Target Corporation (TGT) Earnings Call Transcript & Summary

Good morning. My name is Chris Horvers, I'm the Broadlines and Hardlines Retail Analyst here at JPMorgan. It's my great pleasure with -- to have Target's Management team with us today, including Chairman and CEO, Brian Cornell; EVP and COO, John Mulligan; and EVP and CFO, Michael Fiddelke. This is a fireside chat format. I will start with questions, but investors are encouraged to also participate. There are 2 options to participate. The first is at the bottom of the screen, there's a Q&A feature for those in the Zoom webinar, and you can post your question in there, and we'll ask that question anonymously. There's also, as you all probably are very familiar with 14 months in, there is a Raise Hand feature in Zoom as well. And with that, you will actually ask the question live and directly to the management team. So again, guys, we really appreciate you joining us today for this conference, and we're really excited to have you obviously, the hot topic right now is all about stimulus. You saw the retail sales numbers this morning. Obviously, very strong numbers. But we're also in a reopening period. So can you talk about how the consumer spending behavior has changed? We've had 3 big periods, we had April, we had January and now we add March, you is your business becoming less sensitive to stimulus Is there a change in terms of what the consumer is spending on? Any observations that you're seeing is great?

Well, Chris, I'll start and first of all, it's great to be with you today, and I know John and Michael and I are looking forward to the conversation. We've been looking at the consumer environment on a weekly basis for over 1 year now. As we think about the impact of the pandemic, the influence of stimulus, obviously, the influence of vaccines. And from a Target perspective, as we think about what we saw in 2020, we continue to see a consumer and against-new shopping all of our categories. We've seen surprising strength in our stores. And I think the investments we made throughout the pandemic and the safety of our teams and the safety of our stores has built enormous trust with the guests and the consumer that we serve. As we think about our results from 2020, the fact that we saw some of the strongest store comps in recent years, despite the fact that during the pandemic, many Americans have been staying home to stay safe. I think it's just a sign of the trust that we created in a store experience. We've seen a number of changes in the consumer shopping pattern over the last year. Michael and John can talk about how we try to tease out stimulus. But with so many different variables, it's really hard. 1 year ago at this time, Americans were stocking up on medication and household essentials, food and beverage. And then quickly pivoted or recognized that they were going to be working from home and educating their kids from home, and we saw a big uptick in electronics and office supplies, anything to do with kitchen and cooking. And we continue to see those trends evolve as consumer confidence improves. While there's still tremendous concern in the consumer environment, I think we're seeing much more optimism as the vaccine is distributed, as we start to think about the future. So we're watching it carefully, but Chris for everyone who's with us today, it's really difficult in this environment to tease out stimulus from what's happening with people returning to work as we see strength in the vaccine being distributed in greater confidence, as consumers are getting back to some level of normal life. But Michael and John and I talk about stimulus all the time, it's really hard in our business to determine how much of the results we've been driving -- were driven by stimulus versus our strategy. Our investments in our stores and digital fulfillment categories, the trust we've built with our guests because of the investments we made in team safety and guest safety. So while we think about it all the time, it would be false precision for us to apply any type of growth factor to stimulus in an environment that's so rapidly changing.

The thing that I might add, Chris, is that's why we're so focused on share performance, and we have been throughout 2020, is whether a market was locked down or with high guest mobility as it ran wide open, whether there's a period of without stimulus or there's obviously an impact when stimulus hits. But by focusing on share, that's the tale of the tape that lets us know is our strategy resonating, and are we building trust with consumers. And on that front, 2020 was quite remarkable. Usually, when we dive into share, there's a nail sticking out of the board that here's where we're overperforming, and we could extract some lessons or here's a place where we've got some work to do and the consistency of share performance across categories, across geographies and across time frames is just remarkable last year. And I think that speaks to the deepening trust that Brian referenced that we've built with guests in 2020, and that's an incredible foundation on which developed 2021 and beyond.

