Ladies and gentlemen, thank you for standing by. Welcome to the Target Corporation third quarter earnings release conference call. [Operator Instructions] As a reminder, this conference is being recorded Wednesday, November 16, 2016. I would now like to turn the conference over to Mr. John Hulbert, Vice President, Investor Relations. Please go ahead, sir.

Good morning, everyone, and thank you for joining us on our third quarter 2016 earnings conference call. On the line with me today are Brian Cornell, Chairman and Chief Executive Officer; Mark Tritton, Chief Merchandising Officer; John Mulligan, Chief Operating Officer; and Cathy Smith, Chief Financial Officer. This morning, Brian will recap our third quarter performance and progress in pursuit of our strategic objectives. Mark will provide detail on recent category performance, along with our fourth quarter merchandising and marketing plans. John will provide an update on our efforts to improve operations and modernize our supply chain. And finally, Cathy will offer more detail on our third quarter financial performance and our outlook for the fourth quarter and full year. Following their remarks, we'll open the phone lines for a question-and-answer session. As a reminder, we're joined on this conference call by investors and others who are listening to our comments via webcast. Following the call, Cathy and I will be available to answer your follow-up questions. As a reminder, any forward-looking statements that we make this morning are subject to risks and uncertainties, the most important of which are described in our SEC filings. Also in these remarks, we refer to adjusted earnings per share, which is a non-GAAP financial measure; and return on invested capital, which is a ratio based on GAAP information with the exception of adjustments made to capitalized operating leases. Reconciliations to our GAAP EPS from continuing operations and to our GAAP total rent expense are included in this morning's press release, which is posted on our Investor Relations website. With that, I'll turn it over to Brian for his comments on the third quarter and our expectations going forward. Brian?

Thanks, John, and good morning, everyone. We are very pleased with the financial results we announced earlier this morning. While we have much more work to do, this quarter, we saw meaningful progress in our efforts to improve our traffic and sales as both metrics improved by about a percentage point compared with the second quarter. In addition, we generated much stronger-than-expected EPS performance, driven by strong signature category growth, favorable results in Back-to-School and Back-to-College season and the continued benefit of our cost-savings efforts. Our third quarter adjusted EPS of $1.04 was 22.1% higher than last year and well beyond the high end of the guidance range of $0.75 to $0.95. With this outstanding third quarter performance, Target's adjusted EPS has grown more than 10% through the first 3 quarters of the year. This is particularly strong performance given that we've experienced flat comparable sales growth during this period. In addition, our business continues to generate very strong after-tax returns on invested capital. For the 12 months through the end of the third quarter, we reported a very healthy after-tax ROIC of 14.3%, excluding the onetime benefit of the gain on the sale of our pharmacy business. This performance represents an increase of approximately 130 basis points from a year ago. Of course, strong cash generation by our business allows us to continue to fund a healthy level of investment in our stores, supply chain and technology while funding robust cash returns to our investors. In the third quarter, we returned about $1.2 billion to our shareholders on the form of dividends and share repurchases. Year-to-date, we've already returned over $4 billion to our shareholders. I'd like to pause and thank our team for their boundless energy and passion to serve our guests by offering them unique merchandise, outstanding…

Thanks, Brian, and hello, everyone. I'm so happy to be joining all of you on the call today. I look forward to meeting with you in New York this spring. As Brian mentioned, I spent the last several months digging into our business, understanding Target's strengths and exploring where we have the biggest opportunities to grow. And what I found is we have a strong business as it stands today, a powerful Target brand, an impressive own brand portfolio, great-looking stores, a friendly and engaged team and a huge base of passionate guests. With these strengths, we also have an amazing opportunity in front of us. It's been energizing to dig in with the team to develop merchandising's plan to drive Target's future growth. I look forward to sharing our vision in detail with you at our Financial Community Meeting. For today, I'm going to focus on our recent performance and our plans for this quarter and the holiday season. In the third quarter, sales performance improved across nearly every part of our business. Comp sales in Apparel and Home accelerated the most, providing a positive mix benefit on the gross margin line. Strong execution and markdown management compounded that benefit, leading to much stronger-than-expected gross margin in the quarter. As Brian mentioned, we saw very strong trends in Back-to-School and Back-to-College, reflecting our focus on key growth categories and the benefit of improvements we made to our promotional cadence. Digital growth played a big role in the season, particularly in Home, which is already one of our biggest and most profitable categories online. We've continued to see the fastest growth in signature categories sales. A few of the highlights from the third quarter include Kids, where we've seen an outstanding performance in Cat & Jack and Pillowfort. We've also…

