Q3 2024 BBB Foods Inc Earnings Call
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Speaker Change: Marcia to cold we reported them.
Operator: Questions from the media will not be taken.
Marcia DeColby: Marcia DeColby reporting. Any forward-looking statements made during this conference call are based on information that is currently available.
Speaker Change: Any forward looking statements made during this conference call are based on information that is currently available to us.
Speaker Change: To date, where James has given us today is the Chief Executive Officer, Anthony cut them, and Chief financial officer, and they'll be soup.
Speaker: Today, we're joined by Tiendas Tres Vez's Chief Executive Officer, Anthony Hatoum, and Chief Financial Officer, Eduardo Pizarro.
Anthony: I will now turn the call over to Anthony. Please go ahead.
Anthony Hatoum: I will now turn the call over to Anthony, please go ahead. Good morning, everyone, and thank you for joining 3B's third quarter 2024 earnings call. I will begin with a review of our operating results for the quarter and Eduardo Pizzuto, our CFO, will follow me and will provide an overview of our financial performance.
Anthony: Good morning, everyone and thank you for joining <unk> third quarter 'twenty 'twenty four earnings call.
Anthony: I will begin with a review of our operating results for the quarter and Eduardo Pizzuto, Our CFO will follow me and we will provide an overview of our financial performance.
Anthony: We will then open the floor for Q&A.
Anthony Hatoum: We will then open the floor for Q&A. I am pleased to report another strong quarter for 3B. This quarter, we opened 131 net new stores, bringing our total store count to 2,634 as of September 30. Same store sales for the quarter grew by 11.6% year-on-year, while total revenues increased by 29.8% to reach 14.8 billion pesos. Third quarter EBITDA reached 688 million pesos, that is a 54% year-on-year increase. We prefer to measure cash flows on a cumulative year-to-year basis. Our quarterly numbers are available in our earnings report in the appendix. You can expect that this number will be volatile on a quarterly basis.
I am pleased to report another strong quarter for <unk>. This quarter, we opened 131 net new stores.
Anthony: Bringing our total store count to 2634 as of September 30th.
Anthony: Same store sales for the quarter grew by 11, 6% year on year.
Anthony: While total revenues increased by 29, 8% to reach 14.8 billion pesos.
Anthony: Third quarter EBITDA reached $688 million vessels that is a 54% year on year increase.
Anthony: We preferred to measure of cash flows on a cumulative year to year basis, our quarterly numbers are available in our earnings reports in the appendix.
Anthony: You can expect that this number will be volatile on a quarterly quarterly basis.
Anthony: For the first nine months net cash flows provided by operating activities.
Anthony Hatoum: For the first nine months, net cash flows provided by operating activities reached approximately 2.3 billion pesos or a 22.4% increase year-on-year. We ended the quarter with a net cash position of approximately 1.3 billion pesos and an additional 2.9 billion pesos in short-term U.S. bank-denominated positions. In U.S. dollar terms, our total cash position remains unchanged from the same period last year. Our rapid growth continues to be self-funded.
Anthony: Approximately $2 3 billion vessels or $22 four increased year on year.
We ended the quarter with a net cash position of approximately $1 3 billion vessels and an additional $2 nine.
Anthony: Billion peso in short term U S bank denominated positions.
Anthony: In U S. Dollar terms, our total cash position remains unchanged from the same period last year.
Anthony: Our rapid growth continues to be self funded.
Anthony: Turning to operational performance.
Anthony Hatoum: Turning to operational performance. Our store expansion is progressing strongly. As mentioned, we opened 131 net-new stores in the third quarter of 2024. That makes 346 net new stores if we look at the first nine months of this year. Last year for the same nine month period, we opened 243 stores, so this is a 42% increase versus last year. Regarding guidances that we shared on store openings in the range of $3.80 to $4.20, we will solidly meet them for 2024. Moving on to revenue and gross margins, total revenue grew by 29.8% year-on-year for the quarter. This driven by an increase in same-store sales of 11.6% and the contributions from new stores open in the last 24 months.
Our store expansion is progressing strongly as mentioned, we opened 131 net new stores in the third quarter of 24.
Anthony: That makes 346 net new stores, if we look at the first nine months of this year.
Anthony: Last year for the same nine months period, we opened 243 stores. So this is a 42% increase versus last year.
Anthony: Regarding guidance says that we shared on store openings in the range of 382 for 'twenty.
Anthony: We will solidly meet them for 2024.
Anthony: Okay.
Moving onto revenue and gross margins total revenue grew by 29, 8% year on year for the quarter. This driven by an increase in same store sales of 11, 6% and the contributions from new stores opened in the last 24 months.
Anthony: Our gross profit margins compared to the same quarter last year remained flat at 15, 8%.
Anthony Hatoum: Our gross profit margins compared to the same quarter last year remained flat at 15.8 percent. Efficiencies from scaling up were passed to price to the benefit of our customers. 3B continues to offer the market's best value for money in the products we sell. It's one of the key drivers of our success.
Anthony: Efficiencies from scaling up we're past to price to the benefit of our customers.
Anthony: <unk> continues to offer the markets best value for money and the products we sell.
Anthony: It's one of the key drivers of our success.
Eduardo Pizzuto: I'll now pass the mic to Eduardo.
Eduardo Pizarro: I'll now pass the mic to Eduardo. Thank you, Anthony. Good morning, everyone. Our SG&A as a percentage of total revenue decreased by 51 basis points year over year from 13.9 to 13.4. Expenses as a percentage of revenue is an important metric for us. We look at it constantly to ensure a downward trend. This reflects our ongoing efforts to optimize expenses. We have seen a notable increase in our EBITDA of 54% from $447 million to $688 million. or an increase of 73%. This increase is driven by our sales growth and our operational I remind you that we do not manage our business with an EBITDA goal in mind.
Eduardo Pizzuto: Thank you Anthony good morning, everyone.
Eduardo Pizzuto: Our SG&A as a percentage of total revenue decreased by 51 basis points year over year from $13 nine to $13 four.
Eduardo Pizzuto: Expenses as a percentage of revenue is an important metric for us we look at it constantly to ensure a downward trend. This reflects our ongoing efforts to optimize expenses.
Eduardo Pizzuto: Okay.
We have seen a notable increase in our EBITDA of 54% from 447 million to 688 million pesos or an increase of 73 basis points.
Eduardo Pizzuto: This increase is driven by our sales growth and our operational efficiency.
Eduardo Pizzuto: I'll remind you that we do not manage our business with an EBITDA goal in mind.
Eduardo Pizzuto: EBITDA for us as a consequence of meeting revenues product contribution margin on lower cost as a percentage of sales objectives.
Eduardo Pizarro: EBITDA for us is a consequence of meeting revenues, product contribution margin, and lower cost as a percentage of sales subject. We continue to generate significant amount of cash from changes in negative working capital. In Q3-24, are dates in favor continuing to be consistent with historical trends? As of September 30th, 2024, adjusted negative working capital was 10.3% of total revenue, reflecting our operational efficiency and the strength of our business model.
Eduardo Pizzuto: Okay.
Eduardo Pizzuto: We continue to generate significant amount of cash from changes in negative working capital.
Eduardo Pizzuto: In Q3 24, our data favorite continue to be consistent with historical trends.
Eduardo Pizzuto: As of September 30th 2024, adjusted Native working capital was 10, 3% of total revenue, reflecting our operational efficiency and the strength of prognosis model.
Eduardo Pizzuto: I'd like to remind as and Anthony mentioned at the beginning we continue to be self funded despite 42% increase in store openings versus last year and opening two distribution centers.
Eduardo Pizarro: I'd like to remind, as Anthony mentioned at the beginning, we continue to be self-funded, despite 42% increase in store openings versus last year and opening two distribution centers.
Speaker Change: I will now turn the microphone back to Anthony.
Closing remarks.
