Q1 2025 BBB Foods Inc Earnings Call
Operator: Good morning, everyone.
Good morning, everyone my name and they won't be here.
Leonora: My name is Leonora and I will be your conference.
Leonora: Welcome to Tiendas 3B's first quarter 2025 conference. All lines have been placed on mute to prevent any background noise. There will be a question and answer session after the speaker's remarks and the instructions will be given at that time. Please ensure that your full name is displayed correctly on Zoom. If not, please take a moment to edit your display. Also, please note that this call is for investors and analysts.
Welcome to demonstrate that.
Conference.
Conference call.
All lines have been placed on mute to prevent any background noise.
There will be a question and answer session. After the Speakers' remarks.
Instructions will be given at that time.
Please ensure that your full name is displayed correctly in film.
Jane: If not please take a moment to edit Jane explained.
Speaker Change: Also please note that this call is for investors and then a question from the media will not be taken now should the COVID-19.
Leonora: Questions from the media will not be taken, nor should the COVID report have. 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.
Leonora: Today, we're joined by Tiendas Tres Reyes, Chairman and Chief Executive Officer, Anthony Hatoum, and Chief Financial Officer, Eduardo Pizzuto. I will now turn the call over to Anthony, please go ahead.
Speaker Change: To date, reaching breakeven Crazy, Chairman and Chief Executive Officer, Anthony <unk>, and Chief Financial Officer, and I have a piece of it.
Speaker Change: I will now turn the call over retention. Please go ahead.
Anthony Hatoum: Good morning, everyone, and thank you for joining Tiendas Tres Pez first quarter 2025 earnings call. I will begin with a review of our operating results for the quarter.
Speaker Change: Good morning, everyone and thank you for joining gender stress bays first quarter 2025 earnings call.
Speaker Change: I will begin with a review of our operating results for the quarter.
Anthony Hatoum: And we'll be followed by our CFO, Eduardo Pizzuto, who will provide an overview of our financial performance.
Speaker Change: And I will be followed by our CFO Eduardo Pizzuto, who will provide an overview of our financial performance.
Anthony Hatoum: We will conclude with a Q&A session to answer any questions you may have. We are very pleased with the results of our first quarter, more so in the context of this market environment. Our consistent execution and our attractive value proposition have allowed us to accelerate growth and to increase market share gain. We opened 117 net new stores for a total of 2,889 stores. Same-store sales grew by 13.5%. Total revenues increased by 35% to $17 billion pesos, EBITDA increased by over 12% to reach $705 million pesos. Cash flow generated by operating activities reached 1.1 billion pesos, a 49% increase year over year.
Speaker Change: We will conclude with a Q&A session to answer any questions you may have.
Eduardo Pizzuto: We are very pleased with the results of our first quarter more so in the context of this market environment.
Eduardo Pizzuto: Our consistent execution and our attractive value proposition have allowed us to accelerate growth and to increase market share gains.
Eduardo Pizzuto: We opened 117 net new stores for a total of 2889 stores.
Eduardo Pizzuto: Same store sales grew by 13, 5%.
Eduardo Pizzuto: Total revenues increased by 35% to 17 billion peso.
Eduardo Pizzuto: EBITDA increased by over 12% to reach 705 million pesos.
Eduardo Pizzuto: Cash flow generated by operating activities reached one 1 billion pesos or 49% increase year over year.
Anthony Hatoum: We ended with a net cash position of approximately 1.6 billion pesos. In addition, we have 150 million dollars of cash in U.S. dollars.
Eduardo Pizzuto: We ended with a net cash position of approximately $1 6 billion pesos. In addition, we have $150 million of cash and in U S dollars.
Anthony Hatoum: We turn to operational performance and look at store openings. We have opened 117 net-new stores this quarter, compared to 94 stores for the first quarter of 2024. and we are accelerating our store opening. Another way to look at this is comparing our store openings last 12 months, first quarter this year versus last year. For this year, we have 507 stores. For last year, 416 stores. This is an increase of roughly 100 stores.
Eduardo Pizzuto: Return to operational performance and look at store openings. We have opened 117 net new stores this quarter.
Eduardo Pizzuto: Compared to 94 stores for the first quarter of 2024.
Eduardo Pizzuto: And we are accelerating our store openings.
Eduardo Pizzuto: Another way to look at this is comparing our store openings last 12 months first quarter. This year versus last year for this year. We have 507 stores for last year 416 stores. This is an increase of roughly 100 stores.
Anthony Hatoum: If we look at our revenues and same-store sales, we continue to be one of the fastest-growing retailers globally. Total revenues reached $17.1 billion, an increase of 35.1% year over year. Very strong same store sales growth of 13.5%. Our same-store sales numbers continue to be driven by our value proposition to customers and that value proposition continues to improve. If we look at our same store sales versus untaught, the gap is notable and increasing.
Eduardo Pizzuto: If we look at our revenues and same store sales, we continue to be one of the fastest growing retailers globally.
Eduardo Pizzuto: Total revenues reached $17 1 billion, an increase of 31 35, 1% year over year.
Eduardo Pizzuto: Very strong same store sales growth of 13, 5%.
Eduardo Pizzuto: Our same store sales numbers continued to be driven by our value proposition to customers.
Eduardo Pizzuto: That value proposition continues to improve.
Eduardo Pizzuto: If we look at our same store sales versus sub debt. The gap is notable and increasing.
Eduardo Pizzuto: Yeah.
Eduardo Pizzuto: I will now pass the microphone to Eduardo. Thank you, Anthony.
Eduardo Pizzuto: I will now pass the microphone to Eduardo.
Eduardo Pizzuto: Thank you Anthony.
Eduardo Pizzuto: Good morning, everyone. Sales expenses as a percentage of revenue slightly increased from 10.2% to 10.3% due to our accelerating store opening pace. As Anthony just mentioned, we increased our pace roughly 100 stores in the last 12 months. On the matter of operating leverage, at the unit level we continue to see a decreasing trend in cost as a percentage of sales. This is not apparent at the consolidated level as we continue to accelerate the pace of store opening.
Speaker Change: Morning, everyone.
Eduardo Pizzuto: Okay.
Eduardo Pizzuto: <unk> expenses as a percentage of revenues slightly increased from 10.2 to 10, 3% Detroit accelerating store opening pace.
Speaker Change: As Anthony just mentioned, we increased our pace roughly 100 stores in the last 12 months.
Speaker Change: On the matter of operating leverage at the unit level, we continue to see a decreasing trend in cost as a percentage of sales.
Speaker Change: This is not apparent at the consolidated level as we continue to accelerate the pace of store openings.
Eduardo Pizzuto: It is important to keep in mind that we pay the full cost of new stores and regions before we see the full revenue. Admin expenses as a percentage of revenue increased by 60 basis points from 3.5 to 4.1 percent. This includes incremental $84 million pesos on non-cash, share-based payments for roughly 50 basis points.
Speaker Change: It is important to keep in mind that.
Speaker Change: We pay the full cost of new stores and regions before we see the full revenues.
Speaker Change: Yes.
Speaker Change: Admin expenses as a percentage of revenue increased by 60 basis points from three five to four 1%.
Speaker Change: This includes incremental 84 million pesos on noncash share based payments of roughly 50 basis points.
Eduardo Pizzuto: We're also investing for current and future growth acceleration. hiring key personnel for the four new regions we're opening in 2025 and increasing talent density at headquarters, particularly in IT, purchasing, controls, and legal. We posted robust growth of 12.7% in our EBITDA that reached 705 million bids. Margin decreased from 4.9% to 4.1% due to the increase in investments to support our accelerating growth. Ours is a business model that generates significant negative working capital. In turn, we generate significant cash flows from changes in negative working capital. We can see for example that in March of 24 we had a negative working capital of 4.8 billion pesos compared to a negative working capital of 6.5 billion pesos in March of 25.