So just a dovetail question on the category side. Obviously, 1 year ago, there was a big pantry load that was going on and couldn't sell enough toilet paper, couldn't get enough toilet paper in the stores. As the year progressed, did you start to see the discretionary categories accelerate? And during those periods of stimulus, did you generally see a spike. And as you think about some categories that were big winners 1 year ago, home, as you mentioned, Brian, electronics, are you seeing any signs in terms of pull forward in those categories given the strength that -- and the share that you gained in those categories last year?

Chris, I'll go back to the 2020 share performance that Michael highlighted. It is what we talked about, we picked up almost $9 billion of market share in 2020. And that was broad-based. Every 1 of our 5 major merchandising categories saw short share increases. So certainly, home was a standout performer. We saw a great performance in electronics and all things office. But we also took significant share in categories like apparel and continue to take share in beauty and household essentials and consistently are taking share in food and beverage. So while the trends are obviously going to evolve from period to period and season to season, the share gains have been broad-based And despite some changes in the consumer environment, the fact that we're seeing consistent share gains across our entire merchandising portfolio, tells that the target is becoming more and more of a destination for a consumer who is consolidating the number of places they shop, and we think that's going to continue. And the unique multi-category portfolio, our combination of upgrading physical experience and the ease and convenience of our digital fulfillment options, I think, is giving us an opportunity to win share and win trips and clicks with consumers no matter what they're looking for, no matter of what type of challenges we're facing.

Brian, the other thing I might add, if you look at over the past year, holiday performance. Consistently when we got past Easter of last year, Memorial Day, Fourth of July, Labor Day, Halloween, Thanksgiving and then the holidays, absent food and beverage, those are largely discretionary categories that occur. And we gained share and had great performance, and that has nothing to do with when stimulus comes, right? That has everything to do with what we're offering and what the guest is looking for. And we showed up for them when they wanted to celebrate holidays, and it's just another indicator that I think this is beyond what stimulus is doing and more about what we were doing with our guests and the trust we had built with them, everything that Brian talked to during the first question.

So I have a number of following questions around share and trip consolidation, but I had one other sort of consumer behavior change in a reopened economy. You have some states that are further along in vaccination, Texas and Florida, you have states -- those states are also warmer further along in the spring, where people can get out. So just as a general consumer commentary, are you seeing much difference in those areas that are potentially further along in reopening versus the behavior of consumers and geographies like the Northeast, for example.

Chris, it's a great question. So like, Michael and John can add some additional color or commentary. I'll share a couple of stories that I personally heard when I've been out in different markets. And I think it's more about the vaccine and vaccine distribution that it might be about geography. But our store directors have told me, they're seeing guests again that haven't been in our physical stores in almost a year. And they're almost celebrating their second vaccination by coming back into our stores. And they might have been in our parking lots using our drive-up fulfillment option where they may have had a ship shopper bringing product to their home. But I think as Americans are getting vaccinated, those that have been shopping with us through order pickup or drive up or ship are now celebrating that occasion by physically coming back in our stores. And I do think that gets back to trust that we've built throughout the pandemic and the state shopping environment that is in place today and will remain in place throughout 2021. And the standards and protocols that John and his store teams have put in place to make sure that we're the safest place to shop in America, but I know John is hearing the same thing when he's out in the market, guests are back in our stores. And I think they feel safe and confident now that they've got a second vaccine and they're looking forward to continuing go out and Target is one of the first places I think they're visiting.

Chris, it will be interesting to watch how some of this year plays out. But at the core of that question, we can, I think, find some things instructed from last year because it's about guest mobility. And back to the share conversation we're having, last year, when we saw a market go from low guest mobility to high guest mobility, our share strength persisted throughout that transition in a specific market. And I think that speaks to how there's so many ways to drive a trip to Target. And so maybe in the more locked down state, it was food and beverage and essentials that were some of the trip triggers that mattered most in. But as guests opened up, as maybe some of those discretionary categories came on, we shine there too because we can use those categories to drive that same trip relevance. And I think that's the why behind that consistent share story that we saw in almost those natural experiments of watching how market evolved last year.

