BBB Foods (NYSE:TBBB) Q3 2026 Earnings Call

0:00 Good morning and thank you for joining us today. I will begin with a review of our third quarter operating results and will be followed by our CFO, Eduardo Pizzuto, who will discuss our financial results. We will then conclude with a Q&A session. The strong momentum we demonstrated in the first half of the year continued into the third quarter, delivering another quarter of excellent results. Let me highlight some of our key achievements. We opened 141 net new stores, bringing our total store count to 3,765. Over the last 12 months, we opened 603 net new stores.

0:45 We also opened four new distribution centers, expanding our network to 25 regions. Same store sales grew 20.5% year over year. Total revenue increased 40% to 28 billion pesos, reported EBITDA reached 1.3 billion pesos, while EBITDA excluding non-cash share-based compensation increased 60% to 1.9 billion pesos. Finally, operating cash flows for the first nine months of the year reached 7.1 billion pesos, an increase of 128% over the same period last year. Let's now take a closer look at our operational performance.

1:34 During the third quarter, we opened 141 net new stores, bringing our year to date openings to 419 stores. Over the last 12 months, we have opened 603 net new stores. Our real estate strategy remains unchanged. We continue to expand into new markets while increasing store density in our existing markets. Our strong operating momentum translated into another quarter of exceptional revenue growth. Total revenue reached 28 billion pesos, an increase of 40% year over year. Same store sales grew 20.5%. The drivers of our same store sales growth remain consistent.

2:22 Continuous improvements to our value proposition, growing brand recognition and increasing customer trust. Our same-store sales performance continues to significantly outperform the broader market. During the quarter, we maintained a gap of more than 21 percentage points versus Antad, while keeping our internal inflation very low. I will now pass the microphone to Eduardo.

2:55 Thank you, Anthony. Good morning, everyone. Sales expenses as a percentage of revenue decreased by 36 basis points year-over-year to 9.8% in the third quarter of 2026. Most of the expense lines showed operating leverage, including labor. Admin expenses, excluding share-based payment, decreased by 6 basis points year-over-year. While we continue our investment in talent, as well as expanding into new regions, strong top-line performance allow for operational leverage generation. With respect to share-based payment expense, these charges are non-cash and already reflected in our fully diluted share account. Additional details are available in the appendix of this earnings release, where we also provide projections for this non-cash expense.

3:47 EBITDA for the third quarter of 2026, excluding non-cash share-based payment expense, increased 60% to 1.9 billion pesos, driven by strong sales growth, improved gross margin, and operational efficiencies. The adjusted EBITDA margin increased by 83 basis points year over year. As you know, we don't manage this business to an EBITDA target. EBITDA will naturally continue to grow over time, driven by our disciplined execution. Our business model generates strong operating cash flow through our structurally negative working capital model. As of September of 2026, adjusted negative working capital reached 10.8 billion pesos compared to 7.8 billion in 2025, excluding IPO and follow-on proceeds.

4:40 This represents approximately 10.9% of total LTM revenue, also excluding IPO and follow-on proceeds. Our operating cash flows fully fund our organic expansion. I will now turn the call back over to Anthony for some final remarks.

5:00 Thank you, Eduardo. We delivered an excellent first nine months of 2026, driven by strong execution across our business. Our business model continues to demonstrate its resilience, scalability and its ability to self-fund our growth. Importantly, our growth is driven by two powerful engines. The continued expansion of our store network and sustained same store sales growth supported by a never improving value proposition for our customers. Our newer store vintages are performing better than our previous vintages. They start with higher initial sales and their sales grow faster. This momentum continues into our fourth quarter.

5:47 And if we look further ahead, we remain confident in the significant growth opportunities before us and in our ability to continue executing with increasing efficiency. Thank you for your continued interest in Tiendas 3B. We will now open the call for your questions. Thank you. We will now conduct a Q&A session with Anthony Hatoum and Eduardo Pizzuto. If you would like to ask a question, please press the raise your hand button located at the bottom of your screen. We remind you that all lines have been placed on mute. When it is your turn to ask a question, you will be given permission to speak.

