Well, good morning, everyone. Thank you for joining us. For those of you here with us in the room, we're really excited that you joined us here in our hometown. And hopefully, you found the experience last night, the store tour, the exhibits this morning helped you get a deeper understanding of what we're working on. Couple of housekeeping items. First, there's a couple, I'm going to just literally read the slides. First of all, 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. Second, in today's remarks, we refer to non-GAAP financial measures, including adjusted earnings per share. Reconciliations of all non-GAAP measures to the most directly comparable GAAP measure are included in our financial press releases and SEC filings, which are posted on our Investor Relations website. So finally, something new this year for those of you on the webcast. You can submit questions. I'm happy to say we are already getting questions, so please submit those. The team will get those questions to us, and we will take some of those during the Q&A session after the speeches. So with that, we can get started with Brian.

Well, thanks, John, and good morning, and thank you for joining us today in Minneapolis. John, Cathy and I really enjoyed spending time with you during last night's tours and the reception. And I hope all of you had a chance to explore even more this morning. While we can make slides or show videos, there's simply no substitute for being here live and in person, walking the sales floor, talking to our teams, touching, feeling and experiencing new products and services, seeing for the first hand the future of Target. What's so exciting for me is that, last year at this time, all we could do was talk about the future. Most of what we could show were still renderings. Today, those things are real. The work is well under way. We've made a ton of progress against our priorities. And as you saw today, our teams are more focused than ever. And our guests are responding in kind. What a difference a year makes. Think back to this meeting 2017. The world could not have looked more different. Coming out of soft holiday sales, the headlines were all about store closures, a catastrophic border tax and a looming retail apocalypse. That morning, we had a tough message of our own. But one by one, many of you pulled me aside that day and said, "Brian, I'm glad you're investing. We believe in your strategy. I'd make the same moves if I was standing in your shoes." It was a long flight home, but let me tell you what happened as soon as we landed in Minneapolis. The very next morning, we gathered our senior leadership team from every part of the country, and we grounded them in our company purpose, making sure every decision we made from that…

I've seen that video a half dozen times now, but it still makes me smile. I couldn't be more proud of what this team has accomplished. 2017 was quite a year. We introduced 3 new billion-dollar brands; 10 new brands in all; 110 remodels; nearly 30 small formats, Herald Square, Houston, Hearth & Hand; new payment systems; new partnerships; new promotional strategies; a new mobile app; and new fulfillment capabilities, next day, same day, pickup, Drive Up and, of course, tens of thousands of new personal shoppers delivering Target products from Shipt. Early this morning, we reported our fourth quarter and 2017 year-end results. And you don't have to get too far to the numbers to see that our strategy is working. Guests like what we're doing. The investments we're making are taking root, and they're driving results. Here are just some of the highlights. Strong Q4 traffic, not just in digital but, importantly, in our stores, which led to a 3.6% comp increase. We saw that growth come across our business as we gained market share in all 5 core merchandising categories. This was the fourth year in a row that digital grew by more than 25%. But it was our coast-to-coast network of neighborhood stores that enabled that growth, as our stores fulfilled more than half of our total digital volume. Given the strong sales performance and the benefits from the recent change in the tax code, we finished the fourth quarter with adjusted EPS of $1.37 and $4.71 for the full year. But what's most encouraging to me is that we can't hang these results on any one single aspect of our strategy. Rather, it's a sum of the parts, everything working together and everything working that carried the day. While we're obviously pleased with the results,…

