BBB Foods Q2 2025 Earnings Call Transcript

Quartr
Provided by Quartr
August 12, 2025

Key Takeaways

  • Positive Sentiment: Accelerating store network expansion: In Q2, Tiendas Tresbe opened 142 net new stores, bringing its total to 3,031, and plans four new distribution-center-backed regions in H2 to support its accelerating expansion.
  • Positive Sentiment: Robust revenue and same-store sales growth: Total revenues rose 38.3% to MXN 18.8 billion and same-store sales climbed 17.7% year over year, outpacing other listed grocery retailers in Mexico.
  • Negative Sentiment: Margin compression despite higher EBITDA: EBITDA increased 22.5% to MXN 844 million, but margin contracted 58 bps to 4.5% due to upfront logistics costs for new regions and noncash share-based payment expenses; EBITDA ex–share-based pay grew 32%.
  • Positive Sentiment: Strong cash generation: Operating cash flow jumped 56% to MXN 1.9 billion, leaving a net local cash position of MXN 1.1 billion and US$150 million from the IPO, fully self-funding its growth.
AI Generated. May Contain Errors.
Earnings Conference Call
BBB Foods Q2 2025
00:00 / 00:00

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Operator

Good morning, everyone. My name is Leonor, and I will be your conference operator. Welcome to Tiendas Tresbe Second Quarter twenty twenty five Conference Call. All lines have been placed on mute to prevent any background noise. There will be a question and answer session after the speakers' remarks, and instructions will be given at that time.

Operator

Please ensure that your full name is displayed correctly on Zoom. If not, please take a moment to edit your display name. Also, please note that this call is for investors and analysts only. Questions from the media will not be taken nor should the call be reported on. Any forward looking statements made during this conference call are based on information that is currently available to us.

Operator

Today, we are joined by Tiena Stresves' Chairman and Chief Executive Officer, Anthony Hatum and Chief Financial Officer, Eduardo Pizzuto. I will now turn the call over to Anthony. Please go ahead.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Good morning, everyone, and thank you for joining Tienda Stresbe's second quarter twenty twenty five earnings call. I will begin with a review of our operating results for the quarter and will be followed by our CFO, Eduardo Pizzuto, who will provide an overview of our financial performance. We will conclude with a q and a session to answer any questions you may have. We continue to add breadth and depth to our management team. Today, I would like to take the opportunity to welcome to the team two new members, Amparo Martinez, who joins us as general counsel, and Joaquin Lei, who will head investor relations.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Welcome. We delivered another quarter of exceptional growth, far outperforming other listed grocery retailers in Mexico due to our unrivaled value proposition. In q two, we opened 142 net new stores for a total of 3,031 stores. Our store opening rate is accelerating. Together with this acceleration of store openings, we have invested in four new regions that we will open in the second half of this year.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

That means four new distribution centers, logistics, and all the personnel required to run it and its operations. Same store sales grew by 17.7% versus 10.7% in the second quarter of last year. Total revenues increased by 38.3% to reach 18,800,000,000.0 pesos. EBITDA increased by 22.5 to reach 844,000,000 pesos. If we exclude our share based payment expense, which is noncash, then our EBITDA would have increased by 32%.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

During this first semester, cash flow generated by operating activities reached 1,900,000,000.0 pesos or a 56% increase versus twenty twenty four. We ended with a net local cash position of approximately 1,100,000,000.0 pesos, and we have $150,000,000 cash position mostly mostly from funds we raised at the IPO. Let's turn to operational performance. We are increasing the number and the rate of store openings. In the first six months of this year, we opened 259 stores compared to the 215 stores we opened in the first half of the previous year.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

If we look at this on a twelve month basis, we opened 528 stores versus 460 stores in the previous twelve months. Our revenue growth remains rapid. We continue to be one of the fastest growing retailers in Mexico and possibly globally. Total revenues reached 18,800,000,000.0 pesos, an increase of 38% year over year, with with very strong same store sales growth rates of 17.7%. Same store sales growth continues to be driven by continuous improvements in our value proposition to our customers.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

And we are seeing an increasing number of tickets as well as an increasing number of items per ticket. When compared to, we appear to be increasing the gap in the growth rate of same store sales. We see in the second quarter a larger gap of 15 percentage points. I will will now pass the mic to Eduardo.