Anthony Hatoum: I will now turn the microphone back to Anthony for closing remarks. Thank you all again once again for joining us today.
Anthony: Thank you all again once again for joining us today.
Anthony: I'll leave you with the following thoughts.
Anthony: Very strong store openings in line with guidance very strong growth in sales and very healthy same store sales growth.
Anthony Hatoum: I'll leave you with the following thoughts. Very strong store openings in line with guidance, very strong growth in sales, and very healthy same-store sales growth. Very healthy improvement in cost as a percentage of sales as planned. Cash generation allows us to continue to fully self-fund ourselves and our growth. We continue to do the same, just better and faster.
Anthony: Very healthy improvement in costs as a percentage of sales as planned.
Anthony: Cash generation allows us to continue to fully self fund ourselves for and our growth.
Anthony: We continue to do the same just better and faster and we are very excited for what's coming up next.
Anthony Hatoum: And we are very excited for what's coming up next.
Speaker Change: We'll now start the Q&A session. So please go ahead operator.
Operator: We'll now start the Q&A session, so please go ahead, operator. Thank you. We will now conduct the Q&A session with Anthony Khatun and Eduardo Pizut. If you would like to ask a question, please press the raise your hand button located at the bottom of the screen. If you're connected via telephone, please dial star 9. Remind you that all lines have been phased and muted. When it is your turn to ask a question, you will be given permission to speak. You will then be able to unmute yourself and that's good.
Speaker Change: Thank you.
Speaker Change: We'll now conduct the Q&A session with Anthony capital in there that are opposite.
If you would like to ask a question. Please raise your hand button located.
Pete: It's Pete.
Pete: Is there a connected via telephone.
Pete: Barney.
Pete: That all lines have been placed on mute.
Pete: It is your turn to ask a question you will be given permission to speak he will then be able to meter yourself and mascara brush.
Okay.
Pete: I just want to extend my gratitude to our investors and analysts for your continued support and confidence in our strategy.
Anthony Hatoum: Um I just want to extend my gratitude to our investors and analysts for your continued support and confidence in our strategy. And if you have any further questions, please don't hesitate to reach out to us.
Pete: And if you have any further questions. Please don't hesitate to reach out to us.
Speaker Change: Our first question comes from the line of Bloodsport.
Operator: Our first question comes from the line of Love Sport. Please state your name before asking your question. and company needs.
Speaker Change: State your name before asking your question.
Speaker Change: And company names.
Bob Ford: Hi, its Bob Ford.
Bac Banc of America Corp.
Bob Ford: Hi, it's Bob Ford at BAC, Bank of America Corp. Hi, Anthony. Hi, Eduardo. Congratulations on the quarter. And thank you for taking my questions.
Speaker Change: Hi, Anthony Hi, Dorothy congratulations on the quarter and thank you for taking my questions.
There was a sequential gross margin decline and simultaneously kind of a step up in operating leverage that was bigger than trunk right and I was curious what was behind each of those numbers.
Bob Ford: There was a sequential gross margin decline and simultaneously, kind of a step up in operating leverage that was bigger than trend, right? And I was curious, what was behind each of those numbers? And then, you know, what proportion of the store base has a netto in the trade area? And how has that netto value proposition behaved over the last few months?
Speaker Change: Then.
Speaker Change: What proportion of the store Beach has a a nickel in the trade area and how has that met the value proposition behaved over the last few months.
Speaker Change: And then lastly, Anthony you made a couple references to the pace of growth right Youre Annualizing nearly 500 units a year and it appears you peer well above guidance and I was wondering how we should think about the pace of new store openings for 2025. Thank.
Bob Ford: And then lastly, Anthony, you made a couple of references to the pace of growth, right? You're annualizing nearly 500 units a year and it appears you appear well above guidance. And I was wondering how we should think about the pace of new store openings for 2025. Thank you.
Speaker Change: Thank you.
Speaker Change: Okay Bob.
Speaker Change: Hi.
Anthony Hatoum: Okay, Bob. Hi.
Speaker Change: Let's start with the question about gross margins changes.
Anthony Hatoum: Let's start with with the question about gross margins changes. Last quarter, you'll recall that our gross margin was 16.7%. And somebody on that call asked me whether that's the trend. And I replied, you know, This is a number that's a consequence of a lot of individual decisions that we make on pricing, and you shouldn't see much into it as a trend because this number is going to fluctuate quarter to quarter. And what we're seeing here is exactly that. Nothing has changed in our strategy. We continue to price. product by product to maximize volumes and peso operating profit.
Last quarter, you'll recall that our gross margin was 16, 7% and somebody on that call asked me, whether that's the trend.
Speaker Change: And I replied.
Speaker Change: Sure.
Speaker Change: This is a number that's a consequence of a lot of individual decisions that we make on pricing and you shouldn't see much into it as a trend because this number is going to fluctuate quarter to quarter.
Speaker Change: And what we're seeing here is exactly that nothing has changed in our strategy we continue to price.
Speaker Change: Product by product to maximize.
Speaker Change: Volumes and peso operating profit so what you see here as a consequence of what we did over the last two quarters.
Anthony Hatoum: So what you see here is a consequence of what we did over the last two quarters.
Speaker Change:
Speaker Change: Yeah.
Anthony Hatoum: Um Today, on your question, you asked several questions, but one of the questions was, you know, Netto and other competitors. And let me say that. With regards to Netto today, we have about 1,500 Nettos next to our existing stores. and what you're seeing is exactly our current performance continues to be extremely strong. So we welcome all the competition and we're very confident that, you know, our value proposition is stronger than most and what we're doing is the right thing in terms of offering the best value for money to our customers and therefore attracting more customers, increasing the number of transactions and increasing the amount of items that customers are buying from us over time.
Speaker Change: Today on your question you asked several questions, but one of the questions was the.
Net to <unk>.
Speaker Change: Metal and other competitors and let me say that.
Speaker Change: With regards to network today, we have about 1500 Nettles next door.
Existing stores.
Speaker Change: And what Youre seeing is exactly our current performance continues to be extremely strong. So we welcome all the competition and we're very confident that our value proposition is stronger than most.
Speaker Change: And what we're doing is the right thing in terms of.
Speaker Change: Offering the best value for money to our customers and therefore, attracting more customers increasing the number of transactions and increasing the amount of items that customers are buying from us over time.
Marvin you asked a question about real estate too.
Speaker Change: You ask about Bob if not mistaken you asked about operating leverage.
Anthony Hatoum: Marla, you asked a question about real estate. No, you asked about Bob, if I'm not mistaken, you asked about operating leverage. Yes. Is that right?
Speaker Change: Is that right I'll I'll take that one Bob.
Speaker Change: So I mean.
Eduardo Pizarro: I'll take that one, Bob. Thank you.
Speaker Change: Really we've not we've done nothing different from what we've done in the past as you know we continue to look at hours worked at <unk>.
Eduardo Pizarro: So really, we've done nothing different from what we've done in the past. As you know, we continue to look at hours worked at the store level and our distribution centers, really everywhere. And we'll look for ways to continue to make our operations more efficient. So that's the consequence of those actions. So sales expenses were down versus last year. Admin expenses flat versus last year. And as you know, the explanation there is that we continue to make investments in talent, mainly across the board. That also has to do with the additional number of distribution centers, the personnel on our regional headquarters.
Speaker Change: Store level, our distribution centers really everywhere.
We will look for ways to continue to make our operations more efficient.
Speaker Change: So that's the consequence of all of those actions so sales expenses were down versus last year.
Speaker Change: Admin expenses flat versus last year and as you know the explanation there is that we continue to make investments.
Speaker Change: In in talent, mainly across the board that also has to do with the additional number of distribution centers.
Speaker Change: The personnel on our headquarter on regional headquarters.
Speaker Change: And we also have public company expenses now.
Speaker Change: But that is that is what has been driving most states are.
Eduardo Pizarro: And we also have public company expenses now. But that is what has been driving mostly our operating leverage.