Chris, one of the things that John Mulligan and I talked about during our last earnings call, as we talked about the January performance, is the guest response to all things new. And John has talked about some of the changes in our assortment. But I do think as we think about the consumer environment and for many Americans who have been in their homes and working in their homes, educating kids, having 3 or 4 meals a day at home, As they get out, I think they are looking for newness, and that's something we saw in the month of January. I think it's just a sign of how the consumer is reacting and will react going forward. I think there's going to be a pent-up demand to get out, experience physical storage again, continue to take advantage of the ease and convenience of digital but I think they're reacting to new changes in our assortment. And as we said a few weeks ago, all things new were very popular at Target in all of our categories as we moved into the month of January.

You mentioned trip consolidation. I was curious, how concerned are you, Target to the point of how differentiated the assortment is from the consumables side, from the apparel, the decor and home and electronics. And it is -- Target is the biggest beneficiary of trip consolidation, especially when you throw a drive on in top -- Drive Up on top of that. So how concerned are you as you look ahead to '21 that as the consumer does get out there and reopen and Michael, you talked about some areas and vaccination progress, I'm curious what you're seeing there, that they're going to start shopping, they're going to go through a strictly apparel specialty retailer, strictly home furnishing specialty retailer, and you lose that benefit of the assortment?

Chris, I would probably substitute the term optimistic for concerned. I think as we sit here today, we feel really good about our position in the marketplace. So the unique nature of our multi-category portfolio, the curation that our merchants do in each one of those categories, both from a physical assortment standpoint and a digital standpoint. And as you've heard us talk about in the past, I've been a student of market share for most of my career. Market share tends to be very sticky. And I think the habits and the trust we've built with consumers will benefit Target for years to come. And the fact that you can come into our stores and pick up your favorite beauty brands, your favorite Apple products, the food and beverage items you need, great new assortment in apparel, I think that makes us a continued destination for years to come. And then we complement it with some great new brand partnerships. And as you know, we're very excited about bringing Ulta Beauty into Target stores. And I think it's just one more reason for our guests and consumers to shop the target for expanding our partnership with Levi's, the expanded partnership with Apple, continuing to put Disney stores inside of our stores. So those are just additional reasons to come to target because of our unique national brand and own brand assortment and now punctuated with these very select new partnerships that will drive more traffic to our stores and visits to our site. So I'll turn it over to John and Michael for reaction, but we're not using the word concern very often. It's really thinking about the opportunities that are in front of us, the ability to build on our momentum, continue to grow share across our portfolio and capitalize on the additional relevance and trust we've built with millions of consumers across the country.

The one thing I would add, Chris, I think you hit on 1 of the, well, not so secret weapons anymore, all of last year and we think into the future is the combination of Drive Up with the store and in Drive Up our guests have discovered "Wow, I cannot believe how easy this is. It's picked for me in 90 minutes. I get to the parking lot, it's there in 2 minutes in my trunk, how easy is that?" For the things that you don't want to spend a lot of time in store for. For the case of water and the 50-pound bag of dog food, we'll take out a lot of the effort for you. And then that combined with, as Brian talked about, and Michael, as things open up, and there is this returning to normal, the ability to come into our store, grab your Starbucks and then shop the discretionary part of the store for all the great brands that they've come to experience. As we said, our store traffic has been very strong all of last year. And so they've continued to shop us in that part of the store, and that's built trust with them. And so I think it's this combination of both plus the assortment we have that becomes very, very powerful as we go forward.

So we've had a number of questions come through in the Q&A feature. So -- that are follow-ups to this line of questioning. So there's you and some other large players added $25 billion of sales in apparel during the pandemic, Target, Costco, Amazon, some others and the industry was down $6 billion. So that's an amazing share shift. So I'm just curious: A, have you sized sort of how many doors have gone away from apparel or what those sales represented; and B, on the merchandising side, which has always been the target secret sauce, how are you sort of leaning forward to make sure, from a newness perspective, special partnerships that you've always had a long history with to make sure you may not only maintain that share but grow that share going forward?