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

Thank you, Anthony. Good morning, everyone. Sales expenses as a percentage of revenue slightly increased from from 10.4% to 10.5%. This increase had two main drivers. Due to our accelerating rate of store openings, we see higher store personnel and D and A expense.

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

This is normal. 45% of our total store base was opened during the last three years. As North store vintages mature, sales expenses naturally decrease as a percentage of revenue. This is what happened with our older vintages. Moving on to admin expenses.

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

Admin expenses as a percentage of revenue increased by 31 basis points from 3.6% to 3.9%. This includes recognizing an incremental $111,000,000 in non cash share based payment expenses. To recap our share based compensation plans, it consists of a legacy plans of twenty years that terminated at IPO and a new standard plan that started at IPO. In addition, this June, our board granted a share based awards tied to our IPO. This award announcing our IPO and follow on documentation does not change our fully diluted share count.

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

It was already factored in. It just results now in an accounting recognition of a non cash expenses upon granting. For those investors who prefer to look at this non cash expense, we have made it easy to review by providing a breakdown in the appendix of our earnings release. We encourage you to read it. Moving on to EBITDA.

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

EBITDA reached MXN844 million, a 22.5% increase year over year. EBITDA margin was 4.5% down 58 basis points. The margin impact mainly comes from higher logistics costs associated with our opening of four new regions in the second half of this year, non cash share based payment expenses and the acceleration of our store opening rate. If we exclude non cash share based payments, then the EBITDA margin would have been 5.8%, down 27 basis points and our EBITDA would have increased 32% year over year. I would like to anticipate the very normal question about operating leverage.

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

It is real, but hard to see when viewed on a consolidated basis that given the increasing rate of store openings. But when we look at it on a store vintage basis, we see it clearly. And therefore, we're confident that when our store opening rates flatten, it will become very evident. However, we choose to go for the higher growth rates as this is what is going to maximize shareholder value creation. Finally, our working capital.

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

Our business is a business model that generates significant negative working capital. And in turn, we generate significant cash flow from the changes in negative working capital. We can see for example that in June 24, we had MXN 5,000,000,000 compared to a negative working capital of MXN 7,000,000,000 in the 2025 excluding IPO proceeds. We are roughly at 10.5% of total revenue LTM excluding IPO proceeds. Our accelerated growth continues to be self funded.

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

I will now turn the call back to Anthony for final remarks.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

We are exceeding our targets. We are accelerating the rate of store openings. This, along with related investments, affects our consolidated margin. But across the board, and especially at the vintage level, we continue to see the benefits of and operating leverage. Sales and same store sales are booming, reflecting our unrivaled value proposition, and we are funding all this growth and investment internally from increasing cash flows.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

We continue to invest to sustain accelerating growth because by doing so, we are creating additional shareholder value, and we are increasing our lead versus the rest of the market. Ours is a winning business model. We will keep on executing, and we will continue to do it just faster and better. We will now move to start the q and a session. Please go ahead, operator.

Operator

Thank you. We will now conduct a q and a session with Anthony Hatom and Eduardo Pizzuto. If you would like to ask a question, please press the raise your hand button located at the bottom of the screen. If you are connected via telephone, please dial 9. We remind you that all lines have been placed on mute.

Operator

Our first question comes from the line of Bob Ford. Please state your company name and ask your question.

Robert Ford Aguilar
Robert Ford Aguilar
Senior Analyst at Bank of America Merrill Lynch

Hey, good day everybody. Bob Ford, Bank of America Merrill Lynch. Anthony, Eduardo, congratulations on the quarter. What do you attribute the acceleration in same store sales to? And how should we think about ticket traffic, items per basket trends in the quarter, the inflation rates in your assortments and and maybe the momentum as you come out of, you know, the shift of Easter into July and and early August?