Speaker Change: Operating leverage.
Speaker Change: Last question you asked Bob was about you know the pace of store openings and a leader.
Anthony Hatoum: Last question you asked Bob was about, you know, the pace of store openings. We can say that we're going to solidly meet guidance and as we believe that this market can sustain up to 20,000. Bbb Stores over time, it's natural to think that we will be focusing on increasing the pace. of store openings over time.
Speaker Change: We can say that we're going to solidly meet guidance and.
Speaker Change: As we believe that this market can sustain up to 20000.
Speaker Change: BB stores over time.
Speaker Change: It's natural to think that we will be focusing on increasing the pace.
Speaker Change: Of store openings over time, but for now I'll say.
Speaker Change: We're very comfortable in meeting guidance.
Anthony Hatoum: But for now, I'll. say that we're very comfortable in meeting guidance. Um, it's very hard to tease out a netto effect from what is a very strong trend in our same store sales and the way a store performs in general. But I think, you know, pragmatically, if you walk into a 3B and then you walk into a Netto, you can see for yourself. where the customer will prefer to shop.
Speaker Change: Makes perfect sense and then Anthony good question on that though is really more about the reports that are financial difficulty and the affiliates.
Anthony: You know, there's some noise among suppliers that maybe they're having difficulty paying suppliers and some suppliers are refusing to ship and I was just curious if youre seeing that or any evidence of that at the point of sale.
Anthony: In those 1500 overlapping locations.
It's very hard to tease out a neto effect from what is a very strong trend.
In our same store sales.
Anthony: The way a store performs in general.
Anthony: But I think pragmatically, if you walked into a <unk> and then you walked into a network you can see for yourself.
Anthony: Where the customer will.
Anthony: Prefer to shop, and I'll leave it at that.
Speaker Change: Understood. Thank you so much and again congratulations on the quarter.
Anthony Hatoum: And I'll leave it at that.
Speaker: Understood.
Speaker: Thank you so much and again congratulations on the quarter.
Speaker Change: Thank you Bob Okay.
Speaker Change: Yeah.
Operator: Thank you, Bob. Our next question comes from the lineup.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line now.
Speaker Change: Yeah.
Speaker Change: Please state your company name and thus care question.
Operator: Please state your company name and ask your question.
Speaker Change: Hi can you hear me.
Speaker Change: Yes.
Alvaro Garcia: Hi, can you hear me? Yes, I'll do it. Perfect.
Speaker Change: Perfect and what all of US here from from BTG Pactual.
Alvaro Garcia: Alvaro Garcia from from BTG Pactual. Two questions. The first one on your cash balance, even in a quarter with 130 store openings, you're not burning cash.
Speaker Change: Two two questions. The first one on your cash balance.
Speaker Change: Now even in a quarter with 130 store openings, you're not burning cash and I know you're focused on growth, but I was wondering what the long term outlook for dividends might be or if theres any sort of change in in the speech on that front. That's my first question.
Eduardo Pizarro: I know you're focused on growth, but I was wondering what the long-term outlook for dividends might be, or if there's any sort of change in the speech on that front. That's my first question.
Okay, Although I think it's way too early to talk about dividends, but I think.
Eduardo Pizarro: Okay, Alvaro, I think it's way too early to talk about dividends, but I think, you know, anybody who's modeled this business knows that eventually there is significant cash generated. And then the question would be, what's the wise thing to do with this excess cash? And if it's dividends, so be it.
Speaker Change: No.
Speaker Change: It was modeled this business knows that eventually there is significant cash generated.
And then the question would be what's the wise thing to do with this excess cash and if its dividends sobeit.
Speaker Change: But I'll leave it at that for now.
Speaker Change: Okay.
And then my second question is on the Spaghetti chart.
Eduardo Pizarro: But I'll leave it at that for now. Okay.
Eduardo Pizarro: And then my second question is on the spaghetti chart. You know, we haven't seen it in a couple quarters, but I was just wondering if you can maybe give an update on the productivity of the newer stores. I know that they're maybe a bit larger in size, but any sort of color on productivity readings from stores open over the last 24 months would be very helpful. Yeah, you're right about the spaghetti chart in that we refresh it once a year and we'll do so in Q4, but all I can leave you with is that all our vintages continue to perform very solidly and the trend that we've seen with newer vintages doing strongly continues.
We haven't seen it in in a couple of quarters, but I was just wondering if you can maybe give an update on the productivity of of the newer stores I know that there maybe a bit larger in size, but any sort of color on productivity readings from stores opened over the last 24 months would be very helpful.
Speaker Change: You're right about the Spaghetti chart, then that we refresh it once a year and.
Speaker Change: And we will do so in Q4.
But all I can leave you with is that all our vintages continued to perform very solidly and the trend that we've seen with newer vintages doing strongly continues.
Speaker Change: So nothing new to report on that front it seems to be.
Eduardo Pizarro: So, nothing new to report on that front. It seems to be business as usual. Okay, that's great to hear. I'll leave it there.
Speaker Change: Business as usual.
Speaker Change: Okay.
Speaker Change: That's great to hear I'll leave it there. Thank you very much at all congrats on the quarter alone.
Thank you Rob.
Speaker: Thank you very much, gentlemen.
Speaker: Congrats on the forward.
Speaker: Thank you.
Speaker Change: Our next question comes from the line.
Speaker Change: Joseph Caravan. Please state your company name and basket crush.
Joseph Giordano: Our next question comes from the line of Joseph Jordan.
Joseph Giordano: Please state your company name and ask your question. Hi, everyone. Hello, Anthony.
Speaker Change: Hi, everyone Hello, Anthony had a lot of this is Joe Giordano JP Morgan. Thanks for taking my question.
Joseph Giordano: Eduardo, this is Joe Giordano, JPMorgan. Thanks for taking my question.
Speaker Change: Taking my question could <unk>, Cisco course, Laker with D C. The company accelerating while the market that can be accelerated.
Joseph Giordano: I feel like I'll split my question into two pieces. So first, like, we did see the company accelerating while the market actually decelerated. So my question to you, like, maybe like try to resonate with the spaghetti chart, but like trying to look into the quarterly trends, trying to break down the same store sales between tickets and traffic just to try to understand like how more Mexicans are seeing higher value proposition into 3B stores.
Speaker Change: So my question to you I can maybe late great resonated the spaghetti packed with Laker crank look into the quarterly trends.
To break down the same store sales between.
Speaker Change: Ticket.
Speaker Change: And a graphic just to try to understand like how.
Speaker Change: How are.
Speaker Change: More in Mexico is there through higher value proposition into <unk> stores.
The second question goes into laser going back to the gross margin here, we understand that that fluctuates.
Joseph Giordano: The second question goes into like going back to the gross margin and we understand that that fluctuates on a quarterly basis really depends on mix and like commercial stance from both you and the competition. But just wanted to understand like where we should be anchoring like the normalized level when we look at a 12-month, 18-month basis. So if we could assume that 2023 levels would be the levels going forward as a normalized basis.
On a quarterly basis really depends on mix and lake commercially stands from both you and the competition.
Speaker Change: I just wanted to understand like why we should be anchoring lake than normalized level. When we look at that 12 month 18 month basis.
Speaker Change: So if we could assume that the 2023 levels.
We would be.
Speaker Change: The levels.
Speaker Change: Going forward as a normalized days last one elise amine likelihood expansionary flag EMEA comfortable into the guidance for this year.
Joseph Giordano: Last but not least I mean like look at the expansion as you flag I mean you're comfortable into the guidance this year. I think in a seasonality like probably it suggests that you could naturally beat the guidance this year. But looking to the quarter what I wanted to understand is that like how can we reconcile like this higher SG&A leverage right so it was a quite important number for that and the store openings throughout the quarter just to understand how relevant those new stores were to revenues or if we could assume that eventually could have an even higher operating leverage if those stores were open like earlier into the quarter.