6:32 You will then be able to unmute yourself and ask your question. Our first question comes from Andrew Rubin from Morgan Stanley. Please ask your question.

6:45 Thanks very much for the question and congratulations on the quarter. Just checking in on the store openings, if we look at the pace so far this year, it looks like it's annualizing a bit below the guidance. But at the same time, we've seen in recent years, 4Q tends to be a heavier period for openings. So given that, I'm curious how you're feeling about the 590 to 630 opening guidance for the year. And then related, is there anything we should consider about kind of a structural reason why you might see more openings in 4Q compared to the other quarters of the year?

7:19 Thank you. Hi, Andrew. Thank you. No, we're still well within guidance, and you're absolutely right. The fourth quarter tends to be a little bit heavier on store openings and our pipeline looks very healthy at this stage. So no change in guidance. Thank you. We can now go to Alejandro Fuch from Itao. Please state your question.

7:55 Thank you, operator. Good morning.

8:03 Alejandro, you broke up. Can you hear us?

8:13 Sorry, is this better? Yes. Oh, sorry. Sorry. Thank you. No, just one quick question on competition. Wanted to see if have you seen anything different the last couple of months? How maybe are you seeing the trends in the fourth quarter starting? Anything that caught your attention? Thank you.

8:34 We haven't seen anything notable. From our own perspective, nothing has changed. We still are gaining new customers and we still see a healthy trend in ticket size. But we read what you read and we see people moving. And I think overall, this is healthy for the market and for the consumer. So all healthy, all good from the competition point of view.

9:01 Thank you, Anthony. Our next question comes from Hector Maya from Scotiabank. Please go ahead.

9:13 Hello, Anthony and Eduardo. Thank you for your time and congrats on the results. I have two questions. First, how much did commercial margin help Q3 margins and how should we think about it going forward?

9:39 Yeah, Hector, I don't know if you hear us, but you were breaking up a little bit. I heard your question is about commercial margin. I would say that there is an expansion in commercial margin in this quarter. And as we've said many times before, margins go up a little bit, come down a little bit. But overall, the trend over a longer period of time is a healthy upward trend. In terms of other things that affected our numbers, I would say we've seen a lot of operating leverage this quarter too. And that is also very healthy. So net-net, everything is pointing in the right direction. And in the fourth quarter, just expect business as normal for us.

10:32 Thank you, sorry. Do you hear me here? Can you hear me here? Yeah, sorry. Thank you for that. And the other question was about Mexico's corporate tax and how we should think about it down the road.

10:46 Hi, Hector. I'm not sure if you're referring to this new law that limits deductions. But if that is the case, as of today, with the information that we have today, this is a law that would mainly affect temporarily cash flows. So as of today, we don't expect any changes for our plans for next year. But of course, we will give you guidance on our next call, in which we will review Q4.

11:22 Thank you. Thank you very much, Anthony, Eduardo. Next question comes from Bob Ford from Bank of America. Please go ahead.

11:33 Thank you and good morning, Anthony, Eduardo, Joaquin, and thanks for taking my questions. Just to follow up on Hector's question with respect to commercial term improvements, I was curious, were those realized as a result of your price volume optimization processes strictly or did Volume-based rebates play a role at all in that improvement. And then when you think about the improvements in transportation costs that you refer to, how should we think about capacity utilization in the network? And I'm just curious, what do you see driving the improvements in transportation costs?

12:10 Thanks, Bob. Very thoughtful questions. Let me start with the last one. The world of transportation for us, let's say, is a world with a lot of potential going forward. We've barely scratched the surface in what we can do to further optimize transportation costs. And it's a very exciting topic for us, and you'll see a lot more happening in 2027 on that front. In terms of commercial margins, It's a little bit of everything you mentioned, right? So of course, the main driver of improvement has always been scale. And as we continue to scale, everything improves, including rebates, as you mentioned. So I would expect this to continue for the foreseeable future.

13:02 And no changes in anything that we haven't seen in the past.