Yes. Chris, I'll start, and I'll actually go back to 2019. Because the share gains we've seen in apparel have been going on for multiple years now. Michael, you and I talked about the fact that in 2019, we added $1 billion of share in apparel, and that continued in 2020. And as we go forward, we'll continue to invest in our own brand assortment in apparel, those great owned brands like Universal Brand or A New Day We'll complement that with great partnerships like Levi's, and we'll continue to make sure we're managing those brands like a consumer packaged good company. We'll continue to bring newness to our style and aesthetic, make sure we combine the quality with great affordability and continue to take advantage of some of the dislocation that's taken in place in the apparel space. But it's certainly a hallmark category for us and we certainly expect apparel to continue to grow as consumers are back in stores. And going back to work and back to church and back-to-school, we certainly are very opportunistic about what's going to happen in the apparel category.

I'd maybe just add one thing to that. We've talked a little bit about habit. And another thing that's important is trial. And on the owned brand front, when we feel really good about the price value equation of a new owned brand or the iteration we've done based on the learnings from last year in an owned brand with the new annual setup, the challenge is getting people to try it oftentimes, and we have seen so much outsized trial over the last year, given the share gains we've had and the strength of the business overall. I mean, that's worth years of advancement in terms of giving guests exposure to some of the owned brands that we know will resonate most and apparel is a perfect example of that. All In Motion launched last year right before the pandemic in the amount of trial we've been able to see guests take in that specific category with that brand has just been outstanding because of the base of loyalty that we can build when we get that trial.

Understood. Another follow-up question is Walmart is talking about higher CapEx this year and also in the medium term, how are you thinking about CapEx for Target And then where the CapEx needs to be spent?

Michael, do you want to talk about our $4 billion investment this year and our plans for the next couple of years and how we'll be spending that capital?

Yes, absolutely. The -- as I said in our Financial Community Meeting, we think for the next few years, we'll be in or around $4 billion of CapEx in the business. And the theme I'd wrap all of that around is growth. We expect to build on the base we've built this year and drive long-term growth and market share. And every piece of that CapEx story takes back to growth. Some of that is making sure we've got the capacity for more growth. As John Mulligan would tell you, we chewed up some of the slack in the system just from an overall general capacity perspective, having enough upstream fulfillment of our stores to make sure that we can support ongoing growth there and so there's a little bit of supply chain. But then you'll see a lot of that CapEx continue to be invested into the stores themselves. I mean stores is hub, it's been so central to some of the gains we've seen over the last few years, and we believe there's a lot of runway and higher-return projects that can continue to support growth. I can pick a couple of examples, and I'm sure John and Brian can tack on more, but even something that might sound as basic as our remodel program. A few years ago, we embarked on remodeling a chain that needed some freshening up at the store level. We're halfway through that agenda. And so there's a lot of runway in front of us to get back into some of the remodels that we paused this year, build upon the great digital fulfillment experiences that we've got to start on and add some of the capacity in the system for the growth that we would anticipate over the years to come.

John, do you want to talk about our remodel plans for 2021 and some of the new small-format opportunities that are in front of us as well as the investment we're making in fulfillment capacity in our stores?

