(02/05/25) Top Picks 2025: BBB Foods (TBBB)

02/05/2025 5:00 am EST•2 min read •Tickers: GO, TBBB

Analyst & Author

It takes a passionate leader to make you fall in love with a dull business like groceries. The CEO of BBB Foods Inc. (TBBB) is one of those passionate leaders. I promise, if you read the CEO letter in BBB Foods IPO prospectus, you too will fall in love and want to buy shares of this fantastic growth company, says Tyler Crowe, editor of Misfit Alpha.

BBB Foods is the parent company of Tiendas BBB (“Bueno, Bonito y Barato”, or Good, Nice, and Affordable). It’s a fast-growing chain of hard discount grocery stores in Mexico. As of the most recent quarter, the company had 2,600 stores and 16 distribution centers across 15 Mexican states.

Hard discount grocers are no-frills grocery stores that pride themselves on offering lower prices, but skimp on product presentation (products stacked on pallets instead of on shelves, for example). Similar hard discount grocers include Grocery Outlet Holding Corp. (GO), Lidl, and Aldi. The company started in 2005 and IPO’d in 2024 to help accelerate its growth prospects.

Low-margin grocery retail doesn’t sound like the most exciting stock idea. But there are several reasons why BBB Foods looks like it could be a great opportunity in 2025 and beyond:

* Stellar leadership: Founder and CEO K. Anthony Hatoum studied hard-discount grocers while working in private equity and determined Mexico was one of the best markets in the world to build a grocer from scratch. You can tell by the excruciating details he highlights in the company’s prospectus – from average walking distance to a store to packaging sizes to accommodate a 2-3 time per week shopper – that the company knows its customers and how to serve them.

* Stellar operations: Management’s attention to the details really shines when you look at the company’s operating metrics. Over the past 12 months, BBB Foods turned inventory 19 times. For comparison, Kroger Co. (KR), one of the best grocery operators in North America, had inventory turnover for the past 12 months of 14.8 times. Since 2020, BBB Foods has posted same store sales growth rates in the low teens or better.

* Stellar growth opportunities: Management believes that Tiendas BBB can sustain a 20,000-store count across Mexico. It added 396 stores in 2023 and its 2024 growth will likely be around 500 new stores. Seven-X store count over the next several years sounds like a rather attractive growth story.

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