13:08 Great to hear. And just one follow-up, and that is, going into year-end, how are you guys thinking about seasonal? What's different in seasonal for you compared to prior years?

13:18 Big differences? We see none, but definitely there's a seasonal effect with end-of-year because, of course, seasonal products get sold in the month of November, December, and sometimes through January, too. And there might be some timings and payments of rebates For sales that are done in December, you see the rebates in January. So that's the only effect that is likely to be seen and that's nothing new. We've had it every single year for the last several years.

13:46 So in terms of your irrepetibles or things like that, very similar to prior years, nothing?

13:53 I would think so. With improvements, again, improvements driven by scale, right? What I'm showing you this year in December, is probably going to be much better than what we showed you last year at the supper. Looking forward to it.

14:09 Thank you so much and congratulations on the quarter. Thanks. Our next question comes from Irma Sargz from Goldman Sachs.

14:19 Hi, thanks Anthony and Eduardo for answering the questions. I'm sorry, I want to just go back to the commercial margin or to the gross margin, sorry, with a bit more detail. If you could just break down, I think a lot of analysts had expected some quarter over quarter or year over year pressure or at least less expansion in that gross margin. So I think that was a positive surprise, especially in the context of you building out four new distribution centers in this quarter. So could you just provide a little bit more, you know, you point to the commercial margin whilst you do acknowledge the pressures from this build-out. Just within that commercial margin, is there any sort of more breakdown that you can provide in terms of how much of that comes from Thank you for your question.

15:40 Anthony went over a little bit about the commercial margin. And I think the difference in this quarter is the fact that we opened four new DCs. And it did have an impact. If you look at it sequentially, it did have some pressure on margin. But if you look at versus... A year ago, there's no doubt that the overall march has expanded. What happened this quarter, specifically with our logistics expenses, that out of the four DCs that we opened, two of them opened in the early part of the quarter, so in July. So most of the pre-opening expenses happened in Q2. So that's one part. The second part is that we continue to get better at pre-opening expenses. So we continue to get smarter on how we do the opening of distribution centers. And then the balance of that is overall transportation expenses continue to get better. The older distribution centers that we opened, for instance, last year, they're doing their job and they're becoming more efficient.

16:44 So everything is accretive. So all in all, as we open more DCs, we become more efficient and that helped out in the overall expenses and that's the consequence you see on margins.

16:59 Okay, thank you. Next question comes from Alvaro Garcia from BTG Pactual. Please go ahead.

17:12 Hey, Anthony. What a hope you're doing well. I have a multifaceted question here on the impact to same-store sales and average ticket from Frozen. You know, we've been able to visit some stores recently and it's pretty clear how dynamic that category has become. So I guess my question is, first, where are we in the middle of sort of this rollout to increase I guess a broader question on sort of the identity of the store, Anthony. Where do you see the identity of the store? It kind of felt a lot more like a convenience store than a grocery store in some of my more recent visits in how I saw some customers shopping for those specific categories, you know, sort of that impulse element behind your business.

17:59 So I'd love to hear your thoughts on sort of that convenience versus grocery identity. Thank you.

18:04 Hi, Alvaro. Let me start with the last one. Yeah, convenience versus grocery store. No, we firmly believe that we're still a grocery store where the client comes mainly to fill up their pantry. But it's true that maybe in urban areas that you're more likely to visit if you visit stores in Mexico City, that you might see a smaller component which is convenience-driven, and that's normal. But we're definitely a lot of value for your money. Grocery store, come do your pantry shopping with us. In terms of categories, and you mentioned frozen. Yes, it's one of the exciting categories that are naturally developing in 3B. We were the pioneers.

18:55 In Mexico and bringing high value for money frozen to the market, it took a very long time to develop the category. And what you're seeing today is the result of many years of work and the natural evolution of this category, similar to other categories which you didn't mention, which very normally, and that's what we do for a living, is improve every single product in our catalog and every year try to give you better money, better value for your money. So, but Frozen is more visible because you see a capex at the freezers. And I just remind everybody that, you know, we look at the ROIC of this capex very carefully as we do with everything else in every single other investment. Frozen remains a growth category and we have several others that are also growing quite fast and will continue to grow through 2027 if we do our job correctly.