Speaker Change: We're also investing for current and future growth acceleration.
Speaker Change: Hiring key personnel for the four new regions, we're opening in 2025 and.
Speaker Change: An increasing talent density at headquarters, particularly weighted.
Speaker Change: Purchasing controls and legal.
Speaker Change: We posted robust growth of 12, 7% and our EBITDA reached 705 million pesos.
Speaker Change: Margin decreased.
Speaker Change: Four 9% to four 1% due to the increase in investments to support our accelerating growth.
Speaker Change: Ours is a business model that generates significant negative working capital.
Speaker Change: In turn we generate significant cash flows from changes in negative working capital.
Speaker Change: We can see for example that in March of 'twenty, four we had a negative working capital 4.8 billion pesos compared to negative working capital of $6 5 billion pesos in March of 'twenty five.
Eduardo Pizzuto: This is roughly 10.5% of total revenue. I'd also like to highlight that our accelerating growth continues to be self-funded.
Speaker Change: This is roughly 10% 10, 5% of total revenue.
Speaker Change: I'd also like to highlight that our accelerating growth continues to be self funded.
Anthony Hatoum: I will now turn the call back over to Anthony for final remarks. Ours is a robust business model that is very resilient, our value proposition continues to increase, our competitive advantages are real and increasing. As a result, we will see continued growth and gain in market share.
Anthony: I will now turn the call back over to Anthony for final remarks.
Anthony: Ours is a robust business model that is very resilient our value proposition continues to increase our competitive advantages are real and increasing.
Anthony: As a result, we will see continued growth and gaining market share.
Anthony Hatoum: We will continue to increase our investments for our future growth. It has always been our approach, and it's a proven strategy. We believe that this will pay off in increasing growth rates and the creation of value for our shareholders. We continue to do the same, just faster and better.
Anthony: We will continue to increase our investments for our future growth. It has always been our approach and it's a proven strategy.
Anthony: We believe that this will pay off in increasing growth rates and the creation of value for our shareholders.
Anthony: We continue to do the same just faster and better.
Operator: We can now start our Q&A session, so please go ahead, operator. Thank you.
Speaker Change: We can now start our Q&A session. So please go ahead operator.
Anthony: Yes.
Operator: We will now conduct the 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 the screen. If you are connected via telephone, please dial star 9.
Anthony: Thank you we will now conduct the Q&A session with Anthony cut them and they look at.
Anthony: He would like to ask a question space craft they raise their hand button located at the bottom of the screen.
Speaker Change: These are connected via telephone please dial style Nate.
Operator: 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. You will then be able to unmute yourself and ask your question.
Speaker Change: We remind you that all lines have been placed on mute when needed here trying to ask a question you will be given permission to speak.
Speaker Change: He will then be able to mute yourself and ask a question.
Operator: Our first question comes from the line of Bob Ford.
Speaker Change: Our first question comes from the line of <unk> <unk>. Please state your company name and ask your question.
Bob Ford: Please state your company name and ask your question. Hey, good morning, everybody. This is Bob Ford from Bank of America Merrill Lynch. Good morning, Anthony and Eduardo.
Speaker Change: Hey, good morning, everybody. This Bob Ford from Bank of America Merrill Lynch, Good morning, Anthony as more development.
Speaker Change: How should we think about your investments in talent both in terms of the magnitude of the expense and as well as the capabilities and functionality.
Bob Ford: How should we think about your investments in talent, both in terms of the magnitude of the expense, and as well as the capabilities and functionality that some of the additions kind of bring about. And then with respect to the new distribution centers that you're planning for this year, how should we think about the split between increased density in existing trade areas versus entry into new regional markets? Hi, Bob. Thanks for the question. Look, any investment we make is made... with simple criteria in mind. What's the return on this investment? So when we do increase talent density, and it does result in an increase in expenses, as we have observed in this quarter, it is definitely because we are planning for our future growth.
Speaker Change: The additions.
Speaker Change: Kind of bring about.
Speaker Change: And then with respect to the new distribution centers that you're planning for this year, how should we think about the split between increased density in existing trade areas versus entry into new regional markets.
Speaker Change: Hi, Bob Thanks for the question look any any investment we make.
Speaker Change: It is made.
Speaker Change: With a.
Speaker Change: A simple criteria in mind, what's the return on this investment so when we do increase talent density and it does result in an increase in expenses.
Speaker Change: As we have observed in this quarter.
Speaker Change: It is definitely because we are planning for our future growth and.
Anthony Hatoum: And it's always been our strategy to invest for future growth. Nothing, there's nothing new in our approach. And strong believers here that, you know, an increase in talent and density is one of the key competitive advantages that we will have going forward. And one of the key drivers, one of the key ingredients, but you want to think about it this way, to create opportunities and to create growth going forward.
Speaker Change: And it's always been our strategy to invest for future growth nothing there's nothing new in our approach.
Speaker Change: Strong believers here that to non increase some talent and density is one of the key competitive advantages that we will have going forward and one of the key drivers.
Speaker Change: One of the key ingredients it but you want to think about it this way to create opportunities and to create growth going forward.
Anthony Hatoum: The second question had to do with density of distribution centers. And, you know, it's again the same approach as always. We are very standard in our approach of opening distribution centers. We like them to be all operating exactly the same, and it makes it very easy for us then afterwards to manage this business because they're all equal regions, equal distribution centers, and benchmarking them allows us to be very efficient thereafter. So the question is, does this density impact one another? It's all driven by stores. We open stores and based on their location, we decide where to open our next generation of distribution centers.
Speaker Change: The second question had to do with density of distribution centers.
Speaker Change: And it's again the same approaches always.
Speaker Change: We are very standard in our approach.
Speaker Change: Opening distribution centers, we liked them to be all operating exactly the same.
Speaker Change: And it makes it very easy for US then afterwards to manage this business because they're all <unk>.
Speaker Change: Equally regions equal distribution centers.
Speaker Change: And our benchmarking them.
Speaker Change: How's us to be very efficient thereafter. So the question is does this density impact.
Speaker Change: One another it's all driven by stores.
Speaker Change: Well, we open stores and based on their location, we decide where to open our next generation of distribution.
Anthony Hatoum: If they happen to be close to each other, that could be the case, but it's a very logical outcome because what you're doing is compacting distances between a distribution center and its stores and therefore increasing your logistics efficiency. And that's the only criteria that really matters. How efficient are you logistically? And if you're being more efficient, then that's the right answer.
Speaker Change: <unk> centers, if they happen to be close to each other.
Speaker Change: That could be the case, but it's a very logical outcome because what youre doing is come back to this distances between the distribution center in its stores and therefore, increasing your logistics efficiency and that's the only criteria that really matters, how efficient are you logistically and if youre.
Speaker Change: Being more efficient then that's the right answer.
Anthony Hatoum: You know, my spin is actually very different in the sense that, you know, I really believe that you're understored in your core market, right, where you started in New Mexico City, and I think that the opportunity to drive greater density is massive, and I think that because there's familiarity with the brand, your stores are more likely to mature faster, and that was where I was coming from. Oh, absolutely. You know, you're absolutely correct with the statement in that there is still significant runway in the areas in which we're operating. So, our strategy has been to spread out, but also to increase the density within the areas in which we operate, and we have yet to see, you know, I would be hard-pressed to tell you, oh, we've saturated an area.
Speaker Change: My spin is actually very different in the sense that.
Speaker Change: I really believe that you are under stored in in your core market right, where you started in Mexico City, and I think that the opportunity to drive greater density is is massive and I think that because there's familiarity with the brand new stores are more likely to mature faster and that was where I was coming from absolutely.
