. Potential insurance recovery of up to Ps. 63,197 had not been recognized because recovery was not considered virtually certain.
Outlook, risks and controls
- Management expects existing cash and other funding sources, including IPO proceeds, to meet anticipated cash needs for at least 12 months, assuming expected organic growth. It plans continued store and distribution-center expansion. The filing gives a 2024 capital-expenditure budget of approximately Ps. 2,425 thousand, including Ps. 1,651 thousand for new stores and Acapulco reopening and Ps. 104 thousand for distribution centers; the stated amounts and scale are unclear relative to reported 2023 expenditures.
- The company describes at least 12,000 additional potential store locations in Mexico, but provides no formal quantitative revenue or earnings guidance. It warns that past growth rates may not continue and that expansion into new regions, leases, permits, supplier capacity and execution could constrain growth.
- Key risks include narrow retail margins and intense competition; inflation, wage and commodity costs; peso-dollar movements; supply-chain and inventory disruption; negative working capital; lease obligations; labor retention and regulation; product safety and recalls; cybersecurity and privacy; Mexican political, economic and security conditions; and natural disasters.
- Management concluded disclosure controls and procedures were ineffective as of December 31, 2023. The company disclosed material weaknesses concerning reliance on outside advisers for IFRS reporting and segregation of duties in its ERP system. It aims to remediate them during 2024; remediation was not yet complete at the report date.
- The auditor issued an unqualified opinion on the IFRS financial statements. Lease accounting was identified as a critical audit matter, involving judgments about lease terms, renewal options and incremental borrowing rates.
Most important facts for investors to verify
- Post-IPO cash, total debt and liquidity after repayment of the notes, including the intended use of remaining IPO proceeds.
- Whether the 2024 capital-expenditure budget amounts are correctly stated and how they compare with the expansion plan.
- Progress in remediating the disclosed internal-control material weaknesses and the effectiveness of controls in subsequent reporting.
- Acapulco store reopening progress, actual insurance recoveries and any continuing effect on expansion or results.
- Sustainability of same-store sales growth, gross-margin improvement and cash generation as store openings accelerate and supplier-payment terms evolve.