19:53 There was another part to your question, maybe, that I missed?

19:57 Yeah, I guess the only part was where are we in the rollout? I know that we're looking to sort of increase the number of freezers. Obviously, the new stores come with the freezer set that you'd like, but I know you're looking to increase the number of

20:12 Let me answer it generically by saying that refrigeration strategy is very dynamic. You'll see changes in our refrigeration approach in the next years. It's not likely to stop. We're always looking to optimize everything in the store, including refrigeration. We do it on many levels. For example, we try to reduce refrigeration costs while offering you refrigerated goods and that will result in physical changes in the store that shouldn't surprise anybody because we're driving towards better ROICs on the refrigerated goods. So what you will see going forward is more changes in both refrigeration and frozen but always driven by what I mentioned before. Improve the ROIC, give better value to your customer.

21:06 Wonderful. Thank you very much. Thank you, Eduardo. Our next question comes from Joseph Giordano from JP Morgan. Please go ahead.

21:17 Good morning, everyone. Good morning, Anthony and Eduardo. Thanks for taking my question. I would like to explore three fronts here. So first, looking at this commercial margin, right, to understand there's lots of scale gains. So if you could comment a little bit on how you're seeing, like, maybe the price gap Thank you very much. Thank you very much. Terminal Sales, so the sales at maturity is probably higher than what you had back in the past. And in this growth profile, like how the new categories like maybe like frozen are really helping on this additional growth.

22:17 Thank you very much.

22:19 Sure thing. Price gap. We haven't seen much change, notable change. The price gap remains, and it's steady. So in this quarter, we haven't seen anything that jumps. So I would say that continues to be what it was in previous quarters. In terms of new store ramp-ups and higher ramp-ups, it's true that Over time what we've seen is the store sales curve becoming steeper and for all our stores The maximum sales going up over time. And what we'll do is in the next quarter or thereafter, we will update our spaghetti chart, which will clearly show that graphically to everybody.

23:10 So that trend continues. And again, it's driven by two things. One is our brand is much better recognized today than it used to be. And that trend continues. But most important is the value proposition to customers, which is notably improving over time. We are continuously offering our customer more value for money. And in the categories that we have, like you mentioned frozen, what you find today in the freezer is much more relevant and more value for money than it was last year. And this keeps on driving what you see in same-store sales. It keeps on driving this curve, which you see steepening, starting higher, and reaching higher.

24:01 For the time being, this continues. Joe, did you have another question related to that?

24:18 Sorry, the last question. No, I think like you responded at all. It's more about like the private label helping the pantry loading, but you're right to answer that. Thank you. Thanks. Next question comes from Vinicius Estrano from UBS. Please go ahead.

24:40 Anthony, Eduardo, thanks for taking my question. Could you please break down semester sales growth between traffic and ticket? And within ticket, how do you see items per basket evolving? At what level items per basket are mature stores are reaching if you're seeing growth here as well? And any commentary around which categories are leading growth? and how they are contributing to margins, any color on how mix might be helping margins as well. These would be my questions. Thank you.

25:24 So it has been very consistent for the past quarter. So two-thirds is coming from volume, which is the number of tickets and price per ticket. And the balance is price. And within price, the best maturity comes from mix, not from inflation, because remember, internal inflation is very, very low, actually close to zero. So that is where symptom cells are coming from. In terms of items per basket, yes, you can expect that we continue to see that number going up. If you remember at IPO, we're talking about two to three items. Today, we're talking about a range of four to five items per transaction.

26:10 As Anthony mentioned earlier, as we continue to improve our value proposition, that number tends to go up. And you heard a third point that I couldn't hear Can you repeat that, the other question?

26:25 The other question was just about which categories are leading growth. And if you could just comment around mix contributions to cross margins as well.