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Hi, Bob. Many parts to your question, so I'll try to segregate it. I think fundamentally, it's an amazing value proposition that we keep on improving in everything we offer our customers. And that has not changed at all since inception. We continue to improve on our products, whether it's quality or price or packaging or the assortment.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

And, fundamentally, that's what's driving more traffic into our stores and for existing customers, enticing them to pick up one more item. And in terms of where is that same store sales coming from from a more numerical point of view, we're seeing a notable increase in number of tickets. We are seeing a real increase in the ticket size. And when we look at it in more detail, part of it is number of items that you pick up. And, also, the mix has changed and made the ticket a little bit bigger.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

And, of course, we always look at inflation, but in our case, it's it's a minimal part of the ticket increase. In fact, you know, I might even say that internally, we have deflation of prices. Did I cover all parts of the question?

Robert Ford Aguilar
Robert Ford Aguilar
Senior Analyst at Bank of America Merrill Lynch

No. I I think you did. And and I was just curious. If you look at the your meat and produce pilots, I think they're creating a lot of excitement. You know, how are those developing, and to what extent?

Robert Ford Aguilar
Robert Ford Aguilar
Senior Analyst at Bank of America Merrill Lynch

You know, just scaling that having an impact, if at all, and how should we think about it moving forward?

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Look. We're we're cautiously optimistic, and we're fairly conservative when we look at it. And keep in mind that this is still at a test level. So by no means is it impacting sales the sales numbers that you see today. And even I believe if we never introduced fresh fruits, vegetables, and meats in the future, you would still see significant and notable same store sales growth.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Having said that, there's absolutely no doubt that when you do introduce a new category such as meat or vegetables, you are going to see automatically an increase in the tick. Coming back to the test results, I would be I would say cautiously optimistic. Again, we're very conservative when it comes to rolling out a new category. We wanted not only to to work on the top line, but to make sure that everything behind is working perfectly, that our logistics are efficient, that our sourcing is efficient, that we can scale without problems. Keep in mind that this is a company that's been growing now for many years at 30% plus with no hiccups.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

And I think part of that is due to the fact that, you know, we're cautious and optimistic in how we do things. And we'd like to make sure that things are running well before we scale them up.

Robert Ford Aguilar
Robert Ford Aguilar
Senior Analyst at Bank of America Merrill Lynch

Makes sense. Thank you so much. And, again, congratulations on the quarter.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Thanks.

Operator

Next question comes from the line of Andrew Rubin. Please state your company name before you ask your question.

Andrew Ruben
Andrew Ruben
Equity Research at Morgan Stanley

Hi, Andrew Rubin at Morgan Stanley. Thanks for for all the color so far. You you mentioned the four new regional openings. It's it's pretty sizable. So I'm curious about some of the opening and ramp up expenses.

Andrew Ruben
Andrew Ruben
Equity Research at Morgan Stanley

You mentioned logistics, but when we think about maybe the marketing to build the brand, the hiring, is there anything different in terms of the intensity for new regions versus existing stores or kind of your existing regions? And then when we think about the ramp up period, should we consider kind of similar or or longer? Just really any implications given that you have the four plan for the back half. Thank you again.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Let me take the first part of this question, and then I'll let Eduardo comment on ramp ups and costs. I I think there is absolutely no change in how we've been doing things since inception. We stretch. We don't leap. And, therefore, when we do open a new region, and as you know, a region is a distribution center together with all associated stores and all the functional areas to support these stores running as an autonomous mini company, if you want to think of it that way, we tend to open that new region next to an existing region.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

So by doing that, we have mitigated any risk of branding and name recognition on the contrary when we do open it. People already know who we are, and we shorten the ramp up of this new region. It's not starting from scratch. It inherits a number of stores from existing regions. And, typically, the stores that get transferred are closer to the new region, so you get another benefit, which is more efficient logistics.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

You've compacted the distances. Of course, this region doesn't open with all the stores it can can run and, you know, typically, a region can run up to a 150 stores, but say it opens with 40 to 60 stores. And then it as it adds stores, then it becomes efficient. So, basically, we're talking about going from this forty, sixty stores at at start to what we call a cruising speed at a 150 stores where we think we've reached an optimal point in terms of running a region. I don't think we've seen any change in the time of ramp up, and I don't think that we've we've seen any change in how we operate it.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

So it's all been very smooth. It just happens that this year, the four new regions are more lumped together in terms of when we open them, and that happens to be in the second half of this year. Eduardo, do you wanna add something to this?