Speaker Change: Given the seasonality Lake Providence, It suggests that you could.
Speaker Change: I can repeat the guidance this year, but looking at the quarter, what I wanted to understand is they're like how can we reconcile like this higher SG&A leverage right. So it was a quiet.
You bought a number.
Speaker Change: For that and the store openings that throughout the quarter just to understand how relevant those newer stores where to revenues I E.
Speaker Change: We could assume that I think we could have an even higher operating leverage if those stores were opened.
Speaker Change: During the quarter. Thank you very much.
Speaker: Thank you very much.
Speaker Change: Okay.
Speaker Change: How are you.
Speaker Change: Now let me start with the first question around.
Speaker: Hey, how are you?
Anthony Hatoum: Um, let me start with the first question around what's happening with the tickets and and here this is what I share with you. What we've seen over time is that the number of tickets, the number of transactions has increased notably. The average ticket size has increased healthily. And this despite having year-over-year prices that are completely flat in our country. And for me, that's a very good indication of. very healthy and strong performance.
Speaker Change: What's happening with the tickets and and here. This is what I share with you.
Speaker Change: What we've seen over time is that the number of tickets the number of transactions has increased notably.
Speaker Change: The average ticket size has increased healthily.
Speaker Change: And this despite.
Speaker Change: Having year over year prices that are completely flat in our case.
Speaker Change: And for me, that's a very good indication of <unk>.
Speaker Change: Very healthy and strong performance.
Speaker Change: On the matter of gross margins and.
Anthony Hatoum: On the matter of gross margins and Again, you know, your question of what would be the trend over time. Here's the here's the challenge that I pose to everybody, you know, yes, I can show we can show a higher percentage gross margin Uh, and then it might, you know, drop in another quarter. And the question is what happened to sales? So, as you know, we can, we are constantly trading off. Price versus sales versus. Special Margin Gain And we're always optimizing for the space of margin gains and for volume. So believe me, if you see a decrease in gross margin, we've only done it because we believe we're better off on a volume basis and on a sales basis.
Speaker Change: Again youre.
Speaker Change: A question of what would be the trend over time.
Speaker Change: Here's the here's the challenge that I posed to everybody yes.
Speaker Change: Yes, I can show, we can show a higher percentage gross margin.
Speaker Change: And then it might drop in another quarter and the question is what happened to sales. So as you know we can we are constantly trading off price versus sales versus <unk>.
Speaker Change: So margin gained.
And we're always optimizing for this peso margin gains in four volumes. So believe me if if if you see a decrease in gross margin. We've only done it because we believe we're better off on a volume basis and on a sales basis.
Speaker Change: Otherwise it would not make sense to do it.
Anthony Hatoum: Otherwise, it would not make sense to do it. And I repeat, how we do it is, again, we don't have a gross margin target. We are basically looking at SKU by SKU and optimizing pricing for that SKU to maximize what I just said, which are unit volumes and peso margin.
Speaker Change: And I repeat how we do it is again, we don't have a gross margin target.
We are basically looking at a SKU by SKU.
Speaker Change: Optimizing pricing for that <unk> to maximize what I, just said, which are unit volumes in peso.
Margin.
Speaker Change: So modeling of course.
Speaker Change: Requires you to put a stake in the ground and say, what's the margin going to be over time and you might recall from previous conversations. We've always said you know in our models, we keep our gross margins flat forever.
Anthony Hatoum: So, modeling, of course, requires you to put a stake in the ground and say, what's the margin going to be over time? And you might recall from previous conversations, we've always said, you know, in our models, we keep our gross margin flat forever. And so, you know, I'll leave you with that. At some point, one has to pick a number and model it forever. And that's what we've done internally.
Speaker Change: And so I'll leave you with that.
Speaker Change: At some 0.1 has to pick a number and model it forever and that's what we've done internally.
Speaker Change: There was too low or questions that you had you had one more question. If you don't mind, we'd beat it up last one in terms of guidance in terms of expansion stores I would like to try to understand like how is like how is like how are the openings are spread out throughout the quarter just to try to reconcile it is like.
Joseph Giordano: There was two more questions. You had one more question.
Joseph Giordano: If you don't mind, repeat it up.
Joseph Giordano: Last one in terms of guidance in terms of expansion. Store that was like, just to try to understand, like, how is that? Like, how is it? Like, how are the openings spread out throughout the quarter? Just to try to reconcile this, like, better than expected operating leverage versus, like, the contribution of those stores because eventually, like, maybe some stores were like, really backloaded. We had the expense, but not the benefit of sales. So eventually, like, the operating leverage would be eventually higher than that.
Speaker Change: Better than expected operating leverage.
Speaker Change: Like the contribution of those stores because of anti Lake maybe from scores. We're like really Backloaded, we had the expense, but not the benefit of sales of ethylene.
Speaker Change: The operating lab it could be eventually higher than that and Anthony if you could kind of like help us breaking down the same store sales between traffic and ticket would be.
Joseph Giordano: And Anthony, if you could kind of, like, help us breaking down the same store sales between traffic and ticket would be amazing. Thank you very much.
Speaker Change: Thank you very much guys.
Let's answer real estate for a second.
Anthony Hatoum: Let's answer real estate for a second. We would love. that are real estate teams. are producing stores. on a very regular basis that are flat and we, you know, we'd rather not see any fluctuations in number of store openings, month to month. But the reality is that this is a very dynamic market and things happen in some months. faster than others. And you see, higher numbers of stores in 1 month and lower in another.
Speaker Change: We would love.
Speaker Change: That our real estate teams.
Speaker Change: Or producing stores.
Speaker Change: On a very.
Speaker Change: Regular basis that are flat and we read.
Speaker Change: We'd rather not see any fluctuations in.
Speaker Change: And number of store openings.
Speaker Change: Two months.
Speaker Change: But the reality is that this is a very dynamic market and things happen in some months.
Speaker Change: Foster than others, and you see higher numbers of stores in one month and lower than another.
So for me to tell you with certainty what the number is going to be on a quarter to quarter basis is always a tough call and we'd rather.
Anthony Hatoum: So, you know, for me to tell you with certainty what the number is going to be on a quarter-to-quarter basis is always a tough call, and we'd rather... know, just stick to our numbers on an annual basis. Are you going to see a significant increase? In the next quarter, I would say. No, you will see a healthy increase, but nothing that is going to say, wow, everything has been bunched in the last quarter of the year. So, I'm not sure if I answered your question, but this is... This is how I'd look at things.
Speaker Change: And I'll just stick to our numbers on an annual basis.
Speaker Change: Are you going to see a significant increase in.
Speaker Change: In the next quarter I would say.
Speaker Change: No you'll see in a healthy increase but nothing that is going to say well everything has been bunched in the last quarter of the year.
Speaker Change: So I'm not sure if I answered your question, but this is.
Speaker Change: This is how I would look at things and would that same to you Joe.
Speaker Change: It will be tough.
Eduardo Pizarro: And with that same view, Joe, Talk to to answer the question on operating leverage for Q4 specifically, as you're talking about, but overall, as well, as you've seen on a yearly basis, we continue to strive for for operating leverage, particularly on on on sales.
<unk> talked to to answer the question on operating leverage for Q4, specifically as we're talking about but overall as well as you've seen on a yearly basis, we continue to strive for operating leverage.
Speaker Change: Particular on sales expenses.
Speaker Change: Okay.
Speaker Change: You had one more question about.
Speaker Change: Tickets and traffic Joe.
Joseph Giordano: You had one more question about tickets and traffic, Joe? Yeah, like, just if you could, like, help us breaking down, like, the contribution of ticket and traffic to Simster sales. I know you guys typically don't break that info, but I mean, like, uh, that's available for me.
Speaker Change: I guess, if you could like help us breaking down like they are contributing of ticket and traffic the same store sales.
Speaker Change: I know you typically don't break that April, but that mainly pad that's available from H.