Thanks, Mark, and good morning, everyone. Across every aspect of our operations, we are excited and prepared for the peak holiday season. And as a result of this year's efforts to increase the speed, accuracy and reliability of our network, we're well positioned to deliver great guest service and a better experience in every channel. In our stores, we've hired and trained tens of thousands of seasonal team members who are already serving our guests. Notably, despite the tightest labor market conditions we've seen in some time, our hiring and training process went smoothly. In fact, we met our key hiring and training milestones earlier than a year ago. When guests shop our stores this holiday season, in addition to great products, displays and services, they'll find our in-stock position is better than we've ever measured, reflecting improvement across every category we sell. And importantly, we're attaining those in-stock levels with lower inventory than a year ago. Over the last 18 months, we've deliberately invested in our inventory position in key commodity categories to ensure we remain in-stock in categories where reliability is most important to our guests. However, now that we've annualized these investments and we're beginning to see the benefit of our work to make our supply chain faster and more reliable, we'll be able to deliver outstanding in-stocks on a smaller base of inventory over time. The accuracy of our inventory data is key to our speed and reliability, and we've been investing in our systems and processes to achieve greater accuracy. One example is our implementation of RFID technology in a portion of our Apparel assortment, which is currently in more than 1,600 of our stores. In affected categories, overall inventory accuracy has increased dramatically, meaningfully reducing the number of occasions in which we can't physically…

Thanks, John, and hello, everyone. Our third quarter financial performance was much stronger than expected, driven by strong execution across the board. Adjusted earnings per share of $1.04 was 22% higher than last year and well above the top end of our guidance range. This performance would be noteworthy in any environment but it's especially impressive given our challenging sales trends. Comparable sales declined 0.2% in the third quarter. This was a full percentage point better than our second quarter performance and near the high end of our guidance range. However, it's well below the growth we expect to generate over time. With the removal of our pharmacy and clinic sales from this year's results, total sales were down nearly 7% in the quarter. Digital sales increased more than 26%, contributing about 70 basis points to our comparable sales. Digital growth was fastest in our signature categories and was particularly strong in Kids, driven by the strength of our Back-to-School offering and the launch of Cat & Jack. This is particularly exciting because signature categories are items and brands uniquely Target. Among the components of our comp sales, transactions were down 1.2% in the third quarter and 1 percentage point improvement from the second quarter. Average ticket increased 1%, in line with our performance so far this year. I want to pause here and make it clear that while we have made significant progress, we are not satisfied with our third quarter traffic and sales performance. First and foremost, we are focused on restoring growth to both of these metrics over time. Our REDcard program is our most powerful loyalty vehicle, and it's continuing to grow. Sales penetration on our REDcard was 24.3% in the third quarter, in line with our expectations and 2 percentage points ahead of last year.…

