Is This Fast-Growing Chain the Next Costco?

Company Overview - BBB Foods operates Tiendas 3B, a small-box supermarket concept that combines elements of Aldi and Costco, focusing on providing good, pretty, and cheap products [2][3] - The company has rapidly expanded to 2,772 locations across North America, making it the fastest-growing player in its sector [1][3] Financial Performance - Revenue increased by 30% last year, reaching nearly $2.8 billion, with a further 33% growth in the latest quarter [5] - Same-store sales surged by 17.6% in 2023, building on a 13.3% increase from the previous year [5] - The company turned profitable last year, achieving operating free cash flow for the first time [6] Market Position - BBB Foods' net margin was 0.6% last year, which is low compared to industry leaders like Costco, but the company is expected to improve profitability as it scales [9] - The gross margin for BBB's stores is 16.3%, which is competitive compared to traditional supermarket chains [11] Growth Strategy - The company opened 484 net new stores last year, indicating a strong focus on expansion [5] - Private label products have increased from 46.5% to 53.6% of sales, suggesting growing consumer trust and negotiation power with suppliers [10] Valuation - BBB Foods' stock is trading at 79 times forward earnings and 55 times next year's target, indicating a premium valuation compared to traditional supermarket operators [13] - The market cap is roughly equivalent to its trailing sales, which is higher than traditional supermarkets but lower than Costco's valuation [13][14]