Yes. I think Michael hit on it really well. The CapEx investment, while perhaps elevated from where we were before, shouldn't surprise anybody, right? This is about growth we've seen and growth we expect. I think on the remodel program, obviously, we slowed that down significantly last year. Early in the spring, we finished what we had started and then got out of the ways of the stores, so that we weren't creating complexity in the stores. This year, we'll do somewhere between 130, 150 remodels, all of that backloaded because of the uncertainty we had going through last year. But then you'll see us get back on pace to something above 250 next year and the year after. And we'll bring in all of our latest thoughts. We're also simultaneously, with that, relooking at our prototype or what should the store of the future look like? And we'll build a couple of those next year as well that we'll test. And that will inform our remodel program going forward. I think just as exciting for us and perhaps a little bit less exciting for everyone else is what we're calling the fulfillment remodels where we will do some significant remodeling of the front end and kind of redo it. With the success of Drive Up and the guest expectation that we set in the very high NPS scores, we want to make sure there's significant capacity there for Drive-Up, for Drive-Up with fresh, frozen as well. And so we'll do some significant work there on hundreds of stores. And over the next 3 years, really thousands -- of well over 1,000 stores. to create capacity. And then finally, like Brian said, back to that growth story, we're going to -- we continue to find great sites for small formats, and we should just start calling those different formats because there will be smaller formats and there will be larger ones where it might be at an 80,000 square foot box. And I know Brian and I, we get in boxes like that, and I just literally love them. You get 35,000 square feet of front end, which looks just like a target store, has everything you'd want and then we get some back-end space for, again, continuing to grow our fulfillment capabilities. And so there'll be different sizes, but we continue to find great opportunities in urban markets. We continue to find locations that have been abandoned by other retailers, particularly over the past couple of years. And so we see nothing but more opportunity for us as it relates to new stores as well. You put all that together, and again, that combined with the supply chain, the CapEx investment is really about growth.

Chris I would only add, as we kind of think about the capital investments, you've heard Michael and John talked about, it's all about growth. But I'll go back to Michael's comment about where we are with remodels. We're about half of the way through. John talked about, we've got a tremendous pipeline for years to come of new stores. And no, they won't all be small formats. They will look and feel a lot like a traditional Target store. We think we've got tremendous opportunity to continue to build capacity and support the growth in same-day services. So I would tell you, while we're making investments today, it's because we're still at the early stage of executing the strategy we've been talking about for years. And we think we've got significant upside with future remodels, with new stores, with fulfillment. And as John can talk about, we're still in the early stages of providing fresh products as part of order, pickup and Drive Up. So we're investing in the future growth and it's consistent with the strategy that we've had in place for multiple years now. We're just continuing to accelerate as we think about the future.

So as you think about the strength of the traffic in store and the reopening and the vaccination progress that we're seeing here in the U.S. How are you thinking about the e-commerce -- the growth of the e-commerce in '21? And any thoughts on where ultimately e-commerce lands from a penetration perspective?

Michael, do you want to start kind to give the group a sense of how we're thinking about penetration and the mix between stores and digital as we go forward?

Yes. We've used the term acceleration a lot, as we've talked about last year, that certainly applies to what we saw from e-commerce or digital fulfillment more broadly. You think about the growth of Drive Up and shipped we saw last year specifically is kind of the fastest places of guest adoption of new fulfillment choices there. We had a plan that knew those things would resonate with the guests over many years. And we've just accelerated down the path in where we expected the guests to get to already. And I think each of us would tell you, we expect that behavior to be sticky. And it's because of the convenience John Mulligan talked about. I mean it just -- again, picking on Drive Up for a second, it doesn't get more convenient and that Drive Up trip for so many of our guests. And so we expect some of that behavior and that habit from a digital fulfillment and e-commerce perspective to have moved us down a path that we probably aren't going back from, and I would expect that we build on. And then maybe I'll just spend a second to about like why that's so important for us, because we can kind of get down this different channel view of the business. You guys have heard me say before, but I think it bears repeating because it is the thing that matters most. When we meet the needs of our guests across all their trip types and make it convenient across category, whether that's a ship shopper bringing goods to their doorstep or us dropping a bag in their trunk or them walk the floor at target. When they shop us in new ways, that first, I'm now a Drive Up guest or I'm now a shipped shopper or I'm now a shipped guest. You see the overall engagement with Target to a step function of increase. And that's why the growth of e-commerce or digital or put your label on it matters so much for us. That's 30% lift in overall spend that goes along with that deepened guest engagement is extremely powerful for our P&L. You can see it in the share results in the top line growth that we saw last year. And that's much bigger than just the impact of one channel or one transaction because the deepening of the relationship is the most powerful effect there.