26:39 In terms of categories, when you look at the breakdown of categories, fundamentally, if you look at every item in our shelves have to have a very high rotation. So everything is contributing to growth. Of course, we have had slightly newer categories like frozen or cosmetics, which are having an outstanding performance. But everything improves. Dairy, for instance, continues to have a very solid growth as part of central cells. And then did you ask about mix? Did you have an additional question?

27:22 Yes, if you could just comment around mix contribution to cross margins as well.

27:29 There is no doubt that we're offering higher priced but even higher value for money products, so that might be contributing to Mix in a positive way, as you're correctly asking. But I would say fundamentally, our focus is on getting existing customers to buy more from us, and we're seeing that happen Thank you very much, Anthony and Eduardo. Thank you. Our next question comes from Antonio Hernandez from Actimber.

28:26 Hi, good morning. Congrats on your results. Just a quick one regarding the new pilots that you have over across your different stores. Any new highlight there? Any pilot worth highlighting? Thanks.

28:47 Look, at any point in time, there is about 60 to 80 pilots, let's call them that, or tests that are running in our stores. Some of them you'll pick on because they're very visible, like let's say fruits and vegetables or meats. You physically see them, they take more space, they have special shelving or refrigeration, but a whole bunch of them you won't necessarily pick on because they look like any other product. So we've never stopped piloting products and we do it very aggressively and very consistently. And not all of them work, but those that work, you will see become part of the catalog. And we also maintain our discipline in number of SKUs because we always question when we do introduce a new product, which one should we drop across the board?

29:41 And unless something is very, very different and unusual and unique, We just add it on to our SKU count. And our SKU count today remains very conservative at around 900 products. And we've said before, we have the ability to increase this without changing anything in our operations or in our logistics. to a significantly higher number. But we will maintain our very strict discipline in terms of, you know, very high value for money, very high rotation, and everything else, you know, we're not that interested in offering. Perfect. Thanks a lot. Our next question comes from Federico Galassi from Rohatin Group.

30:33 Hello guys, Anthony, Eduardo, thank you for taking my questions and congrats for the results. Two questions, the first one is, you opened, let me know if I'm wrong, but you opened four distribution centers this quarter. If we see in one year, you opened almost 10. The questions, the two questions are, how much efficient are these new distribution centers? And the second one, if you continue to Have in mind that one distribution center is almost 150,160 new stores. Thank you. This is the first one.

31:08 Federico, yes, the number hasn't changed. It still serves roughly the same number of stores. The operations of the warehouse in general have not changed. But of course, you're always optimizing your logistics. The optimization happens at two levels. One, internal operations, there's always room for improvement for shaving minutes of work and moving boxes and trying to drive down the cost of moving a box through your system. And that I don't think stops, right? And I did mention earlier that on the logistics fronts, there is significant opportunity going forward. And it's for us to...

31:53 The other real mechanical advantage of opening more distribution centers is compacting distances. Every time we open a new distribution center, we're also reshuffling the stores so that the truck Very clear, thank you. And the second question is a rough number. You have about 20% sector sales in your measure, no? That is two years. And when we compare with Santada and other

32:41 Thank you.

33:02 It's a very hard question to answer because, you know, from our perspective, we don't see the full picture. I can't tell you if anybody's losing market share or if the customer is really changing behavior, used to buy something somewhere else and move to us. I'm going to assume there is some of that, but I don't have any concrete data to share with you and saying this is happening exactly that way or this way. All I can tell you is that if the customer did not see more value in our offer, we wouldn't be seeing the numbers we're seeing.

33:38 Perfect. Thank you so much and congrats again for the results. Next question comes from Alberto Badia from Fruit Tree Capital.

33:54 Good morning, Anthony and Eduardo. I have two questions. One is regarding Yema. And we know it's a tiny piece of the pie, but just where do you see it? And if you could give us a quick update on it and where you see it in 10 years. And our other question is regarding talent and culture. And a lot of times that's, you know, when we talk about culture, talent, it's revolving, it's a stock-based compensation. We're more curious of how you see talent development at the base, you know, at the entry level, the person that, the cashier, the stocking at the distribution. That's it. Thank you.