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

Yeah. I I would just add that, Andrew, for for for reference, yes, the the additional expenses on this, it's mainly on on on additional personnel, transportation and training for all these people that are going to be managing these four new regions. But then in terms of the ramp up, really no major changes from what you've seen in the past. The only thing that I would add is that adding more regions for us, it's it's it's a great thing because at the end, we become much more efficient. As Anthony mentioned, we compacted distances between the DC and the and the stores.

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

And in addition to that, we also gained one more new real estate team, which positions us better for for our continuous expansion. So all in all, good good things for the the rest of the year in terms of these four new regions.

Andrew Ruben
Andrew Ruben
Equity Research at Morgan Stanley

Alright. Thank you both for the color. We'll look forward to it.

Operator

Our next question comes from the line of Joseph Giordano. Please state your company name and ask your question.

Joseph Giordano
Joseph Giordano
Equity Research Analyst at JP Morgan

Hello. Good afternoon, Andrew. Good afternoon, Anthony and Eduardo. Thanks for taking my question. I would like to explore, two things here.

Joseph Giordano
Joseph Giordano
Equity Research Analyst at JP Morgan

So first, on the top line, I mean, I would like to understand a little bit, like, the evolution of the private label here. So you mentioned you have like larger baskets or more items. So to understand here how the penetration of private label is evolving into this first half of the year and if the value proposition is really like making a big difference here when it comes to same store acceleration versus the market. The second question is more technical one, concerning leases. So if we look at the total leases, not just the rental leases, it was a little bit higher than what we saw last quarter.

Joseph Giordano
Joseph Giordano
Equity Research Analyst at JP Morgan

So I'd like to understand a little bit like how the refrigeration equipment and potentially like those new DCs are actually affecting that and what could be the recurring level because we understand that maybe we have some higher upfront lease payments when we have those new contracts coming. Thank you very much.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Thanks, Joe. In terms of private label development, you know, it's been this is our bread and butter. We are continuously improving the portfolio of private labels and all the other products that we sell, and it's a dynamic process. What you've seen between, let's say, 2023 and 2024 was a major increase in private label penetration, and I wouldn't be surprised that this trend continues in 2025. We will typically give you the number in q four of this year as to where what we reached in terms of PL penetration.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

But no doubt, it's a main driver of an increase in same store sales because, fundamentally, what you're doing is you're just giving more for your money and then improving private label. It's as simple as that, really. Eduardo, do you want to give some color on leases?

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

Joe, you broke up a little bit. Can you repeat that your second question, please?

Joseph Giordano
Joseph Giordano
Equity Research Analyst at JP Morgan

Yes, yes. When we look at like the total lease expenses, so take the interest and lease payments, the level was a notch higher than everyone was expecting this quarter. I would attribute that to refrigeration since we have the four new DCs, but I would like to understand like if you have like any kind of upfront payments to understand like where this expense should stabilize going forward?

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

So okay. Thank you. Yes. It did went up a little bit. It has to do with actually more leases coming from from growth of stores, equipment at the stores and also the future new regions, which is we're equipping them with cold rooms and frozen rooms as well.

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

So it's the combination of that mix that increase in leases, Joe.

Joseph Giordano
Joseph Giordano
Equity Research Analyst at JP Morgan

Is there any kind of upfront payment, Eduardo, here, like to understand, like, if the select the new level?

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

No. No. No upfront payments.

Joseph Giordano
Joseph Giordano
Equity Research Analyst at JP Morgan

All right.

Operator

Our next question comes from the line of Alvaro Garcia. Please state your company name and ask your question.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Alvaro, you appear to be on mute.