Thanks, Cathy. Before we open up for questions, I want to pause and recap our position as we enter the final quarter of the year. Year-to-date, comp sales have been about flat, and we believe it's prudent to plan for a similar trend in the fourth quarter. That said, we're very excited about our plans for the holiday season, and our team is focused on outperforming our plans, gaining market share and delivering positive comp sales across our businesses, not just in signature categories. On the adjusted EPS line, we have grown more than 10% so far this year. And based on our fourth quarter expectations, our updated range for full year adjusted EPS overlaps with the original guidance range we provided last March, reflecting the team's strong execution in the face of challenging sales trends. Signature categories sales continue to far outpace the company average, and we continue to gain market share in these categories. And because our digital growth continues to outpace the industry average, we continue to gain share in the digital channel as well. So while we continue to adjust our near-term tactics to better maintain the balance on both sides of our Expect More. Pay Less. brand promise, we believe we have the right long-term strategic plan to sustain Target's performance over time. I look forward to covering both our fourth quarter results and our longer-term strategic and financial plans at our Financial Community Meeting, which we'll be hosting in New York on February 28. We'll be providing more details on timing and location soon. But in the meantime, please mark your calendars for that date. With that, we'll conclude today's prepared remarks. Now Cathy, Mark, John and I will be happy to respond to your questions.

[Operator Instructions] Our first question comes from the line of Bob Drbul with Guggenheim.

I just had a couple of questions for you. On pricing, throughout the quarter and, I guess, into the holiday season, what are you seeing and what are you expecting in competition? And you talked a little bit about your ongoing strength in Toys. Can you just talk about the drivers of Toys in the fourth quarter and how you expect that to perform as a category?

Bob, as we think about the holiday season, we expect it to be a very competitive, promotional environment, like we've seen over the last couple of years. So we've -- I think we've got great plans in place. We're very excited about the merchandising, the marketing and promotional plans, and we think we're going to be very competitive throughout the season. As it pertains to Toys, again, we've had a multiyear positive run in that category, and one of the things that's really been important for us is working with key partners like Disney, Mattel, Hasbro to make sure we bring new exclusive items to our assortment. As we go into the holiday season, we're excited to have 1,800 exclusive items in that category, and we think these are going to be very important to our guests throughout the holiday season.

Great. Brian, can I just ask one more follow-up? So when you look at the business over a longer period of time, this has historically been a relatively steady business. I was just wondering, when you look at the volatility between what you saw last quarter and your results and sort of your forecast for the fourth quarter, within 3 months, that's a dramatic change in the outlook. Can you just talk a little bit about exactly what is factored -- what factors are driving this?

Yes. Bob, as we think about our strategy and our approach, while we're certainly very pleased with the progress we saw in the third quarter, it's a result of being very focused on the strategy we've had in place for almost 2.5 years now. And our results and the improvement we saw in the third quarter is really driven by, one, our focus on those signature categories, our commitment to Apparel and Home, baby and Kids, where we continue to see very strong growth and market share improvement. We've been very committed to improving our digital engagement, and year-to-date, we're up over 20%. We saw a 26% growth in the third quarter. And the investments we've been making to improve functionality and ease online is certainly connecting with our guests. We've been very focused, as we've talked about, in expanding our format into new urban neighborhoods. And every time we open up a new store, whether it's in New York, TriBeCa or Philadelphia, we're seeing a great response from our guests. And we've been on a journey, over the last couple of years, to drive greater efficiency throughout our organization. And with John's leadership, we continue to see very strong improvement in operational efficiencies and costs that we're returning to the bottom line. So our focus over the third quarter is very similar to the journey we've been on for the last couple of years, and we've just intensified our focus on executing against our key strategic plan -- planks.

Your next question comes from the line of Scott Mushkin with Wolfe Research.

So just kind of wanted to step back. And we've got traffic that's negative. And trying to understand, as we get out to like next year and the year beyond, where -- obviously, you guys are doing a great job controlling SG&A costs, but it's very hard for a retailer like Target to run this balance with traffic down and sales kind of flat, especially with wage costs rising rapidly. So Brian, if you could take us out and kind of talk about the strategy to drive traffic, get the sales up. I think you threw the number out there, 3% comp growth '17 and beyond. Just how do we get there?