Yeah, I know, it's valuable, but we don't as you said, we don't go down into that level of details, but I would just repeat what I said before I think.
Anthony Hatoum: Yeah, I know it's valuable, but we don't, as you said, we don't go down into the level of details, but I just repeat what I said before, I think. The bulk is coming from a strong increase in transactions. then followed by a good increase in ticket size. and I said, you know, this is despite seeing, you know, No price increases quarter to quarter when we look at our average. Item price last quarter. From 23, Q3 23 versus Q4, Q3 24, it's flattish.
Speaker Change: The bulk is coming from a strong increase in transactions.
Speaker Change: Then followed by <unk>.
Good increase in ticket size.
Speaker Change: And as I said you know this was despite seeing you know.
Speaker Change: No price increases quarter to quarter, when we looked at our average <unk>.
Speaker Change: Price last quarter.
Speaker Change: From 'twenty three to $3 23 versus two for Q3 'twenty four.
Speaker Change: It's flattish.
Perfect. Thank you.
Speaker Change: Thank you Joe.
Speaker: Perfect, thank you.
Speaker Change: Our next question comes from the line now Andrew.
Speaker: Thank you, Joe.
Andrew Root: Our next question comes from the line of Andrew Root.
Please state your company name and basket crush.
Andrew Root: Please state your company name and ask your Hi, Andrew Rubin from Morgan Stanley. Thanks for the questions. I'd like to dig in a bit on the comments around elasticity.
Speaker Change: Hi, Andrew Ruben from Morgan Stanley Thanks for the questions.
Speaker Change: To dig in a bit on the question on the comments around elasticity. So you mentioned the reinvestment in price and I'm curious when you make those changes at a product level do you tend to see the uplift immediately or is it something that takes consumers time to see and you tend to see the benefit of higher sales at the product level over a period of <unk>.
Andrew Root: So you mentioned the reinvestments in price, and I'm curious, when you make those changes at a product level, do you tend to see the uplift immediately, or is it something that takes consumers time to see, and you tend to see the benefit of higher sales at the product level over a period of weeks or months? I think that would be helpful to understand.
Speaker Change: Weeks or months I think that would be helpful to understand and then second we've seen industry sales.
Andrew Root: And then second, we've seen industry sales decelerate, and in difficult economic times, maybe you see a trade down to T&S, Trace Bay, but trying to understand the cadence with which that happens over the short term. Do you see yourself more leveraged to decelerating industry trends, or at what point do you start to see an uplift from trade down into the channel? Any color on those points would be very helpful.
Speaker Change: <unk> and <unk>.
Difficult economic times may be see trade down to D&S transpire, but trying to understand the cadence with which that happens over the short term do you see yourself more leverage to.
Speaker Change: Decelerating industry trends or at what point do you start to see an uplift from trade down into the channel any color on those points would be very helpful.
Good thing I'm very glad you asked the question about the lag in terms of once you know when.
Anthony Hatoum: thing. I'm very glad you asked the question about lag in terms of once you know when when you change a price. when you see the effect of it. And I'm gonna tell you, it's all over the place. Some categories respond immediately and some categories respond literally over three quarters. And we'll see the impact just continuing to develop over a much longer period of time. So sometimes it's a little bit tricky when you're looking at things quarter to quarter where you see, for example, an impact on gross margin and then you basically look at your dollar contribution in terms of margins.
When you change a price.
Speaker Change: When do you see the effect of it and I'm going to tell you. It's all over the place some categories respond immediately.
Speaker Change: And some categories respond literally over three quarters, and we will see the impact just continuing to.
Speaker Change: Develop over a much longer period of time, so sometimes it's a little bit tricky. When you are looking at things quarter to quarter, where do you see for example, an impact on gross margin and then you basically look at your dollar contribution in terms of margins and you don't immediately see within the quarter and impact that is.
Anthony Hatoum: And you don't immediately see within the quarter an impact. That is mostly what will happen when you're doing price changes on categories which have that lag I'm talking about. uh more so highlighted if you're doing it in the third month of the quarter and then basically it spills over into the next quarter. So don't be surprised if you see some of that happen.
Speaker Change: It's mostly a what will happen when you do when your when Youre doing price changes on categories, which have that lag I'm talking about.
Morceau: Morceau highlighted if youre doing it in the third month of the quarter and then basically it spills over into the next quarter. So don't be surprised if you see some of that happening.
Morceau: In terms of your second question and what's happening in the market.
Anthony Hatoum: Um In terms of your second question, and what's happening in the market? Yes, we've heard that, you know, the consumer might be Feeling some tightness in terms of their wallet. Um We haven't seen any of this in 3B. We continue to perform very strongly in it, you've seen our same store, the trends versus Untaad in terms of same store sales. We seem to be rebuffing the tendency. And so. Do you see in that that people are? Switching over to TRES-B, it's probably happening. We have no way of measuring exactly how much and how fast, but all we can see is the number of transactions going up.
Morceau: Yes, we've heard that the consumer might be.
Morceau: Feeling some tightness in terms of their wallet.
Morceau: Hmm.
We haven't seen any of this in the <unk>.
Morceau: We continued to perform very strongly and if you've seen our same store.
Morceau: The trends versus some Todd in terms of same store sales we seem to be.
Morceau: Rebuffing the tendency.
Morceau: And so.
Morceau: Do you see in that people are.
Morceau: Switching over to resume its probably happening we have no way of measuring.
Morceau: Exactly how much and how fast but all we can do all we can see is the number of transactions going up and we have to guess that some of that is taking place plus you add to that that our value proposition is continuously improving so that has another effect.
Anthony Hatoum: And we have to guess that some of that is taking place. Plus you add to that, that our value proposition is continuously improving. So that has another effect. And there's a ton of effects that explain the continued strength of TRES-B and this is probably one of them. But what we found in the past is that once you become a TRES-B customer, you're very sticky. And so when things get better, if that's the case that things have gotten worse, then we're very unlikely to lose that customer.
Morceau: There's a ton of perfect studying that explain.
The continued strength of Alcatraz Ben.
Morceau: This is probably one of them, but what we found in the past is that once you become.
Morceau: This big customer.
Morceau: You are very sticky.
Morceau: And so when things get better if that's the case that things have gotten worse.
Morceau: And then we're very unlikely to lose that customer.
Speaker Change: Great. That's helpful color. Thanks Anthony.
Speaker Change: Sure thing.
Speaker: Great. That's helpful, Culler. Thanks, Anthony. Sure thing.
Speaker Change: Thanks, Andrew.
Speaker Change: Our next question comes from the liner extra nugget.
Hector Maya: Thanks, Anthony. Our next question comes from the line of Hector Maya.
Speaker Change: Thank you your company name and ask your question.
Operator: Please state your company name and ask your question. Hector, are you there?
Speaker Change: Victor are you there.
Speaker Change: Operator, if actors.
Speaker Change: It is not connecting let's leave until the next slot.
Operator: Operator if actor is It's not connecting.
Speaker Change: Yes.
Operator: Let's leave it until the next slot. Yes.
Speaker Change: Next question comes from the line of.
Speaker Change: Let me elaborate.
Daniela: Our next question comes from the line of Daniela.
Please state your company name and ask your question.
Daniela: Please state your company name and ask your Danilo, we heard you a little bit and then you cut off. Sorry, can you hear me now? Yeah, thank you so much for taking my question, Daniella with HSBC.
Speaker Change: Hi, everyone.
Speaker Change: Donnelley, we heard you a little bit and then you put up.
Speaker Change: Sorry.
Speaker Change: Can you hear me now.
Speaker Change: Perfect Yep.
Thank you so much for taking my question in yellow with HSBC question for in the wire, though can.
Speaker Change: Can you just help us understand I saw that your cash position in U S dollar denominated.