While each brand has delivered incremental sales, they're working hard across our assortment, driving traffic to other categories and inspiring cross-shopping. For example, we were highly intentional about launching Hearth & Hand early in the holiday season. It was an invitation for our guests to explore and an opportunity for inspiration, driving results across Home, but also helping categories, like Food as well. And while our design and marketing teams would tell you we set an incredible pace in 2017, we're only going to move faster and faster in the months to come. Last month, we launched Opalhouse in Home. And last week, we debuted a limited-time-only collection with Hunter, a long admired English heritage brand. So before I turn it over to John and Cathy, I want to finish up where I started. 2017 was a big year for Target. We laid out an ambitious agenda, blending digital and physical, creating new experiences, reimagining our network of stores as hubs for commerce and community, expanding into new markets and reinventing our brands. We made bold investments, more than 100 remodels, dozens of new formats, key acquisitions, blockbuster brands, industry-leading investments in our team, and our team delivered. We're headed into 2018 with a road that couldn't be more clear. Our strategy is working. Our guests are responding. And we're accelerating the pace, pushing even harder, moving faster than ever before, 3x as many remodels, dozens of new stores, new services, new solutions, moving from concepts like Drive Up to scale and taking Shipt nationwide. And you'll see us continue to invest in our team and roll out one new brand after another all year long. Putting it all together, this is a strategy that's going to make Target America's easiest place to shop. So now let me welcome John Mulligan, our Chief Operating Officer, to the stage. Thank you.

Good morning, everyone. You just heard from Brian that the Target team delivered on the commitments we made last year and then some, from standing up new stores to remodeling existing ones, rolling out new fulfillment options and expanding capabilities to get products to our guests even faster. We're changing our operations to use our stores in new ways, while we continue to offer an exceptional in-store experience, and it's all made possible by the teams that bring those buildings to life. We have more than 300,000 team members in our stores, face-to-face with millions of guests and tens of thousands more behind the scenes, creating, ordering, moving product and developing the technology, automation and tools that allow us to serve the guests in ways we hadn't even dreamed of just a few years ago. They're the experts, the inventors and the personalities behind every guest experience and the reason we've made meaningful progress toward putting our strategies in motion. Just about everything our team has done, and continues to do, is in service of supporting our stores as hubs, hubs that offer a great shopping experience, support our communities and fulfill digital orders. They're at the center of how we're welcoming and inspiring guests and how we're making it really easy for them to shop at Target. So here's a question I get all the time, in today's digital world, why invest in stores? And for us, the business case is simple. When a digital order comes in, we basically have 2 choices, fulfill it from one of a few fulfillment centers across the country or ship it out the back of a local store. We're fortunate to have more than 1,800 stores in really great locations, prime real estate just down the street from our guests, so we…

Just 8 weeks after our announcement, we began offering millions of guests the ability to shop online for more than 50,000 items across Grocery, Essentials, Electronics, Baby and more, and have those products delivered that same day. Already, we brought Target same-day delivery to Shipt members across the Southeast and in the Twin Cities, and we're rolling into new markets almost every week. By holiday, we'll be the first retailer to offer same-day delivery in nearly every major market. As you just heard, the beauty of Shipt is that it's not just a transaction. Our guests will get a personalized service and care that these shoppers offer, unlike anyone else, while also accessing a wide assortment of products, priced right daily and delivered in hours. The whole package is something no one else is offering today. At the same time, guests still like to come into our stores and shop, but for guests in urban areas, like Manhattan, they can only buy what they can carry home. Last year, our team saw a need and knew we could help. Just weeks later, they'd rolled out a service at our TriBeCa location in New York City, where guests shop the store and then play (sic) [ pay ] a flat fee, about the cost of a short cab ride, very cheap, very inexpensive, to have that order delivered that same day. Today, we're offering delivery from 4 stores in New York, and guests love it. It's quick and efficient, and it's all possible because of the technology we acquired from Grand Junction last year. The platform assigns every order to the most logical local carrier, which is what allows us to efficiently scale the service beyond a single store or a market. Starting this spring, we'll go even bigger in the…

We're incorporating elements of this latest design, as we remodel more than 1,000 stores across the country over the next 3 years, including the 325 we'll do in 2018. But it won't be the same in every store. We'll adjust and evolve, applying what we learn and leaning into what works. And we'll continue to design an experience that feels relevant for each location, from cinema lights on a former theater in Brooklyn to big skylights at the store near sunny UC Irvine. The fulfillment capabilities our stores gain are critical for our strategy, but so is the improved guest experience that comes from updating a store that hasn't been touched in years, and the difference is real. After a store has remodeled. traffic grows. And we see the 2% to 4% sales lift, on average, that we'd expected. In addition to the individual stores we're remodeling, we've made investments in key markets. Pick the Dallas-Fort Worth area. Last year, we remodeled 28 stores across the metro, and guests noticed. The refresh design is inviting guests to come back in and to shop, and the reviews have been overwhelmingly positive. We saw with Dallas and with LA25 a few years ago that we can learn a lot from putting our latest thinking into one market. So this year, we'll go big in our hometown and remodel nearly 30 stores in the Twin Cities, on our way to putting the latest design into all area stores over the next few years. Even as we reimagine our existing stores, we're continuing to find opportunities to bring an elevated experience to new guests, and we're doing that with our small format stores. The flexible design allows us to open in areas where our traditional big-box footprint simply wouldn't fit, city centers, dense neighborhoods,…

