BBB Foods First Quarter 2025 Earnings: Revenues Beat Expectations, EPS Lags

BBB Foods Inc. (NYSE: TBBB) delivered a mixed performance in its Q1 2025 earnings, reporting robust revenue growth but disappointing earnings per share (EPS) results. While the company’s aggressive expansion and strong operational execution propelled revenues to a 35% year-over-year surge, margin pressures and elevated expenses overshadowed the top-line success. Investors now face a critical question: Can BBB Foods sustain its growth trajectory while addressing profitability challenges?

Revenue Surge: Expansion and Value Proposition Pay Off

BBB Foods’ Q1 revenue soared to 17 billion pesos, driven by two key factors:
1. Aggressive Store Growth: The company opened 117 net new stores, expanding its footprint to 2,889 locations. This expansion, particularly in underserved urban markets, is paying dividends, with same-store sales rising 13.5% year-over-year.
2. Private Label Dominance: Private label products now account for 54% of sales (up from 47% in 2023), boosting customer retention and ticket sizes. The Yema brand’s expansion into higher-margin categories like fresh produce and meats signals strategic differentiation.

The company’s negative working capital model (10.6% of revenue) also bolstered cash flow, with operating cash flow jumping 49% to 1.1 billion pesos. This liquidity, combined with a 1.6 billion peso net cash position, provides a solid foundation for future investments.

Why EPS Lags: Margin Compression and Structural Costs

Despite the revenue triumph, net income growth faltered. BBB Foods reported an estimated EPS of 0.02 USD for Q1 2025—far below the prior quarter’s already disappointing -0.04 USD (a -614% earnings surprise). Key culprits include:

1. Margin Erosion:
2. Net margins dropped from 4.9% to 4.1%, as the company invested heavily in talent, distribution centers, and compliance. Administrative expenses rose 60 basis points to 4.1% of revenue.

3. Share-based compensation now consumes 8% of gross profit, a recurring burden expected to remain at 1.2% of annual sales due to prior equity grants.

4. Growth-Induced Costs:

5. Rapid store openings required upfront investments, such as new distribution centers, which will take time to achieve economies of scale. CFO Eduardo Pico noted that operating leverage should improve as these stores mature, but the timing remains uncertain.

Outlook: Balancing Growth and Profitability

Management remains optimistic, projecting 26%–29% revenue growth in 2025 via 500–550 new store openings and 11%–14% same-store sales growth. However, margin stability hinges on:
- Reducing administrative expenses as a percentage of sales.
- Scaling distribution centers to lower logistics costs.
- Expanding high-margin private labels further.

CEO Anthony Hatoum emphasized that the Yema brand’s expansion into premium categories could lift margins, but the rollout will be deliberate to avoid overextending resources.

Conclusion: A High-Risk, High-Reward Story

BBB Foods’ Q1 results highlight a classic growth paradox: the company is winning in top-line metrics but struggling to convert that into bottom-line profits. While its cash-rich balance sheet (1.6 billion pesos) and 49% operating cash flow growth provide resilience, the 0.8% net margin (annualized) is alarmingly thin for a scaling retailer.

Investors should weigh the positives—35% revenue growth, a 1,000-store pipeline, and a proven private label strategy—against the risks: margin dilution, share-based compensation drag, and execution risks in new markets.

The stock’s valuation (current price: ~$72 USD, based on a 38.71 million share count) implies optimism about future margin recovery. However, unless BBB Foods can stabilize its net margin above 5%—a level it briefly achieved in prior years—the EPS underperformance could persist, keeping pressure on the stock.

Final Take: BBB Foods is a buy for long-term investors who believe in its ability to optimize margins as stores mature and private label penetration rises. Short-term traders, however, may want to wait for clearer signs of margin stabilization before jumping in.

Data as of Q1 2025. Analyst estimates subject to revision.