Daniela: Question for Eduardo. Can you just help us understand I saw that your cash position in US dollar denominated was 2964, so almost 7% higher sequentially. But the FX gain was lower, like 300 million versus 210. So I was wondering if there was any change in the FX instrument or where you're, you know, the level that you are at because I actually calculated that you should have had a bigger gain in Q3 and how should we think about this FX gain for Q4? So that's my first question.
Speaker Change:
Was 296, four so almost 7% higher sequentially, but the FX gain was lower like a 300 million versus June 10. So I was wondering if there was any change in the FX instrument.
Speaker Change: Or where you were.
Speaker Change: You know the level that you are ads because I actually calculated that you should have had a bigger gain in Q3 and how should we think about this FX gain for Q4. So that's my first question.
Speaker Change: Hi, Daniela Yep. Thank you.
Speaker Change: I'll make it more simple if we look at it in U S dollars. So what we have the IPO proceeds after paying off the promissory notes et cetera was the balance was 170 million 170.
Eduardo Pizarro: Hi, Daniela. Yeah, thank you.
Eduardo Pizarro: I'll make it more simple if we look at it in U.S. dollars. So what we have, the IPO proceeds after paying off the promissory notes, et cetera, was the balance was $170 million, $170. We have in those short-term deposits around $150 million, and the balance is in our... daily balance in that U.S. account that we have. So nothing has changed, really. It's been increasing with interest, but that's it.
Speaker Change: We have in those short term deposits are around $150 million and the balances and in our in our <unk>.
Speaker Change: Daily daily balance and that are in that.
Speaker Change: U S account that we had so that had nothing has changed really.
It's been increasing.
Speaker Change: With interest, but that's that's into we have not transfer any of that cash to two of the operation in Mexico.
Eduardo Pizarro: We have not transferred any of that cash to the operation in Mexico.
Okay. So Pat down for Q4 for Q4, just your second question for Q Q4, assuming the same thing we continue to be self funded and.
Eduardo Pizarro: Okay, so for Q4, just your second question, for Q4, assume the same thing. We continue to be self-funded and we will not be making transfer to the operation. Okay, so the same amount and then use whatever FX we have. Okay, thanks.
Speaker Change: We will not be making transferred to two to the operation.
Speaker Change: Okay. So did the same amount and then correct.
Speaker Change: Use whatever FX.
Speaker Change: Do we have.
Speaker Change: Thanks.
Speaker Change: And then I just wanted to follow up and I know this has been asked multiple times.
Eduardo Pizarro: And then I just wanna follow up in, I know this has been asked multiple times today, but maybe just ask it in a different way. Have you seen the need to reinvest more in prices to drive sales, less bonus from suppliers or any specific change? Because we are still trying to understand how the margin went from record high to, you know, flat. And whether the accumulated margin, which is 16.3, maybe that's like the level that we should use in our forecast. So maybe help us guide as to what level should we use in our forecast.
Speaker Change: And to date, but maybe just ask it in a different way.
Speaker Change: Have you seen the need to.
Speaker Change: Reinvest.
Speaker Change: More and prices to drive sales.
Speaker Change: Less bonus from suppliers or any specific.
Speaker Change: The change because we are still trying to understand how the margin went from record high too.
No flat and whether the accumulated margin, which is $16 three maybe that's like the level that we should use in our forecast. So maybe help us guide as to what level should we use in our forecast.
Speaker Change: Okay.
Speaker Change: Again back to the very tricky question of reality versus modeling where in reality we've explained.
Eduardo Pizarro: Okay. Again, back to the very tricky question of, you know, reality versus modeling, where in reality, we've explained how we price I'm going to say on a continuous basis, because this is not, you know, an exercise, a one-time exercise, but it's something that, in the company, we are continuously elasticity-testing our products, and we're continuously optimizing price levels and continuously making decisions. The leverage we're getting from scale and the efficiencies we've been getting from scale by just becoming bigger together with our suppliers, whether it gets translated into a gross margin number that, as you, as we've all seen fluctuates, or whether it goes into price.
Speaker Change: How we.
Speaker Change: Price.
Speaker Change: I'm going to say on a continuous basis, because this is not an exercise of onetime exercise, but it's something that.
Speaker Change: And the company, we are continuously elasticity testing our products and we're continuously optimizing our price levels and continuously making decisions if.
Speaker Change: The leverage we're getting from scale and the efficiencies we've been getting from scale by just becoming bigger.
Speaker Change: Together with our suppliers, whether it gets translated into a gross margin number that as you as we've all seen fluctuates or whether it goes into price and then as Andrew correctly pointed out gets a reaction in terms of sales, whether it's immediate or with a lag.
Eduardo Pizarro: And then, as Andrew correctly pointed out, it's a reaction in terms of sales, whether it's immediate or with a lack. And that's the the reality. And we only do that because we believe that this is the right thing to do. And it's driving our value proposition improvements over time and that in turn is driving same store sales that continue to be very healthy and in terms that scale so it's this virtual cycle that makes us extremely competitive in the market.
Speaker Change: And that's the reality and we only do that because we believe that this is the right thing to do and it's driving.
Speaker Change: Our value proposition improvements over time and that in turn is driving same store sales that continued to be very healthy and in terms that scale. So it's this virtuous cycle that.
Speaker Change: It makes us extremely competitive in the market.
Speaker Change: And now we flipped to how do we model this which is very dynamic it would be.
Eduardo Pizarro: And now we flip to how do we model this, which is very dynamic and would be. highly complex to put in an Excel spreadsheet. and you know the way we've handled it internally is very simply we've made an assumption on what a typical sales curve for a store for a store is and when a new store opens and you've seen the improvements. and store every you know, every vintage is getting stronger and better in terms of where they start and how their sales curve performs steeper and therefore, you know, breaks even faster. And we've assumed the sales curve for a given.
Speaker Change: Highly complex to put in an excel spreadsheet.
Speaker Change: And the way we've handled it internally is very simply we've made an assumption on what our typical sales scarf where store for a store is and when a new store opens and you've seen the improvements in.
Speaker Change: In store.
Speaker Change: Every vintage is getting stronger and better in terms of where they start and how their sales curve.
Speaker Change: Performs steeper and therefore, no breaks even faster.
Speaker Change: And we've assumed a sales curve for a given gross margin.
Speaker Change: And so you cannot enlink one from the other at least when we look at it we don't see.
Eduardo Pizarro: And so you cannot unlink one from the other, at least when we look at it, we don't. So if you put a lower gross margin, then you must. change your sales curve and make it a steeper and higher sales curve. One goes in hand with the other.
Speaker Change: So if you put a lower gross margin than you must change.
Speaker Change: Change your sales curve and make it.
Speaker Change: Cheaper and higher sales grew one goes and handle the other.
Speaker Change: And unfortunately, I'm not going to put a number on the table, but all I'm going to say is.
Eduardo Pizarro: Um, and unfortunately, I'm not going to put a number on on the table, but all I'm going to say is. Whatever number you pick in terms of your your model gross margin, just make sure that the sales curve that you put for each store that opens makes sense at that level. And you can look at historically historic trends and basically say, this makes sense. And you can assume that these improve over time.
Speaker Change: Whatever number you pick in terms of your your model. The gross margin just make sure that the sales curve that you put for each store that opens.
Speaker Change: Makes sense at that level and you can look at historically historic trends and basically say.
Speaker Change: This makes sense and you can assume that decent prove over time and that would be my recommendation in terms of how to look at it.
Speaker: And that would be my recommendation in terms of how to look at Thank you. That's very helpful and detailed.
Speaker Change: Thank you that's very helpful and detailed.
Speaker Change: Okay.
Speaker Change: Our next question comes from the liner externally.
Hector Maya: Our next question comes from the line of Hector May.
Speaker Change: Please state your company name and ask your question.
Operator: Please state your company name and ask your question. Hector, I think we can't hear you. If you want to send your questions in writing, we'll try to answer them.
Speaker Change: <unk>, Inc. We can't hear you.