Speaker Change: Your Europe salutes the correct with this statement and that there is still significant runway in the areas in which we're operating so our strategy has been to spread out but also to increase the density will then be areas in which we operate.
Speaker Change: We have yet to see.
Speaker Change: <unk> be hard pressed to tell you Oh, we've saturated in area. There is no more space to open a store in an area in which we currently operate and you're absolutely right the areas in which we currently operate.
Anthony Hatoum: There is no more space to open a store in an area in which we currently operate, and you're absolutely right in the areas in which we currently operate. You have a tremendous leverage because your brand is well-known. People who could be your customers in a new store have probably shopped with you before, and therefore, you do see the improved performance when you do open a new store. Makes sense.
Speaker Change: You have a tremendous leverage because your brand on that your brand is well known people who could be your customers an unused store have probably shopped with you before and therefore, you do see.
Speaker Change: The improved performance when you do open a new store.
Anthony Hatoum: And then with respect to the systems investments that you mentioned in the press release, can you foreshadow maybe some of the capabilities you anticipate and, you know, some additional, I guess, some incremental redundancy initially as you prepare for transition, but maybe, you know, the, I guess the path to increase functionality. new products and services. We look at, you know, absolutely, Bob, I mean, here, we look at it, as we look at any investment, what's the return going to be on investing in tech? And I break it down into two parts. One, The new generation of tech is significantly more efficient.
Speaker Change: It makes sense and then with respect to the systems investments that you mentioned in the press release can can you foreshadow maybe some of the capabilities you anticipate in and you have some additional I guess some incremental redundancy initially as you prepare.
Speaker Change: For transition, but that may be.
Speaker Change: Okay.
Speaker Change: The I guess the patch to to increase functionality.
Speaker Change: New products and services.
Speaker Change: When you look at.
Speaker Change: Absolutely Bob I mean here, we look at it as we look at any investment what's the return going to be on investing in tech.
Speaker Change: I break it down into two parts one.
Speaker Change: The new generation of Tech is significantly more efficient.
Anthony Hatoum: than the generation on which we built our current tech, which, by the way, works perfectly well and continues to be very scalable. But why not take advantage of something that is more efficient? And yes, there is going to be an overlap between the old tech and the new tech, and probably for a period of time, you will see an increase in expenses during that transition period. But on top of the fact that the new tech is significantly more efficient, it gives you a portfolio of new tools that the old tech simply didn't offer or offered you in a very expensive or cumbersome way.
Speaker Change: Then the generation on which we built our current tech, which by the way it works perfectly well and is continues to be very scalable.
Speaker Change: But why not take advantage of something that is more efficient.
Speaker Change: Yes, there is going to be an overlap between the old tech and the new tech and probably for a period of time, you will see an increase in expenses during that transition period, but on top of the fact that the new tech is significantly more efficient. It gives you significant.
Speaker Change: Our portfolio of new tools that the old tech simply didn't tougher offer due in a very expensive or cumbersome way and just think about big data and this is a business that generates significant amounts of data and the way we take advantage of this data and the old tech versus the new Tech has.
Anthony Hatoum: And just think about big data. I mean, this is a business that generates significant amounts of data. And the way we take advantage of this data and the old tech versus the new tech has, it's an order of magnitude more efficient, more impactful, more useful in the new technology platform. And just think about AI. With the old tech, we can't use AI with our databases. With the new tech, we absolutely can use AI. It's as simple as that.
Speaker Change: It's an order of magnitude more efficient more impactful more useful in the new technology platform and just think about AI with the old Tech we kept use AI with our databases with the new Tech we absolutely can use AI to simplify.
Bob Ford: Very helpful.
Bob Ford: Thank you so much.
Speaker Change: Very helpful. Thank you so much.
Alvaro Garcia: Question comes from the line of Alvaro Garcia, please state your company name and ask your Hey, Anthony, Eduardo, thanks for the space. My first question is for Eduardo on sales expenses, I was wondering if you could comment on the timing of, I guess, certain growth investments, DCs, new stores throughout the year and the impact to 1Q specifically. You mentioned in the prepared remarks, it's important to keep in mind that you pay for the full cost of the store and a DC before. before setting up shop. So just curious as to how we should, I see sales expenses as sort of the primary driver of leverage on the margin front going forward.
Speaker Change: Question comes from the line now and when will that be.
Speaker Change: State Your company name and Thats a good question.
Anthony Cut: Hey, Anthony Thanks.
Speaker Change: Thanks for the space.
Anthony Cut: But I'll, let us hear from BTG Pactual.
Speaker Change: My first question is for the Woodlands sales expenses I was wondering if you could comment on the timing.
Speaker Change: I guess certain growth investments D CS new stores throughout the year and the impact to <unk>, specifically you mentioned in the prepared remarks, it's important to keep in mind that you pay for the full cost of the store and a D C before.
Speaker Change: Before setting up shop, so just curious as to how we should see sales expenses sort of the primary driver of leverage on the margin front going forward. So I was wondering if you can comment on timing of sales expenses. Thank you.
Alvaro Garcia: So I was wondering if you can comment on timing of sales expenses.
Eduardo Pizzuto: Hi Eduardo, yes absolutely. The timing of this is because remember that we're increasing the pace of store opening. So today we're increasing from 400 to 500 stores. And what we mean by that is that we're paying off the initial investment of the stores and then revenues will come afterwards. And that's been the case pretty much since inception and since we've been continuing to grow. And this is what we should expect this year as well because we're increasing that pace of growth. Now, in terms of our distribution centers, it's the same case. As Anthony just explained, we open the stores first and then we open our regions.
Alberto: Hi, Alberto Yes, absolutely.
Alberto: The timing of the assess because remember that we're increasing the pace of store openings. So today, we're increasing from 400 to 500 stores.
Alberto: What we mean by that is that we're paying off the initial investment of the stores and then revenues will come afterwards, and that's been the case.
Alberto: Pretty much since inception that says we've been we've been continue to grow.
Alberto: And this is what we should expect this year as well because we're a increasing that pace of growth now in terms of our distribution centers. It's the same case as Anthony just explained we opened the stores first and then we opened our regions will make us even more efficient once these are opening.
Eduardo Pizzuto: We'll make us even more efficient once these are open. These regions, these distribution centers will be open through the year within the next three to six months. And once we have them open, again, we will start seeing the benefits on logistics expense mainly. But on the unit side, you mentioned also leverage on sales expenses that you're expecting leverage mainly on sales expenses. What we're seeing on a unit level, Alvaro, is that we continue to see leverage, as expected. So you don't see that because it's on that consolidated basis that you're looking at right now. But if you were to look at their older, older stores, older vintages, we continue to see leverage on those stores.
Alberto: These regions. This distribution centers will be opened through the year.
Alberto: Within the next three to six months.
Alberto: And once we have them open against we will start seeing the benefits on logistics expense mainly.
Alberto: But on the unit side you mentioned also.
Alberto: Leverage on sales expenses that you were expecting.
Alberto: Leverage mainly on sales expenses.
Alberto: We're seeing on a unit level on the motto is that we continue to see leverage as as expected. So.
Alberto: You don't see that because it's on a consolidated basis that youre looking at right now, but if you were to look at their older older stores older vintages, we continue to see leverage on those stores and that continues to be the case.
Eduardo Pizzuto: And that continues to be the case. So, and today, by the way, the store, the new stores that we're opening, they're pretty much on track as what we have been expecting, as you saw the targets on unit economics. So we're pretty much on track based on what we have published. So that's what we should expect.
Alberto: So and today by the way that Stuart NIM, new stores that we're opening they are pretty much on track as what we had been expecting as you saw the targets on unit economics, So we're pretty much on track.
Alberto: Just on what we have published so that's what we see that's helpful. That's helpful.
Alvaro Garcia: That's helpful.