Scott, as we think about the next several years, you're going to continue to see us make significant investments in our assets, improve the in-store experience. We're already seeing the benefits of the investments we've made in Apparel and Home. We're very pleased with some of the learnings from LA25 that we'll be transitioning into our new remodels as we go forward. So we think the importance of the in-store experience, great customer service, continuing to bring newness to our assortment, elevating and developing our own brands -- I think one of the big highlights for Target in 2016 is the way our guest has reacted to 2 great new brands. Both Pillowfort and Cat & Jack have been incredibly well received. The style, the quality, the value we're delivering is connecting with our guest. So the combination of great in-store experience, making sure we surround our guest with great customer service, whether they're shopping in our store or they've ordered online and they're coming in to pick up that order, and then delivering great Target brands at a value. So we think that combination is the strategy that drives traffic into our stores, cars into our parking lot and even more engagement online.

All right. Perfect. And just as a follow-up to kind of thinking about the '17 and beyond, I know CVS was out, I guess, it was last week, they're losing a lot of scripts because of dynamics that are going on there. Now clearly, you don't -- scripts don't matter anymore to you guys, but how about traffic impact on Target as we get into '17 and beyond? Have you guys thought about that and what that can mean?

Well, Scott, I will start with scripts matter a lot to us, and key to the partnership with CVS is making sure we're working together to drive scripts. Because back to the importance of traffic, scripts will be an important part of driving traffic to our stores, and we were very pleased in the third quarter with the progress we're seeing. We're seeing much greater awareness now that we've completed the new branding. The combination of our in-store marketing and CVS marketing and their PBM is driving increased traffic to the pharmacies. So that is a very important lever going forward, and we're very confident in our partnership. John Mulligan works very closely with the CVS team. We've got great plans in place for the fourth quarter and even stronger plans as we go into 2017. So that is a very, very important part of the traffic equation, and we think, over time, that's going to be a key driver of traffic into our stores.

And your next question comes from the line of Greg Melich with Evercore ISI.

I really wanted to follow up on Grocery and Food and the strategy there and how we're going to use that to drive traffic; and also on traffic, an update on your digital initiatives. I know you were doing some tests of combining Cartwheel with REDcard. Just love to hear how those are going and how you think those could help drive traffic into next year.

Yes. Greg, let me start on the Grocery side. And clearly, we have more work to do there, but we feel like we're making very good progress, changes we've made to assortments, improvements we've made to the quality of our produce items. And we're certainly pleased with the reaction we're seeing as we enhance the experience in our LA25 stores. That being the case, we've got to continue to make sure we build a greater connection with our guest as it pertains to the convenient food offering we provide. And Mark and I are working closely on the next phase of our Grocery evolution to make sure that we continue to provide the right assortment, the right value, the right quality our guest expects from Target while they're shopping our stores. So you'll see a lot more of that when we get together in February, but we recognize that's an area that we've got to continue to drive progress in. From a loyalty standpoint, we are working very closely with the marketing team to ensure that when we get together with you in February, we'll be able to talk about the next iteration of our personalization and loyalty programs. Key to that, Greg, is bringing together some of the great assets we already have in place, leveraging our REDcard, leveraging Cartwheel, which continues to see great response from the guest, and making it easy for the guest to leverage the existing loyalty assets we have in place. So we think that's a key unlock as we go into 2017 and beyond, and that'll be a key topic of the conversation when we see you in February.

Your next question comes from the line of Brandon Fletcher with Bernstein.

First-time caller, long-time listener. My -- our core question is, who else can win in urban environments? I know you only have a few dots with the flexible formats, but we think you guys are pretty far ahead in terms of knowledge, how to run mass merchants in urban stores. And mostly, your competitors are pharmacy stores who are good competitors, but boy, they need a whole lot of price to make it work. Do you see somebody else who's dangerous around the corner for taking a spot in cities, obviously besides Amazon going ever more urban?