Yes. Chris, going back to that specific question. I see John Mulligan on the screen. I can go back to meetings that you and John and I had with investors back in 2015 and 2016 when the question was, "Oh, Brian, is everything going to go digital?" Is half of U.S. retail going to be digital sometime in the near future? And then you think about the realities of the pandemic. Again when so many of us were staying home and avoiding public places to stay safe, and if you look at the composition of retail in 2020, over 80% of those dollars were still spent in-store. So one of the things that John and I have been saying for years is it's not an either or, it is an and. And I think that played out so clearly in 2020. And to Michael's point, I think it's going to continue going forward. I think it's going to be a combination of physical and digital and consumers using both of those channels based on their needs on any given day. But hopefully, we've moved away from the discussion around everything going one direction or another. I think as we sit here today, when we talk to our guests when we talk to consumers, they're just shopping at Target. It's another Target trip, it's another Target run. Some days, it's in one of our stores. Some days, it's with a Drive Up lane in one of our parking lots, some days at the ship shopper coming to their home. But I think we're going to see this continued balance, and it's going to be an and. Stores still matter. And the convenience and ease and same-day fulfillment is going to continue to be important. But John, we've been talking about this for years and hopefully, we've now demonstrated from a consumer and a guest standpoint, it is an end, and I think we're well positioned to fulfill guest needs no matter how they want to shop in the future.

Awesome. So how do you think COVID has changed the long-term margin structure of the business? There's been a lot of things that are going along with that, right? So you've got higher cleaning in the stores, there's been adoption of e-commerce, there's been adoption of Drive Up. But then for Target, you've also gained an immense amount of share and an immense amount of volume. So do these things all sort of net out? Or as you grow, is there an opportunity to perhaps see even better margin expansion over the long term?

I can start on that one, feel free to chime in, Brian and John. You answered part of the question the way you asked it, I think, Chris, I mean growth matters, scale matters. And so the biggest factor always in the margin potential in our business is going to be how much we continue to grow. That's why those investments we just talked about all focused on growth are so important for us. We were quite thrilled with the profit performance we had in 2019. And as we look ahead, as you kind of look at how we've talked about where 2020 could come in, we would expect to be in a better place profit-wise than 2019. The ebbs and flows by quarter and by month, I think you can get -- we'll unpack those together as the year plays out, let's put it that way. But back to the acceleration comments I made on the sales side, something we talk about a lot is we have this long-range plan of where growth would come from. Well, we accelerated the growth side of that. That same plan had a whole set of projects we're excited about to gain efficiency against that growth. And we're still staring and executing at an increasingly long list of ways to continue to drive efficiency within the business against that very same plan. And almost every one of those projects looks even more attractive with the benefit of the scale that we've added to the business now. And so whether that's some of the work that John and team are doing upstream of our stores and supply chain to make the job in the store more efficient with some of the automation and process for testing there or whether it's the sort centers that we're testing into in some of our biggest markets. There are a lot of opportunities for us to drive increasing efficiency against that scale we gained last year.

I think that's the most important point. I know for you and others, it must be plugging in numbers and adjusting basis points in your model. But we're quickly becoming a $100 billion retailer, and scale matters. And we've got lots of different levers we can pull each and every day as Michael thinks about the work we do from a merchandising standpoint, all of the opportunities we have from a fulfillment, a supply chain and a store standpoint. So we don't want to lead you towards a false precision at this point. But we've got opportunities as we think about our category mix, our mix of owned brands and national brands, the mix in digital between same day and ship to home, and we're constantly managing all of those levers to make sure we're doing the right thing for our business, the right thing for our guests and shareholders. But as a rapidly growing scale company, we've had lots of levers. And I would tell you, we've got a sensational and experienced management team that is always looking for opportunities to improve our performance and that focus on execution will continue across each one of our functions for years to come. John, your perspective?