Alvaro Garcia
Associate Partner at BTG Pactual

You go. Can you hear me there?

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

Yeah. We can.

Alvaro Garcia
Associate Partner at BTG Pactual

Yeah. Sorry about that. Alora Garcia from Pactual. I, couple questions. Two questions.

Alvaro Garcia
Associate Partner at BTG Pactual

One on on, the equity incentive plan, the 2024 equity incentive plan. We saw that in 02/2025, you've you've increased the number of both RSUs and options related to the 2024 plan. And I was wondering if that was performance specific or what drove that increase, into two q, and maybe if you have some sort of, I know you it's difficult to give guidance, but what what a a full year '24 number might look like. And then I'll ask my second question afterwards.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Yeah. We we typically would prefer to leave all of this till the end of the year, but sometimes there are events like hiring key personnel that require you to give options or RSU midstream. I wouldn't think that this is that this would be more the exception than the rule. And in terms of guidance for the year, all I can say is that we're well within market parameters for what you would expect a high growth company to be distributing for a total year in terms of awards that are equity linked.

Alvaro Garcia
Associate Partner at BTG Pactual

Cool. Thank you. And then my second question is on on sales. You know, my sense, sort of speaking to people on the ground, is that across income cohorts, the brand is really resonating with the higher income segments. And I was wondering if you're seeing some of that in the data.

Alvaro Garcia
Associate Partner at BTG Pactual

I know you you I mean, we've you've discussed the higher ticket and the drivers behind that ticket, but I was wondering if if there was a comment to be had on on the higher income cohorts driving performance at Tresbe at the moment. Maybe a comment on GEMA outperforming other private label. That's my question. Thank you.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Yes and no. Let me let me say that that that the stores that we have as a percentage of total stores that are in, you know, in neighborhoods with higher economic power remain relatively a smaller segment of our total stores. But there's no doubt that, you know, the higher the purchasing power, the more you can buy. And therefore, you know, you see typically a a little bit higher ticket sizes, more frequency of purchase. And at the end of the day, you know, we've, you know, we've seen it also.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

You see it at BIM, where BIM is present, today in all sorts of neighborhoods. So they you know, anybody who's looking for value for money, irrespective of social economic status is gonna be attracted to our store. And, you know, our criteria for opening stores, it does not you know, there's no limit. I mean, as long as we have clients and we think that we will find a client, we will open a store. And, yeah, it's been it it's been quite successful in all social economic levels in which we've operated.

Alvaro Garcia
Associate Partner at BTG Pactual

It's very clear. Thank you very much, Anthony.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Thank you.

Operator

Our next question comes from the line of Alejandro Fuchs. Please state your company name and ask your question.

Alejandro Fuchs
VP - Equity Research & Head - Mexican Office at Itaú BBA.

Hola, Anthony, Eduardo. Alejandro Fuchs from Itau BBA. Thank you for those paper question, and congratulations on the results. I have two very brief ones, if I may. The first one is in terms of competition.

Alejandro Fuchs
VP - Equity Research & Head - Mexican Office at Itaú BBA.

Right? You guys have been outperforming the market quite consistently. Wanted to see if you see anything different in terms of competitors reacting to this, let's say, or you expect anything different for the next second half of the year? That'll be the first one. And then the second one on the new regions that you're entering, wanted to understand if this is North or South Of Mexico and and and if you expect, you know, competitive dynamics and and performance of the stores to be similar to the ones that you already have, maybe more towards the center of the country? Thank you.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Hi. In terms of competition, we have seen no real change in the environment. The market in Mexico has always been highly competitive, and that's a good thing. And it's good for the consumer at the end of the day that, you know, it pushes us to always try to offer them more for their money. But grand at a granular level, I see no no change in the die in the dynamics of the environment or the competitive level that we've seen in the last two quarters.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

It seems to be more of the same. In terms of seeing a change as we enter new geographical areas or we expand from where we are outwards, because remember, we're always expanding by stretching as opposed to jumping to a new area where we have zero presence. Again, it's been very consistent in terms of buying habits. And, fundamentally, when we think about it at more detail, we are selling basic goods, things that everybody pretty much consumes irrespective of geography and almost irrespective of social economic level. And, you know, the ramp ups of our stores, our client behaviors, our client reactions have all been very consistent.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

You know, I would say, you know, at an extreme, possibly when one day we reach The US border, we might see some changes in purchasing behavior just because tastes will probably change as we get closer to The US. But, you know, for the foreseeable future, it remains stable and predictable.