Yes. Brandon, we're very focused on our own opportunity. Again, we're in 30 locations today. We think we have the opportunity to enter many, many new neighborhoods, and we're really focused on making sure we build the back-end capabilities in supply chain, in assortment management, the in-store operating capabilities that it takes to run these smaller stores. But we think the unique opportunity we have is bringing the best of Target to these individual neighborhoods, making sure that we custom tailor assortment, we bring the right assortment of Apparel and Home, baby and Kids that's right for that neighborhood, complement it with convenient foods and household essentials that really make that local Target run impactful for the guests. So we're still learning. We're very pleased with the feedback, but as we enter very competitive markets like New York, we're going to learn a lot from TriBeCa. We'll take that to other locations. As we do more and more business adjacent to college campuses, we'll understand more and more about the needs of the college student, but we really think, right now, we've got a unique opportunity to leverage this new footprint as a future growth element in our strategy, and the guest continues to say thank you every time we enter a new neighborhood.

Your next question comes from the line of Matt Fassler with Goldman Sachs.

My question is focused on gross margin, where you really turned the corner year-on-year when you back out the pharmacy business. You all spoke to the impact of mix, but can you talk about the impact that you're seeing from cost cuts at the point of purchase for you and how deeply you are into that effort, whether you expect that to be sustained going forward?

Matt, I'd start with we feel really good about the way Mark and his team have managed gross margin throughout the quarter, but it's really a byproduct of the strength we continue to see in those important signature categories. And both in-store but, importantly, online, our growth has been led by Apparel and Home, great strength in baby and Kids, those important high-margin categories that drive differentiation for our brand. So the benefits that we're seeing in gross margin are a byproduct of the strategy we've had in place and really making sure that we're building market share, we're bringing great style and design and newness to those signature categories, and the payback has been margin expansion while we continue to invest in value and getting back to rebalancing our brand promise. We're bringing tremendous product to the Expect More side. And now we've rebalanced our value message on the Pay Less side. So we were able to invest in value throughout the third quarter and still see gross margin range expansion. So we feel really good about the balance we're bringing there and think that can be sustained over time.

Your next question comes from the line of John Zolidis with Buckingham Research.

Great to see the sequential improvement in trends.

Thanks, John.

Question about some of the metrics within the comp. Looking at the average unit retail up 3.5% and units per transactions, down, I noticed that, that has been the case for about 10 consecutive quarters now. So just curious if you could talk about what's driving the average unit retail up and units per transaction down.

Yes. Again, John, it comes back to the mix of our business and the strength we're seeing, particularly in categories like Home, the strength we're seeing in Apparel and accessories, some of the strength we're seeing in baby and Kids. So those are important categories, obviously, in many cases, higher ticket -- still a great value for our guest but higher ticket. And obviously, offset by some weakness we've seen in the Grocery category. So the mix is clearly impacting those metrics you're seeing, and we feel very good about the way the guest has reacted to the quality, the style and the value we're offering in those signature categories.

Is e-commerce growth also a factor then? I would imagine that's more focused into the higher purchase items [ph].

Absolutely. And again, as we noted in our earlier comments, while, overall, we saw our digital business grow by 26%, the bulk of that business, the high-growth areas were in Apparel and Home, so again, higher-ticket items. We feel really good about the progress we're making from a digital mix standpoint, and that's also coming through in the metrics you're seeing.

Your next question comes from the line of Chris Horvers with JPMorgan.

I wanted to think about the shift of the digital promotion in the second to the third quarter. How large of a contributor was that to your delta in comp performance in the third quarter versus second quarter? I ask this because if we look at these 2 quarters together, that's the low end of your 4Q guide. And so as we look ahead, what are the, I guess, big efforts or big drivers that you think drive the business to potentially the higher end of that range? Is it the focus on -- your customers tend to shop more around events? Is it the merchandising side? What drives the higher end of the comp outlook for 4Q?

Yes. Chris, backing up, and I know there are a number of embedded questions there. One, there was some shift because of the promotion between Q2 and Q3. I'd really focus on the year-to-date number. Year-to-date, from a digital standpoint, we've been growing at 20%. As we talked about earlier in the call, we're very pleased with the reaction we're seeing during key event periods, Back-to-College, Back-to-School, a very important period for us both in-store and online. And we think the combination of the investments we've made to improve ease, functionality of our digital engagement and the fact that we're certainly showing the ability to win during key holiday and thematic periods, that's the right balance for us going forward. So we think digital is going to be an important part of our growth strategy going forward. We think digital is certainly the way our guest interfaces with the brand, whether they're in store or online. And we're very pleased with the progress we're making, and our overall growth rate is approximately 2x the digital industry. So we're building market share. We're winning during key seasons, and we certainly expect that to be a key driver to our fourth quarter success.

