Executive Summary / Key Takeaways

• Tiendas 3B (TBBB) is a leading grocery hard discounter in Mexico, driving market share gains through an "unrivaled value proposition" and aggressive, self-funded store expansion. The company's core mission, "Bueno, Bonito y Barato" (Good, Nice, and Affordable), resonates strongly with budget-savvy consumers.
• TBBB continues its rapid growth trajectory, opening 142 net new stores in Q2 2025, bringing the total to 3,031. The company projects opening 500 to 550 new stores in 2025, alongside 11% to 14% Same Store Sales (SSS) growth and 26% to 29% total revenue growth.
• The company's strategic investments in new technology, including enhanced big data analytics and AI capabilities, are foundational to improving operational efficiency and strengthening its competitive moat. These advancements are expected to yield "order of magnitude more efficient" and "more impactful" data utilization.
• Despite upfront costs from accelerated expansion impacting consolidated margins, TBBB demonstrates strong operating leverage at the individual store level. Its negative working capital model generates significant cash flow, enabling internal funding of growth initiatives.
• TBBB's business model proves highly resilient across economic cycles, benefiting from consumer trade-down during downturns and retaining "sticky" customers during upturns, positioning it favorably in Mexico's competitive retail landscape.

The Foundation of Value: Tiendas 3B's Enduring Strategy

BBB Foods Inc., operating as Tiendas 3B, has carved out a leadership position in Mexico's grocery hard discount sector since its incorporation in 2004. The company's enduring mission, encapsulated by "Bueno, Bonito y Barato" (Good, Nice, and Affordable), underpins its strategy of offering irresistible value to budget-savvy consumers. This customer-centric approach, combined with operational discipline, has been the bedrock of its consistent growth and market share expansion.

TBBB's business model is characterized by a focused assortment of approximately 800 stock-keeping units (SKUs), encompassing branded, private label, and spot products. This streamlined inventory, coupled with strategically located neighborhood stores, encourages high-frequency visits from its low-to-middle income customer base. The company's historical journey reflects a commitment to continuous improvement in its product portfolio, particularly through the expansion of its private label offerings, which now constitute a significant portion of sales.

Technological Edge: Fueling Efficiency and Insight

A critical, yet often unseen, differentiator for Tiendas 3B is its ongoing investment in advanced technology. The company is transitioning to a new generation of technology that is "significantly more efficient" than its legacy systems. This upgrade provides a "portfolio of new tools" that were previously unavailable or cumbersome to implement.

A key benefit of this technological evolution is the enhanced capability for big data analysis and the integration of Artificial Intelligence (AI). Management explicitly states that while older technology limited their ability to leverage AI with their databases, the new platform "absolutely can use AI." This translates into an "order of magnitude more efficient, more impactful, more useful" utilization of the significant amounts of data generated by the business. For investors, this technological leap is crucial. It strengthens TBBB's competitive moat by enabling more precise operational decisions, optimizing inventory management, refining pricing strategies, and ultimately driving higher operational efficiency and better financial performance. This foundational technological advantage is integral to TBBB's long-term growth strategy and its ability to maintain its value proposition.

Competitive Landscape: Outperforming in a Dynamic Market

Mexico's grocery retail market is intensely competitive, featuring major players like Walmart de México (WALMEX), Organización Soriana (SORIANA), and Grupo Chedraui (CHEDRAUI). Tiendas 3B distinguishes itself through its specialized hard discount model and unwavering focus on value. While larger competitors benefit from immense scale and broader product ranges, TBBB's agility and targeted approach allow it to outperform in its niche.

TBBB's value proposition consistently drives superior Same Store Sales (SSS) growth compared to the broader market, as evidenced by a 15 percentage point larger gap versus ANTAD in Q2 2025. This indicates a strong resonance with consumers seeking affordability without compromising quality. The company's decentralized real estate strategy, which involves opening new regions adjacent to existing ones, mitigates branding risks and shortens ramp-up times, further enhancing its competitive positioning. This approach allows TBBB to efficiently expand its footprint, even in densely populated areas like Mexico City, where it has yet to encounter saturation limits.