Wow! Like Brian said, what a difference a year makes. Coming out of this meeting a year ago, we were really confident that we were on the right path. Even so, we knew we'd be a show-me story for a while. We need to begin putting some points on the board to show that our strategy was working. And now that started to happen. But let me be clear, I know for some of you, we still remain a show-me story. And we remain confident in our path, but I'd all -- I thought -- I think we'd all agree we're in a much different place today. Last year was the beginning of a multiyear effort to position our business for long-term profitable growth. It was an investment year, as we ramped up our capital spending and devoted a portion of our operating income to reposition Target in this new era of retail. Looking back, I'm happy to say that we made all of those investments and more. And with those investments, our business performed far ahead of our expectations, both on the top lines and the bottom lines. In particular, multiple data points either met or exceeded our expectations, including a 2% to 4% sales lift on average from our store remodels; compelling financial performance from our new small formats, including sales productivity, margins and ROIC; a strong guest response to our new brands; digital sales growth of more than 25% for the fourth year in a row; disciplined execution and a positive guest response to our new -- our tests of our new fulfillment centers -- fulfillment options; and following our investments in being priced right daily, our guests noticed, with our sales at Everyday Low Prices were up more than $4 billion compared to 2016. And finally,…

So I love the way Cathy just brought it all together. We have an incredibly talented team at Target, and they truly delivered in 2017. I couldn't be more proud of their ambition, their passion for the brand and the way they always do the right thing for our guest. When you think about 2017, you heard it from Cathy and John, it was in every sense an investment year. We made big bets on new brands, new experiences and capabilities. We leaned into new partnerships and empowered our people. 2017 was a year of progress. As we looked to the year ahead, 2018 is all about scale and acceleration, so we're tripling the remodel program. We'll add another 30 small formats. We'll introduce many new brands. We're rolling out new service models and game-changing fulfillment capabilities and making even deeper investments in our team. And I'm really confident about what's next. I'll be the first to say we still have a lot of work to do. The competition is fierce, the pace of change is unrelenting, and our guest deserves the very best. But I couldn't be more bullish about Target's prospects. The strategy we're pursuing is working. Our guests are responding. And now our team is more than ready to pick up the pace and move faster than we ever have before, with one goal in mind: to make Target America's easiest place to shop. [Presentation]

All right. So I'm going to ask John and Cathy to join us on stage, so we can answer some of your questions. In addition to questions in the room here today, we also have questions coming from our webcast. We're going to try to make sure we incorporate those into the approximate 30 minutes we have for Q&A today. So we've got mic runners. They'll have bull's-eyes in their hand. I would ask, as you ask your questions, if you could just pause to identify yourselves. We can see many of you, but not very well. So why don't we start with Simeon, right up front. I can see up to about the second row, so it was an advantage.

I want to focus on 2 items that have been pressuring margins. First, investments and capabilities, investments being a catchall, including wage. I mean -- and then the second pressure point is the shift to a lower-margin channel. And can I ask you to comment on each, where you are in terms of your spend? The SG&A guide sort of implies that we've reached some peak level, and we're going to taper off. And then second with regard to the mix shift to online, where are you in that journey? You said the customer is agnostic. Are you financially agnostic?