Alejandro Fuchs
VP - Equity Research & Head - Mexican Office at Itaú BBA.

Super clear. Thank you, Anthony.

Operator

Next question comes from the line of Irma

Analyst

Yes. Thanks for taking my question. I just wanted to touch upon the gross margin pressure, which I think was largely expected given the branching out into new regions. But I was wondering if you could just help us think through a little bit of how we should think about the ramp up of the dilution into the back half of those expenses that you've laid on in anticipation of this build out this quarter, if it's correct to think that we should relatively swiftly, as you laid out, as you grow the store base at the rate that you're growing, I should think that relatively quickly you grow into those new expenses that you've layered on. And the second question I had, if I may, is if you could just comment a little bit about the mature store same store sales growth, sort of what you're observing there in terms of sort of just magnitude because it's obviously a little bit hard to parse it out from your Sims of sales, which obviously still is also seeing the benefits of stores that continue to ramp up the maturation curve? Thank you.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Hi, Irma. Let me start with your last question, which is same store sales growth. Well, there there's no doubt that, you know, given that we have a large number of new stores when you think about it, In the last three years, we opened more than 40% of our stores, that that would sort of bias the same store sales numbers upwards. But I can also tell everybody that even when we look at our oldest vintages, stores that are twenty years old, they're still growing extremely healthy, much better than inflation, posting a very solid same store sales growth. And, fundamentally, what drives that again is that, you know, the portfolio of products that we sell across all our stores has been continuously improving.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

And so, you know, in that very old store, the customer that comes in today sees something that is significantly better than what they used to see five years ago, and that drives in more purchase from that client and possibly even more clients that we were not reaching before. On the matter of margin. Right? I I can say that our commercial margin is very healthy. And that, you know, as Eduardo had mentioned, the the decrease in in margin that we're seeing is driven by that acceleration in store openings and the expenses that it generates.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

And, of course, you have to pay upfront for all these expenses before you see the sales materialize. And as you said correctly, eventually, you achieve these sales, and this expense gets diluted. But here's the perverse thing. You know, the faster we accelerate, the more we have these expenses even though we're creating tremendous value for the shareholder. And at the end of the day, we've chosen to go that route.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

We'll try to accelerate our growth rates and create tremendous value for the shareholder even though optically, you know, on a consolidated basis, you're gonna see a margin that is possibly not growing as fast as you want. But I think it's very worthwhile because at the end of the day, what's important is for us to create more value and also to put more distance between us and the rest of the market.

Analyst

It's very helpful. May I just follow-up? If I do the math sort of of the stores that are in year four, five of your entire store base, so much closer to, I guess, sort of the matured margin, if I may say so, That percentage is actually up a little bit year over year, just you're obviously accelerating at the margin, but it's also a much larger store base and there's like past cohorts continuing to mature. So I was just wondering if why that wouldn't already sort of drive some benefits in terms of dilution of the selling expense. At least I understand that G and A also is seeing some upgrades that you're making to internal structures, and that's well understood already from last quarters.

Analyst

But downselling, was just a little bit curious about that.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Yeah. I I wouldn't see much into that more than you know, the fact is that when you do accelerate, you're gonna get that expense upfront. Take the extreme key case. Of course, if we if we reduce our store opening rate to zero, you will immediately see a pop in margin and in EBITDA. But, of course, we're not gonna do that.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

We will then we're gonna continue to and open as many stores, as many healthy stores as we can because that every store we open that is successful is value accretive. But I don't know, Eduardo, if you want to add some more color to this exactly as to, you know, our four, five year cohorts are doing versus and how much they represent of the total number of stores.

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

Irma, are you there?

