BBB Foods' Q1 2025: Unpacking Contradictions in Investment Strategy, Gross Margins, and Consumer Behavior

Investment strategy and financial timing, gross margin dynamics and strategic focus, impact of economic factors on consumer behavior, gross margin expectations and dynamics are the key contradictions discussed in BBB Foods' latest 2025Q1 earnings call.



Revenue and Store Expansion:
- Tiendas 3B reported total revenues of MXN 17 billion for the first quarter of 2025, up 35% year-over-year.
- The company opened 117 new stores, marking an increase from 94 stores in the corresponding quarter of the previous year.
- This growth is attributed to the company's consistent execution and attractive value proposition, allowing for accelerated growth and increased market share gains.

Operating Performance and EBITDA:
- EBITDA increased by over 12% to reach MXN 705 million.
- Same store sales grew by 13.5%, driven by the company's value proposition, which continues to improve compared to the market average.
- The increase in EBITDA and same store sales was achieved despite an increase in expenses due to accelerated store openings and investments in technology and personnel.

Operating Leverage and Expense Management:
- Sales expenses increased slightly, from 10.2% to 10.3% of revenue, due to the acceleration of store openings.
- Admin expenses rose by 60 basis points, partly due to noncash share-based payments.
- The company emphasized long-term investments in IT, purchasing, controls, and legal, expecting these investments to support future growth acceleration.

Cash Flow and Financial Strategy:
- Cash flow generated by operating activities increased by 49% year-over-year to MXN 1.1 billion.
- The company ended the quarter with a net cash position of MXN 1.6 billion.
- This robust cash flow performance is attributed to the company's business model, which generates significant negative working capital, allowing for self-funded growth and investment in future expansion.