Tiendas 3B (TBBB) Q4 2024: Private Label Penetration Hits 54%, Driving Margin and Store Expansion
Tiendas 3B’s hard discount model delivered robust growth, with private label sales now over half of revenue, fueling both margin expansion and store productivity. The company’s aggressive new store rollout and operational leverage are translating into resilient performance, even as broader Mexican retail slows. Management is signaling further density gains and innovation in 2025, with continued investment in talent and infrastructure to support scale.
Summary
- Private Label Penetration Accelerates: Over half of sales now come from private label, reinforcing margin gains and customer loyalty.
- Store Expansion Outpaces Guidance: Aggressive new openings and regional density moves are sustaining top-line momentum.
- 2025 Playbook Focuses on Scale: Leadership expects operational leverage and innovation to extend competitive advantage despite macro uncertainty.
Performance Analysis
Tiendas 3B, a hard discount grocery retailer, reported a year of rapid expansion, with 484 net new stores opened in 2024, a 21% increase over the prior year. The company’s total revenue growth of over 30% was fueled by both new store openings and strong same-store sales, which rose 13.4% for the full year and 11.8% in Q4—well above the Antad industry benchmark of 2.6%.
Private label penetration reached 54% of total sales, up from 47% in 2023, a critical lever for both margin expansion and customer retention. Mature stores demonstrated healthy underlying demand, with transaction count up 4.6% and average ticket size up 3.6%, even as inflation moderated. EBITDA margin improved to 5.2% in Q4, and cash generation remained robust, supporting self-funded growth. SG&A as a percentage of revenue increased, but this was mainly due to one-off and growth investments, with management reiterating expectations for operating leverage as scale builds.
- Margin Expansion from Private Label: The shift to 54% private label sales is structurally lifting gross margin and deepening customer loyalty.
- Store Productivity Holds in Slower Macro: Same-store sales growth remains well ahead of industry peers, with both ticket and traffic contributing.
- Cost Structure Investments: SG&A uptick reflects talent and compliance investments, but underlying expense ratios are expected to decline as a share of sales.
Tiendas 3B’s model continues to generate negative working capital, enabling aggressive expansion with minimal external capital needs. Management’s discipline on cost and innovation in product mix is sustaining high returns on incremental investment.
Executive Commentary
"What is driving this is a continuous improvement in our value proposition to customers. And this happens when you scale because you drive costs down and you improve your private labels quality and features. So as a result, you offer better value to your clients."
Anthony Hatoum, Chairman and Chief Executive Officer
"In 2024, we once again self-funded our aggressive growth, clearly demonstrating the strength and resilience of the hard discount business model."
Eduardo Pizzuto, Chief Financial Officer
Strategic Positioning
1. Private Label as Growth Engine
Private label, in-house branded products, now accounts for 54% of sales, up sharply year-over-year. Management credits this shift to continuous improvement in product quality, features, and price, which enhances the value proposition and drives both customer acquisition and wallet share. The company expects further gains as scale allows for better sourcing and product innovation, and sees parallels with global hard discount leaders like BIM in Turkey.
2. Relentless Store Expansion and Density
Store network growth exceeded guidance, with 484 net new stores and plans for 500 to 550 more in 2025. The decentralized real estate model empowers regional teams to pursue both geographic expansion and increased density in existing markets. Leadership sees “tremendous white space” and no signs of saturation, even in mature urban markets, supporting a thesis of sustained multi-year unit growth.
3. Operational Leverage and Talent Investment
While SG&A rose in 2024, much of the increase was due to one-off items and strategic hiring to support public company requirements and future growth. Management expects administrative expense ratios to decline over time as scale builds, emphasizing ongoing investment in talent as a foundation for long-term execution. The company’s negative working capital model, where payables exceed inventory and receivables, continues to support self-funded expansion.
4. Innovation Pipeline and Category Expansion
Tiendas 3B runs up to 60 product and category tests at any time, with upcoming pilots in fresh produce and meats. Management stresses that new category launches will only proceed when operational and margin criteria are met, viewing these as potential upside rather than a core part of the base case. The company’s approach to elasticity testing and continuous assortment refinement underpins its ability to sustain same-store sales growth even in older stores.
5. Resilience in Macro Downturns
Leadership emphasizes the business’s historic outperformance during economic slowdowns, citing customer “stickiness” and value-seeking behavior. The hard discount model is positioned as a net beneficiary of consumer trade-down, and management sees no evidence of competitive pressure or demand deceleration in its results.
Key Considerations
Tiendas 3B’s 2024 results reinforce the durability of the hard discount model and the company’s ability to compound growth through private label, disciplined expansion, and operational efficiency. However, the next phase will test the scalability of this approach as the network matures and new categories are integrated.
Key Considerations:
- Private Label Scaling: Ongoing gains in private label penetration are central to both margin and customer retention, but require continuous product innovation and supply chain discipline.
- Store Density and White Space: No signs of saturation, but further expansion will depend on maintaining real estate pipeline and talent throughput in new regions.
- Expense Discipline vs. Growth Investment: SG&A leverage is expected, but ongoing hiring and compliance costs may limit near-term margin expansion.
- Category Innovation Execution: Expansion into fresh and ultra-fresh categories could unlock new growth, but operational complexity and margin neutrality must be proven.
- Macro Sensitivity: The business has historically thrived in downturns, but a sharp consumer retrenchment or competitive escalation could test the model’s resilience.
Risks
Key risks include execution challenges as the store base scales, especially in new geographies and with new product categories. Operational missteps in fresh or ultra-fresh launches could dilute margins or disrupt supply chains. Regulatory and compliance costs tied to public company status may pressure near-term expense ratios. Intensifying competition or a sharper-than-expected consumer slowdown could impact traffic and ticket size, even if the hard discount model is relatively defensive.
Forward Outlook
For Q1 2025, Tiendas 3B guided to:
- Same-store sales growth of 11% to 14%
- Total revenue growth of 26% to 29%
- 500 to 550 new store openings
For full-year 2025, management maintained a tone of confidence, highlighting:
- Further private label gains and innovation as margin drivers
- Continued operational leverage and expense discipline as scale builds
- Resilience in both upturns and downturns, with no signs of demand deceleration
Takeaways
- Private Label Drives Structural Advantage: The shift to over 50% private label sales is deepening margin and customer loyalty, underpinning the company’s growth engine.
- Expansion Remains Unconstrained: No evidence of saturation in core markets, with decentralized real estate execution supporting aggressive unit growth in both existing and new geographies.
- Watch for Category Innovation and Expense Leverage: Successful execution in new categories and administrative scaling will determine the sustainability of margin expansion and long-term returns.
Conclusion
Tiendas 3B’s 2024 performance demonstrates the compounding power of the hard discount model in Mexico, with private label, store expansion, and operational discipline driving robust results. The company’s ability to sustain high growth while investing in future capabilities positions it well, but ongoing execution in innovation and cost management will be critical as the business scales.
Industry Read-Through
The outperformance of Tiendas 3B relative to the broader Antad benchmark signals continued consumer appetite for hard discount formats in Mexico, even as overall retail slows. The rapid shift to private label and focus on operational efficiency offer a blueprint for regional players and global discounters targeting emerging markets. Investors should watch for further category expansion and competitive responses, as the hard discount model continues to reshape the grocery landscape and pressure traditional supermarkets on price, assortment, and customer loyalty.