Alvaro Garcia: And then my second question is on share-based expenses going forward. We saw a significant uptick in the first quarter. I was wondering if you can maybe provide some color on whether this is a new normal, or if this is a bulkier than usual quarter. My sense is it's a new normal.
Alberto: And then my second question is on.
Alberto: Share based expenses going forward.
Alberto: We saw significant uptake in the first quarter I was wondering if you could maybe provide some color on whether this is a new normal or if its a bulkier than usual quarter.
Alberto: My sense is a new normal you've already sort of announced issuance for this year, but any comments with regards to that line item would be very helpful. Thank you yeah. Thanks, I've got it yes, yes, we should think about what the number that we have today for the remainder of the year.
Eduardo Pizzuto: You've already sort of announced issuance for this year, but any comments with regards to that line item would be very helpful. Thank you. Yeah. Thanks, Alvaro. Yes. Yeah, we should think about what the number that we have today for the remainder of the year. It's about 1.2% of sales. And it has to do with the options and RSUs that were granted at the end of last So it is not a bump in Q1, so think about this as ongoing for the rest of the year. Again, just a just a reminder to all, I mean, Sharebert's compensation has been extremely impactful.
Alberto: One 2% of sales and it has to do with the options and <unk> used that were granted at the end of last year.
Alberto: So it is not it is not a bump in Q1, so think about this.
Alberto: As ongoing for the for the rest of the year.
Alberto: Okay.
Alberto: Just a reminder to all share based compensation has been extremely impactful in our case. It has driven the results that you see today. It has driven the entrepreneurial spirit that you see it but it's bad today. It has driven the can do attitude. It has protected us from coaching talent.
Eduardo Pizzuto: In our case, it has driven the results that you see today. It has driven the entrepreneurial spirit that you see at Press Bay today. It has driven the can-do attitude, it has protected us from poaching talent. So we'll continue to do this because it's an excellent return on investment. Totally. Thank you very much.
Alberto: So we will continue to do this because it's an excellent return on investment.
Alberto: Totally thank you very much thank.
Eduardo Pizzuto: Thank you, Eduardo.
Eduardo Pizzuto: Thank you Eduardo.
Joseph Giordano: Our next question comes from the line of Joseph Giordano, please state your company name and ask your question. Hi, good afternoon, everyone. This is Joe Giordano, VP Morgan. Hi, Eduardo, Anthony. Thank you. Thanks for taking my question. So I have like three short ones.
Speaker Change: Our next question comes from the line of Joseph Jonathan Please state your company name and ask your question.
Joe Giordano: Hi, Good afternoon, everyone. This is Joe Giordano Jpmorgan.
Speaker Change: Atlanta Rethinking. Thank you Scott Thanks for taking my question. So I have I got three.
Joseph Giordano: So the first one, like when you look at the gross margin, historically it's been a little bit volatile. We know that the company's focus is to maximize operating leverage here. So I just wanted to understand a little bit more the dynamics behind the gross margin into the first quarter. Since we have been seeing like an increased penetration of private label in your base, so basically like an interior gross margin driver for that sake. So having that said, I mean, like if you could comment a little bit more, like on this like weakness of the customer environment and if you're seeing like any kind of more aggressive approach from Pierce.
Speaker Change: So the first one Mike when you look at the gross margin historically has been a little bit volatile and no debt.
Speaker Change: The company's focus is to maximize operating leverage here. So just wanted to understand a little bit more of the dynamics behind the gross margin into the first quarter.
Speaker Change: So we had <unk> lake I and increased penetration.
Speaker Change: On private label in your base of basically Lake.
Speaker Change: And in theory.
Speaker Change: Gross margin driver for that sake, so having that said I mean, like if you could comment a little bit more.
Speaker Change: Just like a week and is that the consumer environment, and if you're seeing like any kind of more aggressive approach.
Speaker Change: From Pearson and going back to the expense I mean last year. They get you guys did like an amazing job in the first quarter to offset the minimum wage. So basically you mentioned that there were some threat to be good. So I would like you to compare a little bit your ability this year to offset.
Joseph Giordano: And going back to the expense, I mean, last year like you guys did like an amazing job. In the first quarter to offset the minimum wage. So basically you mentioned that there was some fat to be cut.
Joseph Giordano: So I would like you to compare a little bit your ability this year to offset those expense pressures other than like growing sales in terms of like headcount adjustments and things like that. Thank you very much.
Speaker Change: Those expense pressures there other than like growing sales.
Speaker Change: All right cause all head count adjustments and things like that thank you very much.
Anthony Hatoum: I'll break the question down into two parts. So we'll talk about gross margin, then we'll talk about personnel expenses. On the gross margin, nothing has changed, Joe. It's the same. dynamic driven by scaling up and us taking advantage of the benefits of scale, whether you're looking at commercial or private label products, both benefit from scaling and we will see over time, steady improvement and gross margins while we have quarter to quarter, as we've said many times of changes and volatility, and it's normal because of the way we manage pricing, which is on a product by product basis.
Speaker Change: Now I'll break the question down into two parts. So we'll talk about gross margin then we'll talk about personnel expenses.
Speaker Change: On the gross margin nothing has changed Joe it's a it's the same.
Speaker Change: Dynamic driven by scaling up in us taking advantage of the benefits of scale.
Speaker Change: Whether you are looking at commercial or private label products, both benefit from scaling and we will see over time.
Speaker Change: Steady improvement in gross margins, while we have quarter to quarter.
Speaker Change: As we've said many times.
Speaker Change: Changes in volatility and its normal because of the way we manage pricing.
Speaker Change: Which is on a product by product basis, and then as a result.
Anthony Hatoum: And then as a result... we get the gross margin that you see here this quarter.
Speaker Change: We get the gross margin that you see here this quarter now if your question has to do with do we see any pressure and dropping prices the answer is no.
Anthony Hatoum: Now, if your question had to do with, do we see any pressure in dropping prices? The answer is no, because we haven't changed anything the way we've done things. And we basically set prices based on elasticity, and that we're optimizing for a number of a number of products, items sold and the total revenues in total. dollar margin. So Nothing has changed since last quarter and last year and we don't see any. anything on that.
Speaker Change: We haven't changed anything we.
Speaker Change: The way, we've done things and we basically set prices based on elasticity.
Speaker Change: And that we're optimizing toward number also.
The number of products items sold and total revenues in total.
Speaker Change: Dollar margin.
Speaker Change: So.
Speaker Change: Nothing has changed since last quarter and.
Speaker Change: Last year, we don't see any any.
Speaker Change: Anything on that trumps.
Anthony Hatoum: On the question of personnel, you have to take into account two things. One, because of our accelerated, it's not only the fact that we have an increase, we've seen increases in salaries. but also because when you're looking at growing... the rate at which you're opening stores, you need to start training your peoples ahead of time. And so you might see that appear in the personnel numbers. In our case, you know, these these expenses are highly diluted by the growth in our in our sales. I'm not sure if I answered your question, but I think this is how I look at it.
Speaker Change: On the question of personnel that you have to take into account.
Speaker Change: Two things one because of our accelerated its not only the fact that we have an increase we've seen increases in salaries.
Speaker Change: But also because when you were looking at growing.
Speaker Change: The rates at which you are opening stores you'd need to start training. Your people ahead of time and so you might see that appear in the personnel numbers in our case. These these expenses are highly valued by the growth in our in our sales numbers.
Speaker Change: So I'm not sure if I answered your question, but I think this is how I look at it rehab. Thank you very much Anthony.
Joseph Giordano: I really have. Thank you very much, Anthony.
Speaker Change: Yeah.
Alejandro Fuchs: Our next question comes from the line of Alejandro Fuchs, please state your company name and that's it. BBA. Thank you for the space for questions. I have two quick ones on my end.