Yes. I was just going to add on one thing, Brian. I agree with everything you and Michael said about the opportunities in front of us. The other thing I would say, it's easy to look at the investments we've made in team and cleaning as headwinds to the P&L. I can tell you, as the 3 of us talk about it and going back for a long period of time, those investments are some of the very best investments we make as a company. The -- I look back at the investment we made in bringing digital merchandisers to the store. At the time, that was a significant investment in the team. The payback on that has been astronomical. When you look at the way our stores are merchandised and how important apparel and home have always been but have become even more important for us, the investment in wage and our ability to hire better team members, stronger team members who don't turn over. The ability to get team members that we need in beauty, who really understand beauty or in food who really understand food, outstanding investments that we've made. So it's really the whole thing that comes together to paint the picture. And again, when you pull any one of those apart, you can call it a headwind. From our perspective, those are just as much investments in growth as is our capital investments. And just as important.

One of the questions that we received in the Q&A is about your gross margin outlook for 2021. I'm sure you have received no questions about your gross margin outlook for 2021 prior to today. So maybe Michael and team, maybe you can talk about the puts and takes of that and address specifically your sort of mix assumption and how that might play out over the year?

Yes. I mean, we could probably fill up the balance of the time going into the guts of every potential lever and where it could play out, mix being one of them. Obviously, mix was a headwind last year, and there's a chance that looks different this year depending on how the categories shake out. But I'll build on the point that John just made. Even within the narrow pieces of gross margin, I mean, 1 of the biggest impacts to our gross margin has been the headwind from digital growing so quickly. But I mean, Looking at that in context with what that means to our business in total is extremely important. I would take a little bit of digital headwind as far as the eye can see. If we're continuing to see the guest response that drives Drive-Up and shipped for the first time, the aggregate spending that goes along with that, all day. And so the headwind versus tailwind is a little bit in the eye of the beholder, and you often have to surround the understanding of a specific lever with what it means in total. And the single biggest driver of gross margin for us for a long time has been the mix of channel fulfillment, but the story doesn't start and end within gross margin on a level like that.

And one of the questions that all of our companies are getting is product availability at this point. Obviously, there's very lean inventory in a lot of categories coming into this year. What are you seeing from your perspective? Are there any categories that you are still chasing and then lastly, how are you thinking about the potential for sort of promotions to come back in some of these more discretionary categories?

I'll start, and then I'll let you give some more specifics. But Chris, I think we know that we've been in an environment where inventory has been challenged for our offshore vendors for our domestic vendors, they're trying to keep up with the demand. And again, no one projected that we'd add $15 billion of revenue in 2020. But because of our scale, because of the relationships we have with our owned brand vendors and our national brand vendors and the growth in share we're delivering, I can tell you that we've got great discussions taking place right now. Our vendor partners want to lean in and invest in Target because they know we're making big investments. We're investing in our team, as John talked about, we're investing capital in our stores and our fulfillment channels. So our partners want to continue to invest in the future winners. And I think they view us as a company that's committed to growth, that's committed to a partnership. So it gives us a chance to move towards the front of those lines. and have very productive discussions around our inventory needs and the demand signals coming from our stores and our digital channels.

Yes. Chris, I would just add on, Brian, is 100% right. And look, are we where we want to be? No. The answer to that is no, full stop. And that is not for lack of effort on the part of our partners, on the part of our team. I would tell you, Food and Beverage and Essentials and Beauty, we feel pretty good. We're not where we want to be, of course, but we feel pretty good about where we're at day-to-day, and that has improved for the last 14 months. So we feel good about that. Some of the more long lead categories, we're not where we want to be. One, like Brian said, just spinning up capacity takes longer. And of course, it takes longer to get that here. And then there's been uncertainty. Where is apparel sales going to go? Where is home sales going to go? But we feel good about the progress. There's more progress to be made. And I would just point to just one great example where just the length of time it takes to get. We're the #1 shareholders in LEGO in the world, #1 in LEGO in the world. We can't get enough LEGO. So no one else is getting enough LEGO. And I think that points to our legal partners that are building as fast as they can. We're moving in as fast as we can. But there's just -- it takes time for things to catch up. So we feel great about the progress. Our teams work, our partners work, but there's more to do.

Excellent. I wish we had more time, but we'll have to cut it off there. Brian, Michael and John, we really appreciate your time and have a wonderful spring.

Thanks, Chris. Appreciate it. Good being with you today.

Thanks, Chris.