Yes. So let me start, and then I'll turn it over to Cathy and John. But I think as we outlined today, we've made significant investments in the last year in our team, in new capabilities, in new brands. You're going to see that stabilize as we go into 2018. And as Cathy mentioned in our outlook, we expect to see gross margin rates stabilize, if not slightly improve, in 2018, offset by some of the investments we'll make in SG&A. So I think we've reached a point of general stability in our model. We're going to continue to invest. It's a period of, now, acceleration. But we've spent a lot of time over the last 3 years testing and validating our investments, making sure they are the right thing for our guests, the right thing for our shareholders, that we're going to be sustainable and then we're also going to provide the right return on invested capital. And I think you saw that today in our outlook. So again, we've got a lot of work to do in 2018. It is a year of acceleration. But we're accelerating based on the validation that we saw in '18 and the confidence that we're going to continue to drive great returns.

The only thing I'd add, Simeon, is kind of longer term, that perspective of as our business model is evolving using the stores at the center of that strategy, we do expect that you'll see continued, really terrific ROIC or after-tax ROIC and so kind of probably lower operating margins than we've seen historically, not inconsistent with where we are today, but really strong continued asset efficiency, which will drive that ROIC, so growth in our ROIC.

And your question about digital and the mix between the 2 channels. As I said several times today, we really want to make Target America's easiest place to shop; allow our guest to interface with great stores and even better store experiences as we remodel; give them a number of options for fulfillment, whether it's order online and pick up in our store, now drive up to our lot and pop that trunk, and we'll put it right in there; use Shipt to provide same-day delivering in hours, if not minutes; and convenient service right to their home. So we have to be agnostic, let the guest decide. But one of the great highlights from our fourth quarter was the fact that we saw really strong traffic and growth, both in our stores and our digital channel. And we expect as we go into 2018 to continue to drive positive growth into our stores, to drive positive comps in stores, that's critically important, and to continue to be a leader in digital growth. And I think the investments we're making in Shipt, in Drive Up, in other services positions Target uniquely, as we move into this next era of retailing.

Just to follow-up on his question, looking at the spend rate in remodels may be peaking by 2020, the wage investment is actually peaking then as well. Why wouldn't you expect operating margins to lift in 2020, given the runoff in D&A and the spend is actually over? And then I had a question about John, if you talk a little bit about the execution on -- a lot of I heard -- what have we seen so far today is absent on improve processes, but it that didn't really address maybe the headwind in the store. And that's the modular issue that the systems will allow you to get right quantities, but the challenge is the modulars are not really set in a way that allows it to flow very -- as nice as you would like to see. So how do you address that the modular side, as the store format begins to change over time?

So why don't I start with the first part of the question. And Wayne, you're absolutely right. As we get into the out-years, we are going to see our remodel schedule begin to normalize. Right now, we're in a catch-up state. And as we accelerate over the next 3 years, obviously, we'll touch the vast majority of our stores. So in the out-years, we do expect that to normalize. But we have a lot of work to do in these next few years. It's all about making sure we execute our plan and touch and enhance the experience in as many stores as possible before we return to a normal remodel schedule.

I'm sorry, Wayne. I didn't fully understand the second part of your question.

I probably didn't ask it right, but I'll ask it again. So the challenge to me has always been on store replenishment side was the modulars really are not of the size that allows you to get a full case pack onto the modular. And you can do all the backroom maneuvering that you want to do that gets you so far. But those modulars over time seems to me have to change to allow for bigger quantities, what you want to do. And then you take into account how the store is changing and what modulars may or may not present there in 5 to 10 years now, you may be looking at another remodel around based on where the modulars are.

Yes, I think this goes back to why we talk about flexibility in the supply chain to address that. I think when you look where we're at today, and you're right, it will evolve over the next 10 years. Who knows what we'll have in store then? Maybe Mark does, but that will come later. 70% of that stuff doesn't sell more than 1 per store per week. So I don't need to flow case packs into that store for those items. If you think about bike helmets, the likelihood of us selling more than 1 bike helmet in a week this time of year in Minneapolis is very low. We may sell 1, and probabilistically, we will sell 1 sometime this month, but we won't sell more than that. And so that's why we go back to flexibility. There's things that are going to have to go in there in a very high-speed, high-capacity. To your point, we need to make sure a case pack fits on the floor or a case pack and half or 3 case packs in the case of Tide or 8 case packs or 20 case packs, because we move that in pallet loads. But for the majority of what we sell, much lower volumes, that needs to come in, in single units. And so it's really about having that flexibility upstream to meet the demands of whatever it is we're doing in store. And that's why we're headed down the path we are.

