A 12 store chain that’s going to generate, in our opinion, over a mature period of time could be $150 million to $200 million of revenue. But when those stores are a little bit smaller with a lower fixed cost, we think those things will perform at a higher EBITDA margin, which means for our shareholders, we’re delivering a better return on capital, which is the mandate that they expect from us.
Daniel Imbro: Got it. That’s helpful. And maybe if I just couple that with the cost outlook. I’m sorting [ph] with SG&A here. You came in at the high 70s as a percent of gross profit. I’m assuming you’re closing maybe less profitable stores. And I think you mentioned $60 million of lower compensation. If we see a return to unit growth, we see gross profit dollars going in the right direction, and you have $60 million of lower comp. Could we see a low to mid-70s as a percent of gross profit again?
Marcus Lemonis: Our goal, since we went public and even prior to us going public is that the optimum level is for us to be in the 72%, 73% range of SG&A as a percentage of growth. And our EBITDA margin goal has always been 8% over time. We’ve achieved those things over time. We’re struggling right now between the balance of holding on to what we believe is the best talent in America and compress margins. And as a management team, and we understand that we may get beat up a little bit for this, we believe more in investing in our people and holding on to our people and providing better wages for our technicians and better wages for our management as we are also a growth company. We will end the year probably somewhere around 81% to 81.5%, driven largely by compressed margins.
Normalize the margins, we would be probably in the 76% to 77% range because revenue is down. As we look forward, we know we have to take no less than 2% of those costs out. It all cannot come on the backs of our people, and it will not. We’ve renegotiated leases. Tom and Brent have been very successful in that. We have eliminated locations. We all collectively have been successful in that. We’ve unfortunately had to terminate certain marketing relationships that were big, sticky fixed costs that contributes to it. But we don’t want anybody to leave this call thinking that we’re going to make more money on the backs of our people. We’re going to make more money by driving revenue and then adding costs back in on the people side in a more variable way.
That’s always been our model. I think COVID is explosive growth, probably made us a little sloppier than we should be. We held on to people longer than we should be. And we always want to be that employer of choice. I tend to be a bit of a softy for things like that. This group basically said to me in September, okay, softy parties over. We got to make some changes. So that’s why we went through a significant reduction in headcount. We always do it seasonally around this time. I think the total headcount reduction was north of 1,600. The reason that Lindsey and Tom outlined the 1,000 is because some of those folks are going to come back as the spring selling season returns. So we did not want to have people pro forma a number that was anything other than that.
Daniel Imbro: Understood. So just 80% to 81% and then a couple of hundred basis points down year-over-year as how you think about the next 18 months playing out Marcus?
Marcus Lemonis: Yes. I mean, when I – when we say no less than 2%, like our goal is to get to 77 because we know margins are still not going to be as good as we want them to be next year. But that – how you laid it out is a good goal.
Daniel Imbro: Understood. I appreciate the color.
Marcus Lemonis: Yes. Thank you.
Operator: The next question we have is from James Hardiman of Citigroup. Please go ahead.
Sean Wagner: This is Sean Wagner on for James. You’ve talked about kind of your breakdown of aged inventory, new inventory. Do you have an estimate of where the rest of the industry is as far as model year ’22 and ’23 inventory as a percentage of total?
Matthew Wagner: It’s tough to gauge the entirety of the industry, but I can tell you based upon a number of the deals that we are taking a look at right now, most of our competitors in our far less advantageous position compared to us. And that’s really the only insight that I could share at this point. But we feel really good about where we’re trending right now, where we continue to trend, especially in the landscape that we saw last year. And based upon our conversations that we’re having with manufacturers we head into this upcoming year.
Marcus Lemonis: I’m going to be a little more transparent than that. We know that inventory aging is our path to accretive and opportunistic acquisitions, period end of story. And if we look at some of the ones we’ve done recently, it unfortunately is because of mismanagement of inventory. The only reason we have 122s on the ground is because we bought dealerships that had 22s on the ground. That inventory is largely not anything that we purchased ourselves. We purchased it through acquisitions, and that was a factor in the goodwill analysis of that transaction. As we look to make more acquisitions, please understand that, that 22 number could potentially grow again, but they’re coming in at the appropriate values. Our transactions today are anywhere from 65% to 70% of the original invoice value is how we’re approaching those transactions where the acquisition is going to be made.
So if you scrape our data and you see that the number went from 100 to 400, please know that, that’s because we made a massive accretive acquisition, and we factored in the goodwill associated with that transaction in writing down or valuing that inventory at 30% to 35% off that number. We’ll be able to move through those units quickly, and we will fully disclose the nature and the genesis of those 2022s as they come back on. The reality of it is, is that other dealers around the country probably didn’t do a good enough job saving Acorns [ph] during the COVID process. And when you get back into a tougher environment like we’re in today, when that aging happens, manufacturers and banks alike want curtailments, that’s a pay down on the inventory on their line.