I think it could be in a range, though, perhaps of like 360 to 370 over 2024, which we’re taking that each moment by moment, but what we are confident of is our ability to yield more market share heading into next year. And when we look at the overall market, we’re seeing new end use, which I know oftentimes, these questions are just focused on the new market. Within the used space, I don’t know that anyone is really reporting on the fact that our market share has grown so considerably, but we’re at all-time market share levels between new and used combined. We’re nearly touching 10% of the overall new and used marketplace, which we are laser-focused on growing that in combination with our efforts on used and continue to enhance the new side.
Tristan Thomas-Martin: Okay. Thank you. And then just one more. You called out 9,000 model year ’23 or that’s your target at the end of the year versus 16,000 in ’22 [ph] how does that 9,000 compared to a model year ’20 or model year ’21?
Marcus Lemonis: That’s an excellent question. Obviously, model year ’20 was a little wonky because we were in the middle of the COVID process. And with the manufacturers shut down, the ’20 and ’21 exited at a much faster rate because production had been hampered so dramatically. What we’re using as a benchmark for us, and we clearly know we have a greater opportunity to improve it. How do we start out the beginning of 2023, and we had over 16,000. It’s our goal to be under 9,000 as we end the year, hopefully starting out at almost half of the aged inventory we had a year ago. The good news is, is that the number of ’24s that will be on our lot as a percentage of the total will be materially higher than the number of ’23s we started last year.
That’s what gives us confidence to, quite frankly, have a slightly higher overall gross margin. I think the piece that we really want to focus on is while Matt’s forecasting 370 in overall wholesale shipments and retail in the same neighborhood, it is predicated on driving down those ASPs. And I think the manufacturers in working with them have finally realized through the data that we’ve provided over the last 90 days, that that’s how you’re going to drive replenishment, increasing turns, et cetera. That’s why we are so adamant and we’re asking the market and our holders to really understand and trust us in this process over the next 60, 90 days to continue to accelerate the exit of those old model years because we’re replacing a brand-new unit with the same make model floor plan at a significantly lower cost.
That’s really what’s driving this. We believe that the investment in liquidating these ’23s over the next 90, 120 days is going to pay massive dividends in ’24.
Matthew Wagner: And Tristan, if I could even back up to your initial question, too, to clarify one thing. There’s kind of a false corollary of ever trying to compare 2020 model year and ’21 model year to 2022 and 2023 model year. As such, the manufacturers change their cadence of model year switches in 2021. So they used to change the model year in April and May. However, when they introduced the model year 2022, they actually had introduced that in July. Ergo [ph] you missed a solid 3 months of selling season. So really, this is kind of a totally new set of norms that we’re establishing where we feel really good given that we really just have 2 model years to compare with the progress that we continue to make on this front.
Tristan Thomas-Martin: Awesome. Appreciate all the insight.
Operator: The next question we have is from Noah Zatzkin of KeyBanc Capital Markets. Please go ahead.
Noah Zatzkin: Hi. Thanks for taking my question. Just maybe one for me. And you mentioned expecting gross margins to be flat to slightly positive next year. So in terms of vehicles, particularly given ASPs coming down, if you could provide some color on your thoughts around vehicle gross margins and kind of how that dynamic will impact your ability to kind of hold margins there? Thanks.
Tom Curran: Sure. I think what – this is Tom Curran, Chief Accounting Officer. Just piggybacking off of what Matt stated earlier, I think moving out of those 2023s as quickly as we can is really going to help bolster our margin position on new heading into next year, where we should be able to maintain somewhere in the neighborhood of where we have historically on those new margins. I think we feel very strongly about that. On the used side, I went to Matt in the quarter, and we were going through aging. We were looking at some of the stuff that was sitting on the lot for one reason or another. And we said, we’d look at each other, I said, look, we have to get the…
Marcus Lemonis: It’s actually not how it happened. You went to Matt and said, you better clean up your inventory.
Tom Curran: So many words. Yeah. So that said, while we do see some of that margin compression on the new – on the used side in Q3, and we may see some of that in the short term. We are confident in our ability to start procuring at these new price points as we kind of work through updated to our valuation tools and our used procurement policies heading into 2024.
Noah Zatzkin: Very helpful. Maybe just one more. I think you mentioned a 7% headcount reduction at the end of Q3. Did I hear you right that, that should be viewed as a $60 million kind of annualized SG&A benefit?
Lindsey Christen: Yeah. This is Lindsey Christen. We are looking at that savings to be combined with total headcount reductions as well as some modifications we made to variable compensation plans. It was a difficult decision, but the right thing to do for the overall health of the business.
Noah Zatzkin: Thank you.
Operator: The next question we have is from Brandon Rolle of D.A. Davidson. Please go ahead.
Brandon Rolle: Good morning. Thank you for taking my questions. Just first, on used inventory, what percentage of your used inventory still needs to be adjusted to the new – the new versus used pricing spread that you guys are looking to achieve?
Marcus Lemonis: I think the way that I’m thinking about it, and Karin and Tom have been instrumental in providing the road map is that they are not satisfied with where our terms are. We’ve historically been in that 4 range. And when we made the decision to go for it to really try to grow that overall business, they dropped down below 3.5, a level that Karin and Tom said, look, I’m comfortable with 3.5, 3.75, but I want to see a quarter turn better improvement. So Matt and I, with the rest of the sales organization, have some wood to chop. We probably have about 700 to 800 units that we need to flush out of the system. And in a lot of cases, it’s not about the fact that we own them wrong. It’s about the fact that the accounting team wants the cash brought back into the system and then allow that cash to be redeployed in the first quarter by bringing in those units from consumers at a lower cost.
So they’re looking for a quick 60, 90-day swap. As we add more stores, I would expect that our overall used inventory will get back up to the same total number, but on a same-store basis, we’ll have brought that down by probably 6% or 7% to get that turn back up to where they really want it, which is north of 3.5 – actually, Matt, you’d probably say closer to 4 is what they’ve been telling us, right?
Matthew Wagner: Ideally, yes, but we’re also in such an environment where we’re going to just follow the money trail. We understand that we can get a better yield on some of these used segments compared to some new segments, depending upon what’s happening in the new marketplace. We’re relatively agnostic to whatever needs to happen, Brandon, to fulfill that demand that exists out there. So there might be these moments, which I know Karin and Tom put me under a lot of pressure to actually make sure that we clear these KPIs. But in certain environments, 3.5 turns is pretty damn good, at least…
Marcus Lemonis: That’s our sales – as to the accounting team, its pretty damn good. They haven’t necessarily bought it yet, so we’re trying to find that middle ground. What we have acknowledged is that we have some improvement to be made. The good news is the gamble that we took, the very calculated strategy that we took to grow the used business really paid off in the last 24 months. And if you look at the overall margin profile of the business, it has really benefited from the total gross dollars. If you look at the gross margins on used in Q3, you can see that they’re lower. But that’s a decision to inflect a little bit of pain on ourselves to accelerate that flywheel to get that thing turning. I would expect that suppressed margin profile that you saw in Q3 to linger for probably another 90 days.