Why don't we go to this side of the room? Oliver?

It's actually -- it's Matt Fassler from Goldman Sachs. I've got a question about the level and cadence of expense growth as you move through the year. The guidance that you gave for Q1 and then for the year as a whole would imply that the expense profile improves as you move through the year. As the wage growth piece seems like it will be persistent, are there expenses that fade as you go through the year? Are there cost-out opportunities that build? Or is there a top line acceleration implied in the guidance?

Yes, it's a little bit of -- I talked about all of the tailwinds, and it is a little bit of all of those things. So we'll see some leverage because of the continued comp sales increase. We'll see some continued cost control, as we move throughout the year, that we have planned. So it's kind of the combination of the 4 different tailwinds and 1 of the headwinds.

And if I could just ask a quick follow-up. You also shared lots of top line drivers. You talked about remodels, the new brands, Shipt, free 2-day shipping for a larger array of goods. Can you talk about how those layer into the revenue forecast over the course of the year?

Well, we gave first quarter guidance -- I can start John, I guess. We gave first quarter guidance, obviously, low single digit, and we gave full year guidance low single digit. And those all contemplate, obviously, our continued brand rollouts as well as all of our fulfillment expansion. So those are all included in that low single. Just so happens, it's Q1 and full year.

Yes. And much of that digital, absent the 2-day, which is effective today, the Shipt and Drive Up, those are the 2 big ones that we'll expand nationally. Our goal -- you'll see a pretty linear ramp-up through the end of Q3. And our goal is to have all of that done ready for Q4 to be done, and that'll all ramp up as we go along throughout the year.

Brian, we got one from the webcast participants. We got somebody that said they applaud us for the CapEx that we have, projects that are high-returning, wondered after this wave of remodels is over, the 1,000 over the next 3 years, what a more normalized level of CapEx might look like in the longer term?

I think most of you know, we're not going to provide long-term guidance, and we're not going to provide long-term CapEx guidance. But we're going to continue to look at different projects that add value and provide great returns for our shareholders. And we'll be looking in the future to think about how we continue to provide a great physical and digital experience for our guests and make the right investments that continue to add value for our shareholders. So we don't have a long-term guidance that we're going to provide today for CapEx, John, but we're going to continue to take the same disciplined and surgical approach to CapEx that you've seen over the last few years. Why don't we go upfront. I'll give Oliver a chance, since I jumped over him before.

The digitization of the supply chain is likely key to unlocking the asset turns. What do you think about that with respect to algorithms as well as your relationships with vendors and as you think about robots and making sure that's on track?

Yes. So all things we're working on, Oliver, you heard me talk about we spent the last 12 months testing automation in, I think, 5 different facilities, various different forms of automation, bringing them together in different combinations in the Perth Amboy facility out in the Northeast. We're starting implementation of 1 view of that. We're implementing something different here in a DC located in Fridley. So that's a piece of it. We have a large team working on supply chain analytics, primarily located, but not exclusively located, out in the Bay Area, working with Mike's team to provide the technology and the analytics in combination. And again, if you look at Perth Amboy, Mike's team built an entirely new warehouse management system. And then there is the analytics attached to it to move how much inventory. So were moving down the path on all of those together. It is going to take all of those to deliver what we want from a supply chain perspective.

And Oliver, we try to showcase, obviously, a lot of the initiatives today, give you a chance to interact with the team, see the work that we're doing today. What underpins so much of that is the work we're doing from a data and analytical standpoint. So our team in Sunnyvale is supporting Mark and his team to make better assortment choices, better pricing and promotional choices. Mike's team of engineers that's driving so much of the work we're doing, as we reinvent how we run our stores, how we fuel our supply chain. So the commitments and the investment we're making in our team go well beyond what you've seen today, and a lot of it is to make sure we have cutting-edge data analytics. We've got great engineer and computer scientists that are helping Mike and Mark and Rick make better decisions from a merchandising standpoint, a digital standpoint and a marketing standpoint. And that is certainly going to fuel our business as we go forward for years to come.