And then just one quick follow-up question. Can you talk about how much -- I think CVS was 60 or 70 basis points to the gross margin in the third quarter. You're going to start to lap that in the fourth quarter. It sounds like you're guiding to flat. So just help us understand how that sort of progresses out into the fourth quarter.

Yes. So Chris, this is Cathy. As we said, we're guiding for EBIT margin to be up about 10 basis points. We do -- CVS was -- we closed it, remember, about halfway through the fourth quarter last year, so we'll get a little bit of that impact still. The biggest driver in the fourth quarter, as we said, was the -- is SG&A. So we'll continue to see some improvement there, and that's going to get us that 10 basis points of EBITDA margin.

Your next question comes from the line of Robert Ohmes with Bank of America.

The question I had was just -- was actually -- this might be more of a John Mulligan question. I was hoping, John, you could maybe give a little more detail on what the opportunities are from here in terms of in-stocks, RFID, the stuff you're working on and sort of how that could support store comps as you -- in the fourth quarter and as you head into next year.

Great question, Robbie. I think the team has made a lot of progress. And as we said, at least the way we measure it today, our in-stocks -- out-of-stocks is actually the number we've been focused more on, is at our historically low number. So we feel great about that. Having said that, we think there continues to be significant opportunity for us. And I think we see opportunity, first, at a store level, ensuring we always have what the guest wants when they walk in. Because even though we've improved meaningfully, there's still a lot of distance there to go. And then, more important than that, digitally, ensuring we have the right unit at the right place for the guest, whether they want to come in store and pick it up, whether we're going to ship that from a store or ship that from a fulfillment center. And today, we're not completely optimized there either. And so while we've seen great progress and we -- there's absolutely benefit to the guest and their trust with us when they come into the store over time, we still think there's a lot of runway there for us to improve. And you'll continue to see us focus on reliability and speed in our supply chain, and those are the 2 things that we will continue to drive against over not only next year but the next several years.

Our next question comes from the line of Dan Binder with Jefferies.

It's Dan Binder. You highlighted that Back-to-School was strong for you, and it seems that the consumers are shopping Target when there is an event, which could be good for holiday. But I'm curious what you saw in the post Back-to-School period and just generally, when you look back over the last year or so, in between big events, whether it's a Memorial Day event or a Father's Day event or such, what you're seeing in those traffic trends between the big events.

Dan, it's a great question. And obviously, we feel really good about the support we received during Back-to-College and Back-to-School. In those off-holiday periods, we've got to make sure we've got the right balance between newness and those important style categories and great value in our household essentials and Food. And Mark and his team have spent a tremendous amount of time reshaping our promotional strategies, making sure that, both in our circular but also in-store, it's really clear to our guests that we've got this great combination of newness and style and the value our guest deserves and is looking for in those key household essential areas. So we've done a lot of work in-store. I think with Mark's leadership, we're clarifying value on our end caps, clear assortment that connects with the guest in those off-holiday periods. So I feel really good about the progress. You'll see more of that as we go into the fourth quarter. But why don't I let Mark talk about some of the work that he's been leading as we think about really ensuring that value message is very clear to our guests when they're walking our stores each week.

Yes. Thanks, Dan. What we've seen is like a really hypercompetitive market in the first half of the year that really made us take stock to look at how do we represent and resonate value to our guests more readily. So what you're seeing emerging in third quarter and more in the fourth quarter and beyond is a representation not just of price and value in our circulars, as Brian talked about, but in-store, ensuring the guest clearly sees that value up front and center, so representation on our end caps, increasing single price point end caps to really generate a buzz about our value and really delivering on Expect More. Pay Less. So this is a continuing trend. And then the spaces between the key seasonal events that you raised, as Brian said, we're hyper-focused on that. We've seen some strength in some of our options that we put in place and really looking forward to our plans about how do we continue guest traffic and love post major events where we do win.