Financial Performance: Growth Amidst Strategic Investments

Tiendas 3B delivered robust financial results in the second quarter of 2025, reflecting its aggressive growth strategy. Total revenue reached Ps. 18,770 million, a substantial 38.30% increase compared to 2Q24. Same Store Sales (SSS) grew by an impressive 17.70%, driven by increased customer traffic and a higher number of items per ticket. For the first half of 2025, total revenue climbed to Ps. 35,900 million, representing a 36.70% increase over 1H24.

Profitability metrics, however, show the impact of TBBB's accelerated expansion. Gross profit margin decreased by 53 basis points to 16.20% in 2Q25, primarily due to incremental logistics costs associated with the four new regions slated to open in the second half of 2025. EBITDA increased by 22.50% to Ps. 844 million in 2Q25. Excluding non-cash share-based payment expenses, EBITDA rose by 32.10% to Ps. 1,096 million. The EBITDA margin for 2Q25 decreased by 58 basis points to 4.50%, influenced by higher logistics costs and increased non-cash share-based payment expenses.

The company reported a net loss of Ps. 286 million for 2Q25, a shift from a net gain of Ps. 331 million in 2Q24. This was partly attributable to a Ps. 234 million foreign exchange loss due to the depreciation of the U.S. dollar against the Mexican peso, affecting U.S. dollar-denominated IPO proceeds. Despite these factors, net cash flows provided by operating activities surged by 55.70% to Ps. 1,955 million in 1H25. This strong cash generation, fueled by a favorable negative working capital model and high inventory turnover, allows TBBB to internally fund its significant growth initiatives.

Outlook and Guidance: Sustained Expansion and Value Creation

Tiendas 3B is confident in its strategic direction and anticipates continued strong performance. For 2025, the company projects Same Store Sales growth between 11% and 14%, total revenue growth in the range of 26% to 29%, and plans to open between 500 and 550 new stores. These targets underscore management's commitment to accelerating growth and expanding its market presence.

The company's strategy involves opening four new regions in the second half of 2025, each equipped with new distribution centers, logistics, and personnel. While these upfront investments may temporarily impact consolidated margins, management emphasizes that operating leverage is evident at the individual store level and will become more apparent as the store opening rate stabilizes. The continuous improvement of the value proposition, particularly through private labels, is expected to sustain healthy SSS growth. The successful "YEMA" brand, a testament to TBBB's innovation, is also slated for further rollout, albeit at a different pace than core Tiendas 3B stores.

Risks and Resilience

Investing in TBBB involves considering several factors. The accelerated pace of store openings, while value-accretive, incurs upfront costs that can pressure consolidated margins in the short term. Additionally, the company's non-cash share-based payment expenses, projected at approximately 1.2% of sales for the remainder of 2025, represent a significant expense, though management views this as a crucial investment in talent retention and alignment with shareholder interests.

External economic factors, such as consumer pressure and currency fluctuations, also present considerations. However, TBBB's business model has historically demonstrated remarkable resilience. The company tends to "benefit in environments where a customer is basically trying to save money" and has historically gained "significant new customers" during recessions, who then become "sticky." Furthermore, TBBB's negative working capital model provides a natural hedge against inflation, as it benefits from higher prices on inventory. The company has also shown a capacity to gradually pass on increased costs from peso weakness to consumers over time, mitigating long-term impact.

Conclusion

Tiendas 3B stands as a compelling investment opportunity, driven by its deeply ingrained value proposition, aggressive yet disciplined expansion strategy, and a foundational commitment to technological advancement. The company's ability to consistently deliver strong revenue and Same Store Sales growth, even amidst significant upfront investments, highlights the strength and resilience of its hard discount model in the competitive Mexican retail landscape. With clear guidance for continued expansion and a proven track record of outperforming the market, TBBB is effectively leveraging its operational efficiencies and technological edge to cement its leadership. The strategic focus on self-funded growth, coupled with a robust response to economic and competitive dynamics, positions Tiendas 3B for sustained value creation for its shareholders, making it a noteworthy player in the consumer defensive sector.