Speaker Change: Victor if you want to send your questions in writing, we'll try to answer them.
Okay.
Speaker Change: Our next question comes from the line of <unk> <unk>.
Luis Martinez: Our next question comes from the line of Luis Martinez. Please state your company name and ask your question. Luis, you appear to be on your own mute. Yeah, it was a mistake. I'm sorry. Yeah, that was a mistake. Please go ahead. No, I don't have any questions. It wasn't taken from me. OK, so no problem. Yeah, sorry.
Speaker Change: The company name and ask your question.
Speaker Change: Luis you appear to be on.
Speaker Change: You're on mute.
Speaker Change: Yeah. It was a mistake I'm sorry, yes, I wasn't sure.
Speaker Change: Please go ahead I don't know I don't have any question it wasn't a take it for me.
Speaker Change: Okay. So no problem. Thank you, yes, sir.
Speaker Change: Our next question comes from the line from Dow automotive fittings.
Santiago Alvarez-Bringas: Our next question comes from the LIMA, Chantelle Alvarez-Varines. Please state your company name and ask your question. Hello, this is Santiago Alvarez-Bringas with Summit Management. Congratulations on the outstanding growth from store openings and strong same-sources growth. We can see the strong ramp-up in Capex to sustain the new store's growth.
Speaker Change: State Your company name and ask your question.
Speaker Change: Hello decent tailwind as lingers with summit management, congratulations on the outstanding growth with store openings and strong same store sales growth.
We can see the strong ramp up in capex to sustain the new stores growth can you help us understand more about the unit economics around the cost of a new store and any color on the timing about its representation on the financial statements.
Santiago Alvarez-Bringas: Can you help us understand more about the unit economics around the cost of a new store and any color on the timing about its representation on the financial statements? And going forward, is there any sweet spot in defining the size of CapEx as a percentage of cash flow or any other metric?
Speaker Change: And going forward is there any sweet spot in defining the size of capex as a percentage of cash flow or any other metric.
Speaker Change: Thanks.
Speaker Change: Okay.
Eduardo Pizarro: Thank you.
Speaker Change: Hi, Thank you for your question.
Speaker Change: First off in unit economics.
Eduardo Pizarro: Hi, Satya. Thank you for your question. First off, in unit economics... There's a fairly detailed slide on our perspectives that talks about our target unit economics that it describes what happens in the first three years of a store. And we also talk about the target CAPEX, which is 3.9 million pesos per store. And also talk about the cash on cash. So if, I would encourage you to look at that slide and that's the target and that's where we continue to be at today. And that was your first question.
Speaker Change: Theres a fairly detailed slide on our perspectives.
Speaker Change: That talks about our target unit economics that are at.
Speaker Change: Describes what happens in the first three years of a store and we also talk about the the target Capex, which is $3 9 million vessels.
Speaker Change: Per store.
Speaker Change: And also talk about the cash on cash so I would encourage you to look at that that slide and that's the target and that's where we continue to be at today.
Speaker Change: And I will do.
Speaker Change: That was your first question Ben on your second question was about it was there if I understood correctly is there a sweet spot in terms of Capex as a percentage of sales was that correct.
Eduardo Pizarro: And your second question was about, was there, if I understood correctly, is there a sweet spot in terms of CapEx as a percentage of sales? Was that correct? That's what I heard. Okay. Yeah. As a percentage of sales for cash flow. We don't really have a, we don't really look at capex as a percentage of sales or, or, or, but by that, but that metric for us really is a consequence. What I can tell you is that we. And as you've seen our track record, we reinvest everything back into growth, meaning that this year, as you've seen, our guidance is 380 to 420 new stores.
What I heard okay, yes, as a percentage of sales for cash flow.
Speaker Change: We don't really have a.
Speaker Change: We don't really look at capex, as a percentage of sales or or or.
Speaker Change: By that but that metric for us really as a consequence, what I can tell you that.
Speaker Change: We.
Speaker Change: And as you've seen our track record, we reinvest everything back into growth meaning that.
Speaker Change: This year is as you've seen our guidance is three 8% to 420, new stores. So we want to open as many stores as possible.
Eduardo Pizarro: So we want to open as many stores as possible. So we reinvest everything back into it. So there's really no guidance today as or a sweet spot, as you call it, in terms of CapEx as a percentage of sales or as a percentage of cash flow. So that's pretty much our view.
So we reinvest everything back into it so theres really no guidance today as or a sweet spot as you call. It in terms of our capex as a percentage of sales as a percentage of cash flows. So that's pretty much our view.
Speaker Change: Thank you very much.
Speaker: Thank you very much.
Our next question comes from the line of Jean Zhang.
Gene San: Our next question comes from the line of Gene San.
Speaker Change: Please state your company name and ask your question.
Gene San: Please state your company name and ask your question. Yes, hi, captains of capital LLC. Gentlemen, could you please take some time and talk more broadly about your relationship with the suppliers? Um, you know, just sort of with a long term perspective. There's the price aspect, the non-price aspect, right? As you gain scale, you are negotiating with them. Just longer term, how do you think about that?
Speaker Change: Yes, hi.
Speaker Change: Tattoos of capital LLC.
Speaker Change: Gentlemen could.
Speaker Change: Could you. Please take some time and talk more broadly about your relationship with the suppliers.
You can now just sort of out with a long term perspective.
They're surprised us back the non price aspect right.
Speaker Change: As you gain scale you are negotiating with them just longer term, how do you think about that relationship there.
Speaker Change: Theyre not necessarily exclusive with you by Ryder.
Anthony Hatoum: they are not necessarily exclusive with you by my style, selling online these days just generally how you think about that. from a long-term perspective.
Speaker Change: You know are they sounding online. These days just generally how you think about that relationship.
Speaker Change: I'm a long term perspective.
Speaker Change: Hi, Jen.
Speaker Change: To start with a very high level answer to your question.
Anthony Hatoum: Hi, Jim. I'm going to start with a very high level answer to your question. There is absolutely no doubt that as you get bigger and you scale your relationship with suppliers of any kind gets better and you can get better terms. on everything that you're buying.
Speaker Change: <unk>.
Speaker Change: There is absolutely no doubt that as you get bigger and your scale.
Speaker Change: Your relationship with the suppliers of any kind.
Speaker Change: Gets better.
Speaker Change: And you can get better terms.
Speaker Change: On everything that you are buying.
Speaker Change: And then you need to break it down into <unk>.
Anthony Hatoum: And then you need to break it down into Two groups, one are the traditional FMCG companies with whom we have an excellent relationship. and our our relationships and what we do with them has been improving continuously over time in terms of what we offer our customers coming out of these traditional FMCG companies and the value proposition that through their products we're able to offer to our customers.
Speaker Change: Two groups one are the traditional FMC G companies with whom we have an excellent relationship.
Speaker Change: And our.
Speaker Change: Okay.
Our relationships and what we do with them has been improving continuously over time in terms of what we offer our customers coming out of.
Speaker Change: Is traditionally slow F Mcg companies.
Speaker Change: And the value proposition that through their products, we're able to offer to our customers.
And then the second group are our suppliers, who supply our private label products.
Anthony Hatoum: And then the second group are our suppliers who supply our private label products. And these all started as small and medium sized companies and over the course of The last 15 years have grown at the same pace that we've grown at. And today are not so small and not so medium anymore. And with them, the relationship, let's say, is more, is deeper. With them, we do significant planning ahead of time. We work very closely with one very clear objective in mind, which is to bring our products with the best value proposition to our customers. And again, scale plays a huge role in being able to achieve these efficiencies for both.
Speaker Change: And these all started as small and medium sized companies and over the course of.
Speaker Change: The last 15 years.
Speaker Change: Have grown at the same pace that we've grown up.
Speaker Change: And today are not so small and not so medium anymore.
Speaker Change: And with them the relationship let's say is more is deeper.