Speaker Change: Our next question comes from the line of.
Bush: Bush. Please state your company name and ask a question.
Speaker Change: BVA and thank you for the space for questions I have two quick ones from my and wanted to see maybe if you can give us some color on semi store sales breakdown between traffic and ticket during the quarter and congratulations on the very impressive has shrunk.
Alejandro Fuchs: I wanted to see maybe if you can give us some color on semester sales breakdown between traffic and ticket during the quarter and congratulations on the very impressive and strong print. And the second one in terms of free cash flow generation, I think the quarter was quite strong. I wanted to see if you expect this trend to continue or maybe we have we could have some cash usage due to more openings throughout the year. Thank you. The first part We're seeing solid growth in both. tickets and ticket size. So let's say I'll take it. and on our cash flow generation abilities.
Speaker Change: And the second one in terms of free cash flow generation in the quarter was quite strong when it to see if you expect this trend to continue or maybe we have we could have some cash usage due to more openings throughout the year. Thank you.
Speaker Change: The first part.
Speaker Change: We're seeing solid growth in both.
Speaker Change: Tickets on ticket size, so let's say.
Speaker Change: I'd say 50 50.
Speaker Change: And on the our cash our cash flow generation abilities.
Anthony Hatoum: I'll take that question, Alejandro. Though, I mean, this is again, this is. negative working capital, changes in working capital. This is something that we need to look on, not necessarily in a quarter by quarter, but a longer term range. But yes, we did generate significant cash in this quarter. And it's really business as usual because the fundamentals of those key metrics have not changed. So payables and inventories continue to be pretty much the same, although inventories have slightly come down. And that's the reason that we generate so much cash. And we have always been balancing the cash generated and we invest that back into capex for new stores and more growth.
Speaker Change: I'll take that question I found it.
Speaker Change: No I mean this is again this is.
Speaker Change: Net of working capital changes in working capital. This is something that we need to look on a not necessarily on a quarter by quarter, but our longer term range, but yes, we did generate significant cash in this quarter and it's really.
Speaker Change: It's really business as usual because we're not the fundamentals of those of those key metrics have not changed so payables and inventories continue to be pretty much. The same although inventories are slightly come down.
Speaker Change: And that's the reason that we generate so much cash and we have always been balancing the cash generated and we invest that back into capex for new stores and more growth.
Eduardo Pizzuto: So this is something that we should expect. I mean, some quarters will be up, some quarters will be down, but overall the trend will continue to be upwards as we've seen in the past. And that's why we continue to be self-funded since many, many years now.
Speaker Change: This is something that we should expect some quarters will be up some some quarters it will be down but overall the trend will continue to be upwards.
Speaker Change: As we've seen in the past and Thats why we continue to be self funded since many many years now.
Eduardo Pizzuto: Thank you, Eduardo and Anthony, very dear.
Speaker Change: Thank you a lot of them to be very clear.
Ulises Aragón: Our next question comes from the line of Ulises Aragón. Please state your company name and ask your question. Hi, thanks so much for the space for questions. This is Ulises Zaragoza from Santander.
Speaker Change: Our next question comes from the line of Lisa sentiment.
Speaker Change: Please state your company name and ask your question.
Lisa Sentiment: Hi, Thanks, so much for the space for questions. He sees relief is not about the from something that.
Ulises Aragón: I wanted to get your thoughts on potential impacts and also maybe how you could offset the pressure of operating stores under this assumption of the gradual reduction of the working week in Mexico that was announced a couple of days back. Maybe Anthony, it goes in line with the answer you provided to Joe's earlier question, but would be interesting to get your thoughts on that. And then afterwards, I have another another follow up.
Speaker Change: Wanted to get your thoughts on potential impact and also maybe how you could offset the pressure.
Speaker Change: Operating stores under this assumption of the gradual reduction of the working week in Mexico that was announced a couple of days back.
Speaker Change: Maybe Anthony it goes in line with the answer you provided to drill further question would would be interesting to get your thoughts on that.
Speaker Change: And then afterwards I bought another another follow up question.
Anthony Hatoum: Hi Ulises, thank you. Yeah, as we've explained before, even if it's gradual or a full impact, and which they've announced is going to be gradual, as we've explained before, we have some wiggle room in the sense that we have part-times at the store and we will shuffle those and we will be able to comply when whatever this is said and done. I think we need to get the clear rules on how that will impact. This is something that we've been looking into and also preparing for whenever that happens. So whenever that happens, it will happen and we will comply with it.
Speaker Change: Hi, <unk>. Thank you.
Speaker Change: Yes.
Speaker Change: As we've explained before it even if it's gradual or a full impact in which they have announced is going to be gradual.
Speaker Change: We have explained before we have some some wiggle room in the sense that we have hard times at the store and we will we will shuffle does and we will be able to comply with whatever this is this is said and done.
Speaker Change: I think we need to get the.
Speaker Change: The clear rules on how will that that will that will impact. This is something that we've been looking into and also preparing for when whenever that happens so whenever that happens it will happen and we will comply with it.
Anthony Hatoum: We might see a small bump in the initial stages, but on our labor costs, as we continue to increase our sales, this is something that will eventually stabilize and actually decrease as a percentage of sales. So that's the way we're looking at it.
We might see a small bump and are in the initial stages, but I'll ask on our labor costs as we continue to increase our sales. This is something that will eventually stabilize and actually decrease as a percentage of sales.
Speaker Change: That's the way we're looking at it have leases.
Ulises Aragón: Thank you very much for that.
Speaker Change: Thank you very much for that dialogue.
Anthony Hatoum: The other question that I had was more on the strategic side of things. I was actually driving by your headquarters the other day and saw the Yema sign there next to Tresve, right? So I was just wondering what the strategy is with the brand. Should we can expect some rollout of standalone Yema stores on top of the additional current couple of ones that are already out there? Or is kind of the strategy there for this to serve more as a differentiator in some stores there with assortment? I don't know, maybe just to get some sense of where you see this part of the business going.
Speaker Change: The other question that I had was more on the strategic side of things I was actually driving by your headquarters. The other day and saw that yeah must find their next to transfer rights. So I was just wondering what the strategy is is with the brand should we can expect some rollout of Standalone yammer stores on top of the additional current couple of ones at that.
Speaker Change: Are already out there or is kind of the strategy. There for this to serve moreso differentiator in some stores there with assortment on that or maybe just to get some sense. So far where you see a they saw this part of the business going thank you.
Anthony Hatoum: Thank you.
Anthony Hatoum: I think Yema has been a very successful concept. And we will very likely roll it out. The pace of it would be at a different pace than what we roll out, the end of test-based stores, but it will expand. Perfect, great.
Jim: Alright, I think Jim has been a.
Jim: Very successful concept.
Jim: And we will very likely roll it out the base of it would be at a different base than what we rollout <unk> stores.
Jim: It will expense.
Jim: Okay.
Anthony Hatoum: Thanks for that, Anthony.
Jim: Perfect great. Thanks for that Anthony.
Andrew Ruben: Our next question comes from the line of Andrew Ruben.
Speaker Change: Our next question comes from the line of Andrew Rubin. Please state your company name and ask your question.
Andrew Ruben: Please state your company name and ask your question. Hi, Andrew Rubin at Morgan Stanley. Thanks very much for the question. Maybe just a bit of a broader one, but you showed the chart that essentially implied that your comp spread versus on Todd widened and widened pretty meaningfully sequentially. So I know there's not kind of one single item, but just I'm curious your perspectives, any thoughts of Canada's trace pay versus the market, what might have changed between 4Q and the even more favorable result in 1Q? Thank I mean, I think the only way to answer this is that our clients are choosing us because we are offering a better value proposition.
Jim: Okay.