34:42 We're firm believers that investing in talent is a high return on investment effort and we will continue to do so. We pay maybe more than others attention to the HR and to the culture functions and we believe that these have paid off in droves and have propelled us to where we are today and will propel us going forward to where we'd like to be. It sounds philosophical, but we firmly believe that it's the team that makes the difference and we're investing in the team and we'll continue to do so at all levels, all the way from the cashier, as you mentioned, to the most senior person in the company. And you'll see that physically and you'll see that in our numbers.

35:30 In terms of Yema, it's a very exciting concept. It's only four stores, as you mentioned correctly. It will continue to grow, and it will grow at its own pace. It is hitting a niche of the market that nobody seems to have been looking at, and the reception from customers has been exceptional. It will continue to grow, but we haven't guided and we're unlikely to guide anytime soon as to where it can head to. But very exciting and we're very glad to have it. Thank you very much. Next question comes from Guli Arshad.

36:29 Ayguli, we can't hear you.

36:36 Yes, okay, now you can, right?

36:38 Yes, absolutely. How are you?

36:40 Very good. So congratulations on a great quarter. So I have basically two questions. First, how do you manage the scaling of your private label providers? And related to that, do you have different private providers for different regions for the same product?

37:01 Let's start with that, Guli, because it's a very important question and one that merits its own time. If private labels, as you know, play a strategic role in our growth, and this is where we offer the most value to our clients, and of course when you're growing at the rates we're growing you ask yourself well where do I have a product that is good three years from now and if you're not asking that question today you won't have it in three years so basically we very proactively manage the procurement side and make sure that By the time we get to that three-year point, everything is in place.

37:48 So, for example, in 2026, we're not talking about 2026. We're talking about 28 and 29 with all our suppliers. And that's the way the business has operated. And that also explains why this business has been able to grow at 30% plus per annum now for the last Thank you very much. The logistics make more sense. Sometimes for strategic reasons, you want to have two suppliers because you protect your supply base and you make sure that it's redundant if there is any risk of interruptions.

38:50 So really it's on a product by product basis that we look at it and make decisions as to how many suppliers supply a given private label product.

38:59 So you might have, for example, two yogurt products

39:04 So my second question is really kind of a business school jargon, but...

39:34 I'm so impressed with your growth. So my question is, what do you think is your distinctive competence as well as a differentiator compared to your competition?

39:49 Yes, indeed. I do feel like I'm at business school. Look, it might sound poetic here, but I really think that it's the team. The better team, you can do great things.

40:07 I agree.

40:12 Thank you. Thank you, Juli. Next question comes from Vanessa Quiroga from Eternal Capital Group.

40:23 Hi, thank you. My question is regarding the tax reform that is currently in the process of being approved. Can you comment on any potential impact on the effective tax rate that you're currently paying, both accounting and cash? Thanks.

40:44 Hi, Vanessa. We've addressed this earlier in the call today. And basically, with the information that we have today, this is a law that will temporarily affect our cash flows. So having said that, as of today, we have no plans to change our plans for next year. So for now, no changes with the information that we have today. But of course, this is constantly under review. And so we need to see the final draft. And then we'll give you, of course, our guidance in our Q4 call. But as of today, that's information we have.

41:30 I see. And do you expect this to change your capital structure in the sense of preferring to raise debt maybe in order to manage better the cash flows, for instance?

41:47 We don't think it has that kind of impact. It might shift the cash flows on a temporary basis. But again, let's hold off till Q4 and we'll have a much more concrete and better answer for you.

42:01 Thank you very much.

42:03 Thank you, Vanessa. I have not received any further questions. I would like to hand the call back over to Anthony Hatoum for his closing remarks.

42:17 I'd like to thank you very much for being with us today, for your continued support and your continued interest in our company. Thank you to the analysts that are covering us. Thank you to all our team for making all of this happen. And I look forward to talking to you on the next call. Thank you. Thank you. You may now disconnect.