Speaker Change: With them, we do significant planning ahead of time, we are we work very closely with one very clear objective in mind, which is to bring our products with the best value proposition to our customers and again scale plays a huge.
Speaker Change: Role in being able to achieve these efficiencies.
Speaker Change: Efficiencies.
For both.
Speaker Change: So again.
Speaker Change: This was all planned way ahead of time.
Anthony Hatoum: So, again, you know, this is all planned way ahead of time. We work very closely with all our suppliers. And the objective is super clear. Just make sure that every year you have the supply and what you're supplying is the best possible product for the price.
Speaker Change: We work very closely with all our suppliers.
Speaker Change: And the objective is super clear.
Speaker Change: Just make sure that every year, you have to supply and what youre supplying us the best possible product for the question.
Speaker Change: Got it thank you.
Alvaro Garcia: God, thank you. Our next question comes from the line of Alvaro Garcia.
Speaker Change: Our next question comes from the line of Alethia.
Speaker Change: State Your company name and ask your question.
Alvaro Garcia: Please state your company name and that group. There you go. Thanks for the follow-up. I really appreciate it. Álvaro García from BTG Pactual.
Okay.
Speaker Change: Yes.
Speaker Change: Okay. Thanks.
Speaker Change: Very good thanks for the follow up I really appreciate it.
Alberto Garcia from BTG Pactual.
Just.
Speaker Change: Two follow ups.
Alvaro Garcia: Just two follow-ups. One, sort of housekeeping on the diluted share count, which you provided, which is great to see. Maybe if you can maybe give some color on what's in that and what's not in that. I'm assuming the non-vested shares are not in there, but any color there would be greatly appreciated.
Speaker Change: One sort of housekeeping on the fully diluted share count, which you provided which is great to see the one of the maybe if you can maybe give some color on what what's what's in that and what's not in that I'm assuming.
Speaker Change: For the non vested shares are not in there, but any color there would be.
Speaker Change: We appreciate it and then the second question.
Speaker Change: Sort of more on top line dynamics.
Alvaro Garcia: And the second question, sort of more on top line dynamics. In 3Q specifically, there was a lot of rain, right? There's a lot of rain and we've seen a lot of commentary on. Um, yeah, you know. a big shift towards a traditional channel, but I'm curious as to how the rain impacted demand for you, because technically you're in a walking distance. And I'm not sure if the rain was a good thing or a bad thing. So any comments there would be helpful.
Speaker Change: Uh huh.
Speaker Change: In <unk>, specifically there was a lot of rain right. There's a lot of rain and we've seen a lot of commentary on.
Speaker Change:
Yeah.
Speaker Change: A big shift towards the traditional channel, but I'm curious as to how the rain impacted demand for you because.
Speaker Change: Technically you're not walking distance and.
And.
Speaker Change: I'm not sure if the rain was a good thing or a bad thing for the rest of it so any comments there would be helpful. Thank you.
Speaker Change: So on the Admiral.
Anthony Hatoum: Thank you.
Speaker Change: On the share.
Eduardo Pizarro: So on the eyebrow, on the sure account. These are what's included this quarter and we included the The options.
Speaker Change: Share count.
Speaker Change: Visa what's included this quarter and we included the.
Speaker Change: The options.
Speaker Change: That could potentially be converted and these have to do with those options that are in both in the money invested.
Eduardo Pizarro: that could potentially be converted and these have to do with those options that are in both in the money and vested and this is has to do with our accounting team it's utilizing is 33 so going back to the norm just not to get into a lot of details right now but it's based on is 33 but it's it's basically the the options that are vested in the money That was your first question. And then your second question was on the effect on rain during the quarter. And was that good or bad? Tough question to answer.
Speaker Change: And this has to do with all of our our accounting team utilizing I S 33.
Going back to the normal just not to get into a lot of detail right now, but it's based on IL 33, but it's a it's basically the options that are vested in the money.
Speaker Change: That was your first question and then your second question was on the effect on reign.
Speaker Change: During the quarter and was that good or bad.
Speaker Change: Tough question to answer.
Speaker Change: Rain does have an impact you know people have a tendency not to go shopping when it's raining here.
Anthony Hatoum: Rain does have an impact, you know, people have a tendency not to go shopping when it's raining here.
Speaker Change: But net net no we haven't seen any significant impact of that.
Speaker: But net-net, no, we haven't seen any significant impact of Great, thank you.
Speaker Change: Great. Thank you.
Speaker Change: We will pause for further questions.
Speaker Change: Did we received record of my other questions.
Operator: We will pass for further questions. Did we receive Dr. Meyer's question? Yeah, Hector, we have we have a sec.
Speaker Change: Yes, but we have we have a second we have questions from you.
Speaker Change: Let me start off.
Hector Maya: We have questions from you. Let me start off, you're asking on gross margin, we'll start off with the second one. I just wanted to understand if something there can also be related to higher prices from suppliers with a weaker peso. Also to see how you're thinking on the pricing strategy of a weak peso creates certain pressure on how gradually would you pass this to the consumers and if you could roughly share the percentage of cost of goods directly or indirectly in dollars to suppliers or imports. that will be great.
Speaker Change: You're asking.
Speaker Change: On gross margin, we'll start off with the second one just wanted to understand if something there can also be related to higher prices from suppliers with a weaker peso.
Also to see how youre thinking on the pricing strategy of a weak peso create certain pressure on how gradually would you pass this through to consumers.
Speaker Change: If you could roughly share the percentage of cost of goods directly or indirectly in dollars to suppliers or imports.
That will be great.
Let me, let me answer this sector.
Anthony Hatoum: Let me let me answer this, Hector. This is not the first time we've gone through a special weakness period, and you're absolutely right to say that. Behind the scenes, if you go a couple of layers in terms of looking at manufacturing costs, a lot of items are dollarized. So you will eventually see the impact of a weaker peso and increasing peso costs. And then comes the million-dollar question of how fast do these increases get passed on to the consumer? And if I just look at history, what I've seen is that phenomenon takes anywhere between eight and 18 months to happen.
This is not the first time, we've gone through a <unk>.
Speaker Change: Peso weakness period.
Speaker Change: Youre, absolutely right to say that.
Speaker Change: Behind the scenes. If you go a couple of players in terms of looking at manufacturing costs a lot of items are dollarized. So.
Speaker Change: You will eventually see the impact of a weaker peso and increasing.
Speaker Change: Vessel costs.
Speaker Change: And then comes the million dollar question of how fast do these increases get passed on to the consumer.
Speaker Change: And if I just look at history, what I've seen is that the <unk>.
Speaker Change: <unk> takes anywhere between eight and 18 months.
Speaker Change: To happen.
Speaker Change: And once it's been passed on you basically are back to where you were before with the million.
Hector Maya: And once it's been passed on, you basically are back to where you were before, as if it never happened. The trends continue and you catch up to what the trend was. That's been our experience in terms of seeing peso weakness. Any questions? No, that's it. That was the only question.
Speaker Change: As if it never happened the trends continue and you catch up to what the trend was that's been on our our experience in terms of seeing you know peso weakness.
Yeah.
Speaker Change: Second questions no. That's it that was the only question.
Speaker Change: Yes.
Speaker Change: The robust for any further questions.
Operator: We will pause for any further questions.
Yeah.
Speaker Change: Operator, do we have any more questions from anybody.
Speaker: Operator, do we have any more questions from anybody? Okay, well, again, thank you to our investors and to the analysts that are covering us. And as always, we're very happy to answer all your questions. Please feel free to reach out to us at any time. And thank you again very much.
Speaker Change: Okay.
Speaker Change: Okay, well again.
Speaker Change: Thank you to our investors and to the analysts that are covering us.
Speaker Change: And as always we're very happy to answer all your questions.
Please feel free to reach out to us at any time line. So thank you again very much.
Speaker Change: That concludes today's call you may now disconnect.
Operator: That concludes today's call. You may now disconnect.