Andrew Rubin: Hi, Andrew Ruben at Morgan Stanley. Thanks, very much for the question, maybe just a bit of a broader one but you showed the chart that essentially imply that your comp spread versus on Todd widened and widened pretty meaningfully sequentially. So I know, there's not kind of one single item, but just I'm curious your perspective any thoughts of candidate Straits Bank.
Andrew Rubin: Versus the market, what might've changed between <unk> and even more favorable results at <unk>. Thank you.
I mean I think.
Andrew Rubin: The only way to answer this is that our clients are choosing us because we are offering a better value proposition and.
Anthony Hatoum: And we know internally that we're continuously improving our portfolio of products and increasing what we offer to our clients. That's the only explanation I can give you to why we see our same store sales. at the level they are versus what UNTAD is experiencing. I mean, the only other maybe fine tuning to this answer would be we continue to offer basic goods. I mean, these are the things you consume most frequently. And therefore, you know, you're not going to cut down on these in when it's time, you know, when you decide you want to cut down on your budget of spending, our portfolio is the one that is going to be the least affected, if at all.
Andrew Rubin: And we know internally that we're continuously improving our portfolio of products and increasing what we offer to our clients.
Andrew Rubin: It's the only explanation I can give you to why we see our same store sales.
Andrew Rubin: At the level they are versus so what Todd is experiencing and the.
Andrew Rubin: Only other may be fine tuning to this answer would be.
Andrew Rubin: We continue to offer basic goods I mean these are the things you consume most frequently.
Andrew Rubin: And therefore, you are not going to cut down on these.
Andrew Rubin: When it's time you know when you decide you want to cut down on your budget of spending.
Andrew Rubin: Our portfolio is the one that is going to be the least affected.
Andrew Rubin: If at all so again, our business model because of that is extremely resilient.
Anthony Hatoum: So again, you know, our business model because of that is extremely resilient. We are also extremely efficient because we have a limited assortment of 800 SKUs. And these are, you know, real and sustainable competitive advantages that we've always had and that continue to improve over time. Great, that all makes sense.
Andrew Rubin: We are also extremely efficient because we have a limited assortment of 800 skus.
Andrew Rubin: These are real and sustainable competitive advantages that we've always had and that continued to improve over time.
Andrew Rubin: Great that all makes sense I appreciate it.
Andrew Ruben: I appreciate it.
Andrew Rubin: Okay.
Pablo Valles: Our next question comes from the line of Pablo Valles. Please state your company name and ask your question. I'm Pablo Valles from Summit Management. Thanks for taking my question. Looking back to fiscal year 2024, we saw a slight uptick in your cash conversion cycle, which seems partly due to a decrease in days payable. Now that we are a few months into 2025, do you expect this trend to continue? And could you expand a bit on how you're seeing your relationship with your suppliers? And how that's evolved over the years?
Andrew Rubin: Our next question comes from the line of.
Andrew Rubin: Please state your company name and ask your question.
Speaker Change: Maybe it's parvovirus from someone's management, thanks for taking my question.
Speaker Change: Looking back to fiscal year 'twenty 'twenty four we saw a slight uptick in your cash conversion cycle.
Speaker Change: Tim partly due to a decrease in days payable.
Speaker Change: Now that we're a few months into 2025 do you expect this trend to continue and could you expand a bit on how youre seeing your relationship with your suppliers and how thats evolved over the years. Thank.
Eduardo Pizzuto: Thank you. Yeah, I don't, I think that payables and inventories are stable for the foreseeable future, and if you see small variations quarter to quarter, that's completely normal, but I wouldn't read more into it. And the best assumption is to assume they're stable for the foreseeable future. And our relationship with suppliers has always been extremely strong, and only gets stronger as you scale. But if your question is, do we try to extract from our suppliers better terms and conditions on this front, the answer is, I don't see anything happening there.
Speaker Change: Thank you.
Yes, I don't I think that payables and inventories are stable for the foreseeable future and if you see small variations quarter to quarter, that's completely normal, but I wouldn't read more into it and the best assumption is to assume that they're stable for the foreseeable future.
Speaker Change: And our relationship with suppliers has always been extremely strong and only gets stronger as you scale.
Speaker Change: But if your question is do we tried to extract from our suppliers better terms and conditions on this front. The answer is I don't see anything happening there.
Eduardo Pizzuto: Thank you very much.
Speaker Change: Thank you very much.
Speaker Change: Okay.
Jim Luther: Our next question comes from the line of Jim Luther. Please state your company name and ask your. Good afternoon, Anthony and team. Thank you for taking our questions. This is Jim Luther. I'm a shareholder representing myself. Here's my question. You mentioned in your release that you're operating in a challenging consumer environment. Can you expand on what you mean by that? and expected trends in the future. And in addition, if Mexico doesn't work out a trade agreement with the U.S. in the New York term, will that have any impact? on from your perspective on Mexican domestic consumption.
Speaker Change: Our next question comes from the line of James Please State your company name and ask a question.
Speaker Change: Good afternoon, Anthony and team. Thank you for taking our questions. This is Jim Luther I'm, a shareholder representing myself. Here's My question you mentioned in your release that you are operating in.
Speaker Change: In a challenging consumer environment can you expand on what you mean by that.
Speaker Change: And expected trends in the future and in addition, if Mexico doesn't work out a trade agreement with the U S. In.
Speaker Change: In the near term will that have any impact.
Speaker Change: From your perspective on Mexican domestic consumption. Thank you.
Anthony Hatoum: Thank you. Hi, Jim. Good to hear from you. And Jim is one of our very early shareholders through his father. So it's great to hear from you. As you've heard, analysts opine Mexican consumers are under pressure and have cut down their spending. But as you've heard us say, we haven't seen the impact of that and what we sell. And we don't expect that to change much, because again, what we offer to the customer is a very high value proposition. And therefore, if anything, we benefit in environments where a customer is basically trying to save money.
Speaker Change: Hi, Jim good to hear from you and Jim as a one off or very early shareholders through his father, So it's great to hear from you.
Speaker Change: Yes.
Speaker Change: As you've heard analysts.
Speaker Change: Pine Mexican consumers are under pressure and have cut down their spending but as you've heard us say, we havent seen the impact of that and what we saw.
Speaker Change: And we don't expect that to change much because again.
Speaker Change: What we offer to the customer has a very high value proposition and therefore, if anything we benefits in environments, where our customers are basically trying to save money.
Anthony Hatoum: We also sell the basic assortment of goods which you consume on a very regular basis and therefore when you cut, this is the product that you're least, you cut the last. So very unlikely that we see an impact when things get tight. Now, the second part of your question had to do with what happens in our U.S. versus Mexico tariffs, trade relations, etc. We have looked at all sorts of scenarios of what might happen and we are usually coming out winning in every single one of the scenarios you can think of. So a scenario that increases, for example, inflation because prices of goods become higher.
Speaker Change: We also sell the basic assortment of goods, which should consume on a very regular basis and therefore.
Speaker Change: When you cut this is a product that you are leased.
Speaker Change: The last and so very unlikely that we see an impact when things get tight.
Speaker Change: Now on the second part of your question had to do is what happens.
Speaker Change: Uh huh.
Speaker Change: U S versus Mexico.
Speaker Change: <unk> trade relations et cetera.
Speaker Change: We have looked at all sorts of scenarios of what might happen.
Speaker Change: We are usually coming out winning in every single one of the scenarios you can think of.
So a scenario that increases for example, inflation because prices of goods become higher.
Anthony Hatoum: You know, we're a business model that tends to benefit from inflation given that we work with significant negative working capital. If people are feeling tighter and we go into a recession. People tend to, we have tended in previous recessions to gain significant new customers. And when things get better, customers are sticky. We don't lose them. So, you know, net net, I think this is the business model that is most resilient and resistant to these kinds of things and actually benefits from these turbulent environments.