Analyst

Yeah. I'm here.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Okay. Yeah. We're here. Sorry. We lost you for a second. Yep.

Analyst

Thanks. I think we can take your tab afterwards. Thank you.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Yeah.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

No problem, Irma. We'll follow-up. Eduardo, we're not hearing your mic. Operator, please go ahead with the next question.

Operator

Our next question comes from the line of Hector Mayer. Please state your company name and ask your question.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Hector, we're not hearing you. At least I'm not

Héctor Maya
Equity Research Analyst at Scotiabank

Can you hear me now?

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

Yes. Yes. Absolutely. Yeah. We can.

Héctor Maya
Equity Research Analyst at Scotiabank

Yeah. Thank you very much. Hi, Anthony, Eduardo. Always a pleasure and congrats on the results. Just wondering if you see that the same store sales performance could be sustainable at these levels during the 2025 or if you are having any signs of moderation, anything that concerns you?

Héctor Maya
Equity Research Analyst at Scotiabank

And, also, even with the further opening acceleration and level of acceptance that you are seeing from consumers, Still, I believe that there are lots of people that maybe are not yet familiar with the. So just wanted to understand, is there any point in the future in which you would be open to allocate a budget for marketing to create more awareness for the brand? Thank you.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Hector, you're asking extremely tough questions. Hard. Same store let's start with same store sales, expectations going forward. And I'm not gonna answer this directly, but I'm gonna tell you that we, you know, we don't see anything right now that would say that this would flatten out or decrease. But at the same time, I can't tell you if it's going to be 17% next quarter or 16 or 15.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

But let me just say that it's been consistently healthy, and I do expect it to continue to be healthy for the next quarter. In terms of spending on marketing, again, a very tough call. I think our best marketing has been word-of-mouth. And, you know, even when you think about it, the we have great marketing coming from social media, which is not generated by us. It's just, you know, another way, a modern way of doing word-of-mouth.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

And I think that that has driven a lot of new customers to our stores. In terms of formally spending on marketing, you know, we've done so in the past in many tests, and we don't exclude it from the future. But what we found to be extremely challenging is to link this marketing dollar spent to the increase in sales. We're getting the increase in sales, but we cannot tell you that it was the marketing dollar. And, fundamentally, I believe that it's the value proposition improvement by itself that drives the vast majority of the increase.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

And that, of course, in turn generates the word-of-mouth, and that in turns creates that virtuous circle of, you know, increasing same store sales. But, you know, bottom line, we don't exclude it, but it has its challenges.

Héctor Maya
Equity Research Analyst at Scotiabank

Excellent. Very clear. Thank you very much, Anthony, Eduardo.

Operator

Next question comes from the line of Ulises Aravotte. Please state your company name before you ask your question.

Ulises Argote Bolio
Executive Director - Head of Mexico Equity Research, Strategist & Mexico Consumer Analyst at Santander

Anthony Elordo. Thanks for the space for questions. Ulises Argote from Santander. A couple of questions from my side. So the first one on the supply chain side of the equation.

Ulises Argote Bolio
Executive Director - Head of Mexico Equity Research, Strategist & Mexico Consumer Analyst at Santander

As you continue to expand here further through the country and at this faster pace, are your private label suppliers mostly keeping up with this expansion? Or are you bringing new suppliers on board? Just trying to get a sense of how things are evolving in this site. And the second one, I think it's kind of a bit obvious, but is there space to revise the store opening guidance you provided at the start of the year given the current run rate of store openings? Thank you very much.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Hi, Ulises. I'll start with the last one. We're not revising our our guidance. We usually don't, but I think we'll we'll we'll just we're confident that whatever we gave as guidance is going to be met. In terms of your question about supply chain, again, it's it's as we improve, our suppliers also need to improve.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

And I think the past, I've I've talked about how we do it. Everything is long term planned. So we can predict with a fair degree of accuracy how many stores we're gonna have in the future and the volumes of products we would need to have to meet demand. And as such, we start working on ensuring that we have that supply and the quality and the price that we want way ahead of time. Know?

