And then, you’ve seen it through the year. You’ve seen it through our numbers right now. But the most exciting part of GrowGen right now, is the uptake of our private label products and the brands that we’re bringing to market. We’re launching Drip powders this quarter. To follow up on our Drip nutrient lines that’s had a tremendous first year for us. We’re adding products onto our Char Coir brands, we are launching a benching from our MMI company, single tier benching. So there’s a lot of excitement in our company right now. But getting costs in line with really, it’s the new norm in the business, if you ask me, there are people waking up in the morning and deciding to go out and start growing. That’s kind of — that’s run its course. So you’re seeing, many more legal growers out there.
And also single license in states that are allowing, [indiscernible], Ohio yesterday, they have very favorable home grow rules in Ohio. You probably will see a store from GrowGen in Ohio this year. It’s not going to probably first quarter next year, and we will still be expanding. But you’re probably talking one or two stores in states not what we used to have. The industry right now is more predictable and forecasting is better. So less is more right now for us.
Operator: And your next question is from Eric Des Lauriers from Craig-Hallum Capital Group. Please go ahead.
Eric Des Lauriers: I guess first one, just kind of following up on the store outlook here. It sounds like you’re mostly consolidating stores in these more legacy on limited license markets here. You mentioned Ohio is a place that you might look to add a store within the next couple of months here. Beyond this newly legalized Ohio State here, are there other states that you are looking to sort of continue expanding in? I guess, just how should we think of the overall expansion plans kind of going forward here? Is it kind of following states as they legalized or do you have sort of a more extensive roadmap for call it the next the next year or so?
Darren Lampert: States that are legalizing depending upon rules, and again, in the Ohio rules were favorable. We have a 100,000 square foot warehouse in Ohio. So we’ll probably only need to store in Ohio and ship out of our warehouses within 24 hours. We’re still looking at New York. We’re looking at Pennsylvania, Maryland, and a couple of other states. We’ve looked at another store in Missouri in New Jersey. But right now, we’re taking a wait and see attitude, the states that we’re already in, we’re relieved that we’re pretty well served in those states and aren’t looking to add to footprints. But if something comes up that’s beneficial to our shareholders, we will do it. What we’re really looking for right now is, stores that are closing, we’re bringing them into the GrowGen umbrella, buying some inventory from them, and taking customer lists, and sometimes some employees.
We did that in St. Louis this year and it worked out tremendously for us. So it’s just that wait and see and see where the market goes. But the one thing that we will continue to do is keep our balance sheet extremely strong, until we see a real turn in the industry.
Eric Des Lauriers: It’s helpful. I appreciate that color. Next one for me. I think I caught in some of the Q&A here that. You think private label as a percentage of overall sales? Or maybe as a percent of retail sales, I’m not sure. But that could go up into the 20s next year, that I think that’s an increase from sort of previous commentary. Could you just kind of expand on that a bit of, do you need to get additional new products in line here. I know you have a handful that you’ve just recently introduced here, is this sort of portfolio of proprietary brands now sufficient to get you to that 20% plus level and if you could kind of — if you’re willing to share any kind of longer term goals of where you think private label could be as a percentage of sales, that’d be helpful. Thanks.
Darren Lampert: I believe that what we have in-house right now with the launch of Drip Hydro powders, will bring us into that 20%-mark next year. We’re also doing a lot of work to the harvest company. And we will be launching products into IGC next year, pruners and garden in a box that we’ve just started to roll out, certain mushroom kits that we’re rolling out. Char Coir has had a wonderful 2023. And we continue to launch new Char Coir products from Char Coir. We just entered the propagation space with coco coins. So there’s a lot going on right now in our private label division. And it’s really what’s fueling GrowGen right now starting to feel new customers coming to our stores, and also on the distribution side of it. So we’re excited.
And we do believe you will see that number in the 20s next year. Further out into 2025, we do believe it will continue to grow. We believe there’s a lot of wonderful products from other [indiscernible] vendors out there right now. So we believe somewhere between that 30% to 35% number when we fully grow up, and that’ll probably be 2026-27. We do believe, we’d reach that number.
Operator: Your next question comes from Brian Nagel from Oppenheimer. Please go ahead.
Brian Nagel: So I apologize. This is repetitive. So I do unfortunate, jump in the call late, but just with regard to the store closings? Are you are — is this repositioning within markets? Are you with these closings exiting some markets? And then a second question, and I apologize if you may have already laid this out? How should we think about kind of the near-term financial implications of closing the stores, from a sales loss perspective, as well as an expense reduction perspective.
Darren Lampert: The 12 stores that we’ve closed, Brian in the last four months, we weren’t losing markets. They were redundancies. I think probably 10 or 11 of the stores within 30 miles of another stores that we had. They were smaller stores within regions and not performing as well as we would have liked. And we’ve done a decent job getting out of most of the leases right now and cutting the costs. When you look from a financial side of it, those 12 stores accounted for about $22 million of business in 2022 and that was tailing off into 2023. From a revenue standpoint, what we believe we’re going to keep somewhere in that 50% mark. We usually, we’ll keep a majority of the commercial customers and depending upon which store it is, and how close there’s another store to it.
That’s where the homegrown markets will fall. Now we believe that again GrowGen still is the best on — we have best stock in our stores. We have the best solutions, and again, people still want to shop with us. So we are incentivizing our staff to keep these customers, to go getting the customers. We are doing work before closing stores with contacting customers and giving them benefits to come to the next nearest store of GrowGen. Also, we’ll have a little more color for that, probably in six months when we really get an understanding of what percentage we kept, but we do track it. Right now for guidance, we aren’t changing guidance for 2023. So with that, probably dropped 3 million or 4 million off the fourth quarter, but we still look very comfortable with guidance right now for the year.
Brian Nagel: That’s very helpful, Darren. And then, there is a follow-up question, if I could. Sorry, same caveat, if you’ve addressed that, I apologize. But gross margin looks a bit better here. No, I guess when you confirm that, but then also, how should we think about the drivers here better gross margins in Q3.
Darren Lampert: Greg, you can take that.