Speaker Change: Or a business model that tends to benefit from inflation given that we work with significant negative working capital.
Speaker Change: People are feeling tighter and we go into a recession.
Speaker Change: It will tend to have tended in previous recessions to gain significant new customers and when things get better.
Speaker Change: Customers are sticky, we don't lose them.
Speaker Change: So net net I think this is the business model that is most resilient.
Speaker Change: And resistant to these kinds of things and actually benefits from these turbulent environments.
Anthony Hatoum: Great Anthony, thank you so much.
Lisa Sentiment: Great Anthony Thanks, so much.
Speaker Change: Okay.
Hector Mella: Our next question comes from the line of Hector Mella.
Speaker Change: Our next question comes from the line of extra later, please state your company name and ask your question.
Hector Mella: Please state your company name and ask your question. Thank you very much, Hector Maya from Scotiabank. Thank you, Anthony and Eduardo, for taking my questions. I just wanted to know how your conversations have been evolving with suppliers, with the consumer and tariff context that we are seeing, just to understand what kind of scenarios you're maybe discussing with them, if there are some efficiency initiatives being considered or on negotiations with them. And what's the view on how to split potential savings, if any, in the case that you find further efficiencies down the road, just to understand how much space or opportunities in margins that there could be for the industry under the current consumer environment from a supplier perspective.
Speaker Change: Thank you very much Hector Maya from Scotiabank. Thank you Anthony and of the Argo for taking the questions. Just wanted to know how your conversations have been evolving with suppliers with the consumer and sorry context that we are seeing just to understand what kind of scenario.
Speaker Change: Your may be discussing with them.
Speaker Change: If there are some efficiency initiatives being considered or on negotiations with them and what's the view on how to split potential savings if any in the case that you'll find further efficiencies down the road just to understand how much space where opportunities in margins that there could be for the industry has been under the current <unk>.
Speaker Change: <unk> environment from a supplier perspective, thank you.
Anthony Hatoum: Yeah, and I'm assuming here, Hector, I'm good to talk to you that we're focusing more on our private label suppliers and not on our commercial brand supplier.
Speaker Change: I'm, assuming here actor and good to talk to that we're focusing more on our private label suppliers.
Speaker Change: And not on our commercial brand suppliers.
Anthony Hatoum: If that's the case, then let me step back by giving some context that... We work very closely with our suppliers and we work long-term. Honestly, 2025 was planned three years ago. And so what we do today is thinking with our suppliers and our partners, what are we going to be doing in 27, 28? How are we going to ensure that we have supply? How are we going to ensure that the supply is going to be extremely efficient in terms of manufacturing and distribution? And the matters that you put on the table about, you know, how do we...
Speaker Change: And if that's the case then let me step back by giving some context.
Speaker Change: We worked very closely with our suppliers and we work long term.
Speaker Change: Honestly 2025 was plan three years ago.
Speaker Change: And so what we do today is thinking with our suppliers and our partners what are we going to be doing in 27 28.
Speaker Change: How are we going to ensure that we have supply we're going to ensure that the supply is going to be extremely efficient in terms of manufacturing and distribution.
Speaker Change: And the matters that you put on the table about you know how do we.
Speaker Change: Gets efficiencies have already been discussed and plan for a long time ago. So when it comes to saying, Okay. How do we divide the pie, it's already been divided and Theres no.
Anthony Hatoum: GetEfficiencies have already been discussed and planned for a long time ago. So, you know, when it comes to saying, OK, how do we divide the pie? It's already been divided. And there's no there's nothing new that's happening right now because of the current environment. This builds a lot of trust and this allows us to operate very closely and together look for win-win solutions. And believe me, there is a lot of benefits to working like this very closely with your supplier. Fundamentally, you know, if you look at it, what's driving the benefits is scaling. So as you scale, everything becomes significantly more efficient.
Speaker Change: There's nothing new that's happening right now because of the current environment.
Speaker Change: This builds a lot of trust and this allows us to operate very closely together look for win win solutions.
Speaker Change: And believe me there is a lot of benefits to working like this very closely with your supplier.
Speaker Change: Fundamentally.
Speaker Change: If you look at it what's driving the benefits of scaling so as you scale everything becomes significantly more efficient.
Anthony Hatoum: And these efficiencies are split fairly between us and our suppliers. Thank you.
Speaker Change: These efficiencies are split fairly between us and our suppliers.
Speaker Change: Thank you. Thank you very much company and now that you mention it.
Anthony Hatoum: Thank you very much, Anthony.
Anthony Hatoum: And now that you mentioned it, is there any change on how you're being talking to your other suppliers? Even our commercial brand suppliers who are very important to us. with whom we have excellent relationships. And again, the benefits of scale come into play here.
Speaker Change: Is there any change on how you win.
Speaker Change: Looking to.
Speaker Change: Your other suppliers.
Speaker Change: Our aim and our commercial brand suppliers were very important to us.
Speaker Change: With whom we have excellent relationships and again.
Speaker Change: The benefits of scale come into play here, but perhaps.
Anthony Hatoum: But perhaps the planning is not as long term as we do with our private label supplier. Yeah, I understand. I mean, it's particularly important under the current tariff scenario, right? So Yeah, I mean, again, if part of the question is what happens to prices, because if there are tariffs, we can expect that some raw materials might increase in price, etc. And, you know, whether it's due to tariffs or a devaluation, because, you know, when you look at inputs, they're very dollar priced. What we've seen in the past is that they get passed on to the consumer over time.
Speaker Change: The planning is not as long term as we do with our private label suppliers.
Speaker Change: Yes, I understand I mean, it is particularly important under the current tariff scenario right. So.
Speaker Change: Yes, I mean again.
Speaker Change: Part of the question is what happens to prices because if there are tariffs, who we can expect that some raw materials might decrease in price et cetera.
Speaker Change: And whether it's due to tariffs or a devaluation because when you look at inputs Theyre very dollar Christ, what we've seen in the past is that they get passed onto the consumer over time.
Anthony Hatoum: and the impact of passing on this increase in price to the consumer. has an impact.
Speaker Change: And the impact of passing on this increase in price to the consumer.
Speaker Change: <unk> has an impact and elasticity of products depends.
Anthony Hatoum: Elasticity of products depends on the product, but we just happen to be offering to the client products where you have to, you will buy them and you don't necessarily substitute But again, this is just very theoretical and in general that I can only point to what's happened in the past and what we've observed in the past. Trust Bay doesn't get impacted on the country. I see Trust Bay benefiting from scenarios like Excellent.
Speaker Change: It depends on the product, but we just happened to be.
Speaker Change: <unk> to the client products, where you have to you will buy them and you don't necessarily substitute.
Speaker Change: On significantly when you see an increase in price.
Speaker Change: But again.
Speaker Change: This is just very theoretical and in general that I can only point to what's happened in the past and what we've observed in the past.
Speaker Change: <unk> doesn't get.
Speaker Change: Impacted on the country.
Speaker Change: <unk> Trust bad benefitting from scenarios like this.
Anthony Cut: Excellent. Thank you. Thank you very much Anthony.
Anthony Hatoum: Thank you. Thank you very much, Anthony.
Javier Perez Alvarez: Our next question comes from the line of Javier Perez Alvarez.
Speaker Change: Our next question comes from the line of Javier better Saturday. Please state your company name and ask your question.
Javier Perez Alvarez: Please state your company name and ask your question. Hi, I'm Antonio Eduardo, this is Javier Perez from 1C in Switzerland. Congrats on the strong execution on expansion. I wanted to touch base again on stock-based comp. The way we think about it is in a tough, low margin business like yours, profitability is always a trade-off, no? And assuming the mature model runs on thin margins, it's quite unusual, or at least for us, to see meaningful stock-based compensation programs in retail companies. Yet in Q1, I think the stock based comp reached nearly 8% of the gross profit, which surprised us a bit.