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Think about a three year lead time to ensure that you have everything ready. And by doing so, you mitigate a lot of the risk, and you can ensure that your growth, even though it's very high growth rates, is smooth and continuous. And, again, by by thinking ahead, you mitigate a significant amount of risks, not only on the supply chain, but in human resources and technology and anything you can think of.

Ulises Argote Bolio
Executive Director - Head of Mexico Equity Research, Strategist & Mexico Consumer Analyst at Santander

That's very clear. Thank you very much for that, Anthony.

Operator

Next question comes from the line of Andres Ortiz. Please state your company name and ask your question.

Andrés Ortiz
Director - Asset Management at BTG Pactual

Hello. Andres Ortiz from BT Bactual Asset Management. Thank you, Anthony, Eduardo. I would like to to ask about compensation once the 2024 equity incentive plan ends. Per your release, you expect that the noncash expenses finished by 2028.

Andrés Ortiz
Director - Asset Management at BTG Pactual

But how should we think about management compensation once this start this plan ends? Should we expect additional equity incentive plans going forward or higher wages just to get that sense? Thank you.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Hi, Andres. I'm gonna answer the question at a conceptual level, and then I'll let Eduardo talk about the expenses.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Since inception, we've always believed that equity linked compensation is key to attracting the right profile that we want and motivating and aligning anybody who works at three b with the interest of shareholders. And I can say unequivocally that our success today is in large part because we've attracted the right profile of somebody with a can do attitude that is working towards creating value. And I think we'll continue to do so looking forward. Our new equity linked compensation plan, the 2024 plan, is one that goes forward. It doesn't I I sort of understood from you that might end.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

No. It doesn't. It's these are yearly allocations of equity that we give out that the board approves and gives out to people in three b who have demonstrated leadership. And, also, as I mentioned before, to attract and retain people who we think are the right profile for a high growth company like ours. And I would say that our board is also very conscious about this matter of how much equity linked compensation to give out and does it within market parameters going forward.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

And so that you know, the benefits, know, if if you ask me personally, I'd say the benefits of equity linked compensation outweigh the equivalent benefit of just giving out cash compensation.

Eduardo Pizzuto
CFO - Issuer at Tiendas 3B

The only thing that I would add, Andres, is that and and Anthony briefly touched on it and just clarifying. That that table that we disclosed on the on the appendix two is the the noncash expenses for the next four years for what has been granted. So anything on top of that will will affect this this table. But just for everybody to have clarity on what will happen with this noncash expenses, that's why we laid out this table.

Andrés Ortiz
Director - Asset Management at BTG Pactual

Understood. Thank you very much to both. Congratulations. Bye.

Operator

We will now pass for further questions.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Well, thank you. Sorry. Go ahead, operator.

Operator

We have not received any further questions. I would like to hand the call back over to Anthony for his closing remarks.

Anthony Hatoum
Founder, Chairman & CEO at Tiendas 3B

Thank you, operator, and thank you all for participating and for your interest in our company. Much appreciated. Till next time. And please don't hesitate if you have any questions to reach out to myself, Eduardo Joaquin, who is part of our investor relations team.

Operator

That concludes today's call. You may now disconnect.

Analysts
    • Anthony Hatoum
      Founder, Chairman & CEO at Tiendas 3B
    • Eduardo Pizzuto
      CFO - Issuer at Tiendas 3B
    • Robert Ford Aguilar
      Senior Analyst at Bank of America Merrill Lynch
    • Andrew Ruben
      Equity Research at Morgan Stanley
    • Joseph Giordano
      Equity Research Analyst at JP Morgan
    • Alvaro Garcia
      Associate Partner at BTG Pactual
    • Alejandro Fuchs
      VP - Equity Research & Head - Mexican Office at Itaú BBA.
    • Analyst
    • Héctor Maya
      Equity Research Analyst at Scotiabank
    • Ulises Argote Bolio
      Executive Director - Head of Mexico Equity Research, Strategist & Mexico Consumer Analyst at Santander
    • Andrés Ortiz
      Director - Asset Management at BTG Pactual
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