And then, if I could, just another question. In the last quarter or 2, you've highlighted that the Electronics business was, I think, about a 70 basis point hit to the comps. I was just curious if you could help us understand what that looked like in Q3. And then on the scripts that you mentioned were getting better, trend wise, it sounds positive. But I was curious, if you look at the script trends relative to what you were doing when you owned the pharmacy business, if there's some sort of relative measure you can give us there, that would be helpful.

Yes. So let me start with E&E. And as I've mentioned in my earlier comments, we feel really good about our plans for the fourth quarter. And obviously, Entertainment, Electronics and Toys are critically important gifting items for the fourth quarter. So again, I think the work that Mark and his team have done to make sure, working with our vendor partners, we have a combination of new items, exclusive items, items that are on trend. We've seen a great reaction to our toy and gifting catalog, and we think like that we're very well positioned for the fourth quarter. Those categories did trend downward in Q3. But the important part of the year is in front of us, and I think we're very well positioned. And from a script standpoint, we are still rebuilding some momentum in that space. But sequentially, we've seen improvement from Q1 to Q2 and Q3, and we recognize that with time, as the branding's in place, as our in-store marketing and the CVS marketing take shape, we're going to be rebuilding and growing scripts in that very important part of our store.

Our final question comes from the line of Oliver Chen with Cowen and Company.

Solid margin and inventory control. Just wanted to ask you about fill-in versus stock-up. It's likely related to your -- the progress you've made towards the value messaging. So just curious about how you're feeling about that dynamic. And then I wanted you to try to brief us on the reality versus Amazon, the near-term strategies in terms of how you'll be competitively positioned versus Amazon in the holiday season period. And then as you look to bricks and clicks and the seamless experience over the longer term, for long-term investors, what should the key factors be as we engage in that share opportunity versus Amazon?

Oliver, a great way to wrap up the call. From a fill-in and stock-up standpoint, again, the work that Mark just talked about on the value side is clearly addressing the fill-in guest, and I feel very good about the progress we've made and will continue to make in that space. I think to the broader question, it's a terrific way for us to wrap up before we all get together in New York City. We continue to feel very good about the strategy we have in place and how that will allow us to be very competitive and continue to win in the current retail environment. We think the investments we're making in our stores are critically important, and that store experience that we continue to elevate is a very important measure for our guests. We've learned, as I hope you have, guests still like physical stores, and year-to-date, still almost 90% of all retail shopping is taking place in a physical store. So we've got to make sure we've got a great experience, we've got great service, we continue to elevate that experience and service and combine it with outstanding merchandise and value every time our guests shop. We think our strategy of moving into new neighborhoods, whether it's these densely populated urban centers or on college campuses, is a critical growth vehicle. And again, the reaction we've seen every time we open up a store in Boston, Philadelphia, Chicago and certainly in New York tells us our guests love the convenience of having Target right there in their neighborhood. But we're also continuing to make investments online, and we want to make sure we continue to give our guests the choice of shopping any way they want, the ease of shopping online and picking up in our store, which we think is going to be a very important factor during the fourth quarter, but building out those capabilities, leveraging our stores as flexible fulfillment centers. As we go into this holiday season, well over 1,000 locations will be locations that not only you can shop in and pick up, but we're using to deliver the last mile. We think that's a huge competitive advantage. So we feel very good about the strategy we have in place. We think it's a strategy that will win not only in the short term but over the long term, and we look forward to seeing all of you in New York in February. So with that, operator, we're going to wrap up our third quarter call. I appreciate everyone participating, and we look forward to seeing you in New York in February.

Thank you for your participation. This does conclude today's conference call, and you may now disconnect.