Javier Bernat: Hi, Anthony Eduardo These Javier Bernat from one scene, Switzerland Congrats.
Speaker Change: Congrats on the strong execution on this penchant I wanted to touch base again on the stock based comp.
Speaker Change: The way, we think about it is in the past low margin business like yours profitability has always had a try.
Speaker Change: Oh, no I'm, assuming they mature model requires from the margins, it's quite a newswire or at least for us to see meaningful stock based compensation programs can retail companies.
Speaker Change: Yet in Q1.
Speaker Change: The stock based comp rates are nearly 8% of microdose profit, which surprised us a bit how should we think about it not guessing there in the next he had asked you a couple of where the answer but over the long term on what I'm asking this is because the caito team that went away going out the stock into NBC lithium public firms and.
Javier Perez Alvarez: How should we think about it, not just in the next year, as you have already answered, but over the long term? And what I'm asking this is because the case of Tiendas Buenaventura is starting to gain visibility in public firms. And some potential investors have raised some concerns, both around the future dilution implied by some old outstanding stock options plans, but also the recent sizable stake that you, Anthony, sold in the secondary offering. It would be helpful to hear your perspective on how you are thinking about this going forward.
Speaker Change: Some potential investors have raised some concerns both around the future Duluth young implied by some all outstanding stock options plants, but also their recent sizable stake that you Anthony salt in the secondary offering.
Speaker Change: Would be helpful to hear your perspective on how you are thinking about this going forward.
Anthony Hatoum: Thank you for the questions, and I'll try to break them down as there are several embedded in there. Let me start by stock-based compensation. From the get-go, we are firm believers that stock-based compensation is an investment with a very high return. And therefore, you know, we will continue to do that irrespective because this is what has brought us to where we are and explains the phenomenal growth rates that we've been seeing and the fact that, you know, we operate faster and more efficiently. today than we did yesterday. So when you have an... A company where the entrepreneur spirit is strong, you do have very strong benefits.
Speaker Change: Thank you for the questions and I'll try to break them down as there are several embedded in there let me start by stock based compensation.
Speaker Change: From the get go we're firm believers that stock based compensation.
Speaker Change: As an investment with a very high return.
Speaker Change: And therefore, we will continue to do that.
Speaker Change: Irrespective.
Speaker Change: This is what has brought us to where we are and explains the phenomenal growth rates that we've been seeing and the fact that you know we.
Speaker Change: We operate faster and more efficiently.
Speaker Change: Today than we did yesterday, so when you have an.
Speaker Change: A company, where the entrepreneurial spirit is strong you do have very strong benefits.
Anthony Hatoum: in being able to maintain very high growth rate paces and no hiccups. This is a company that's been able to grow now for over 10 years at these rates you're seeing. with no hiccups. Part of this is. given the spirit of the people that we attract to this company, the talent that we attract, and we attract them with stock-based compensation. And of course, a lot of you are aware that stock-based compensation is non-cash, and it does appear as an expense, but it's a non-cash expense. So when you are modeling, you either model this, but don't dilute.
And being able to maintain very high growth rate paces and no hiccups. This is a company that's been able to grow now for over 10 years at these rates Youre seeing.
Speaker Change: With no hiccups.
Speaker Change: Part of this is.
Speaker Change: Given the spirit of the people that we attract to this company the talent that we attract and we attract them with stock based compensation.
Speaker Change: And of course, a lot of you are aware that stock based compensation is noncash and it does appear as an expense, but some noncash expense. So when you are modeling.
Speaker Change: You either model this but don't dilute.
Anthony Hatoum: in the share count, or you don't take it into account and then use it in the share count. Doing both would be double. Javier, you also asked the question on dilution, et cetera. What I would encourage you, I'm not sure if you had the chance to look at it, is prior to our follow-on, we published an example, an illustrative example of dilution. And it's on our website. If not, you can download it from there. We did. Thank you, Eduardo. Yeah, we did. OK. So it gives you a pretty good idea of what dilution means. So it's roughly about 160 million shares, which is already, everything's already accounted for.
Speaker Change: And the share count or you don't take it into account and dilute the share count doing both would be double counting.
Speaker Change: Oh.
Speaker Change: Have you have you also asked the question on dilution.
Speaker Change: Et cetera.
Speaker Change: What I would encourage you Adam I'm not sure. If you had the chance to look at it is prior to our follow on we publish a an example, an illustrative example of dilution and it's on it's on our website at not.
Eduardo Pizzuto: You can download it from there we need thank you Eduardo.
Eduardo Pizzuto: It gives you it gave you a pretty good idea of what dilution means so it's roughly about 160 million shares.
Eduardo Pizzuto: Which is already everything is already accounted for it. So there is so.
Anthony Hatoum: So there is, so I just want to touch on the point about the future dilution that you referred to. So I think it's pretty clear on that example.
Eduardo Pizzuto: Just wanted to touch on the point about the future dilution that you referred to so I think it's pretty clear on that on that exam.
Anthony Hatoum: Thank you. I would basically say it's a very small stake in the total. And as you know. conservatively have been allocated the whole stake of Bolton Park. The main reason for selling has been fiscal, taking care of fiscal obligations.
Speaker Change: Thank you Laurie a question about my selling a stake in the secondary offering up here.
Eduardo Pizzuto: I would basically say it's less.
Eduardo Pizzuto: Three small stake in the total and as you know.
Eduardo Pizzuto: Conservatively been allocated the whole stake of Bolton partners.
Eduardo Pizzuto: The main reason towards selling has been physical taking care of fiscal obligations.
Javier Perez Alvarez: Okay guys, thank you for the explanation. Thank you, Javier.
Eduardo Pizzuto: Okay guys. Thank you for the explanation.
Robyn: Thank you Robyn.
Operator: That's all the time we have for the Q&A session.
Anthony: That's all the time, we have for the Q&A session I would like to hand, the call back to Anthony for his closing remarks.
Anthony Hatoum: I would like to kind of go back to Anthony for his closing remarks. Ours is a robust business model that is very resilient, our value proposition continues to increase. Our competitive advantages are real and increasing. As a result, we will see continued growth and gain in market share. We'll continue to increase our investments and our future growth. It has always been our approach and is a proven strategy. We believe that this will pay off in increasing growth rates and in the creation of value for our shareholders. We will continue to do the same, just faster and better.
Anthony Cut: Ours is a robust business model that is very resilient our value proposition continues to increase.
Anthony Cut: Our competitive advantages are real and increasing.
Anthony Cut: As a result, we will see continued growth and gaining market share.
Anthony Cut: We will continue to increase our investments in our future growth. It has always been our approach and is a proven strategy.
Anthony Cut: We believe that this will pay off an increase in growth rates and in the creation of value for our shareholders.
Anthony Cut: We will continue to do the same just faster and better.
Anthony Hatoum: Thank you all. Thank you to our investors and to the analysts that are covering us for your continued support and confidence in our strategy. And if you have any questions, you can reach us directly, Eduardo and I. We're very happy to talk to you and to answer your questions. Thank you again. Thank you.
Anthony Cut: Thank you all.
Anthony Cut: Thank you to our investors and to the analysts that are covering us for your continued support and confidence in our strategy.
Eduardo Pizzuto: And if you have any questions you can reach us directly Eduardo ni.
Eduardo Pizzuto: Very happy to talk to you and to answer your questions. Thank you again.
Eduardo Pizzuto: Okay.
Operator: That concludes today's call. You may now disconnect. Goodbye.
Eduardo Pizzuto: Thank you that concludes today's call you may now disconnect.
Eduardo Pizzuto: Goodbye.