Last question is about value. What are your thoughts about value in terms of making sure you communicate a clear value? And as we model comp store sales, should we continue to see your check size versus traffic? How do you think that will evolve in stocking versus fill-up?

Yes. I think one of the great highlights this year that we really didn't cover is the work that was done between Mark's merchandising team and Rick Gomez's marketing team to make sure that as we made these investments to be priced right daily, we communicated that to our guest, both in-store from a personalized standpoint and throughout the year in our marketing and advertising campaign. And I think it was the combination of all that work that yielded the benefits that Cathy talked about today, that significant mix of $4 billion of sales from promo to Everyday. So as we go forward, we'll continue to remind our guests that we offer great value, that we're priced right daily on thousands of items across the store. And I think one of the great turning points for our business this year was the balance that we brought back to advertising Target style, but also letting our guests know every single week that we were priced right daily and there was great value within the store. And I think that's driving traffic. I think that played a significant part in the traffic increases we saw in the fourth quarter that's driving basket. And beyond some of the numbers that we've shared, it's driving an acceleration in units in those important personal and essential categories. So that commitment to value and being priced right daily, we think, is critically important to driving traffic, to leveraging our multi-category portfolio and making sure people are shopping us not only for the great style brands that our teams are bringing to market, but those household essentials that bring cars into our parking lot and clicks to our site every single week. So that commitment to value is something that you'll see throughout '18 and for years to come. Why don't we go to the back of the room, and I'll let you pick a hand, because unfortunately, from here, we can't see. So if you can identify yourself, we'd really appreciate it,

It's Bob Drbul from Guggenheim Securities. Brian, 2 questions I have. I guess the first one is, as you look at the full year expectation for gross margin coming off of this holiday season, can you just reiterate what you see from a gross margin and competitive perspective that gives you the confidence in a flattish or up-slightly gross margin? And the second question is on the free 2-day shipping program, will that be fulfilled out of the stores? Or is that going to be a fulfillment-center type, can you just maybe elaborate on that expectation going forward?

Why don't I start from a margin standpoint? And as we've talked about throughout the last few quarters, our team has made significant progress, as we have shifted our business from promo to Everyday, the by-product of that commitment to being priced right daily. That's going to continue as we go forward. As you've seen over the last couple of days, we'll continue to introduce great new own brands in those signature categories that, as we all know, are higher-margin and provide a great return, both in-store, but also to our digital business. So we'll continue to see the benefits of the analytics, the science that we're placing behind our pricing and promo strategy, the shift from promotional sales to more regular-priced business, the benefits as we bring new excitement into our stores with great innovation. That's going to continue to stabilize and improve our margins over time, and it's a great point of differentiation. So whether it's Opalhouse or Umbro or some of the things you saw this morning, many new things that we'll talk about over the balance of the year, those higher-margin Home and Apparel items, those great own brands that you can only find at Target, benefit not only our store margins but also our digital margins. And we'll continue to drive efficiency over time. John, you want to talk about fulfillment?

Yes. I think you'll see -- next year at this meeting, you will see that our penetration of units delivered from stores will grow relative to 2017 and relative to 2-day, absolutely. We would expect the majority of that to be delivered from store. We know that's the fastest place it can be delivered from.

John, should we go to the webcast?

Yes. Thanks, Brian. We've got a variety of questions about Shipt, so I'll just give you all of them. One being, are we getting new guests coming in because of Shipt yet? One, the decision to maintain the marketplace in order -- in other words, share that marketplace with other retailers on the Shipt platform. And then finally, the decision of why to acquire them versus to just become a partner on their platform.

John, you want to lead this one off?

Sure. I think maybe I'll start with just what are we trying to do with Shipt and then hopefully, address some of those questions. We have 3 priorities for Shipt that we have been focused on since we closed the acquisition. One is scale Target nationally under Shipt app and shipt.com. And we are well down that path, we're in 455 stores. We're adding markets every single week. The second was -- is bring Shipt to target.com. Mike and his team are working hard on that to provide that option for guests who come to us directly through target.com will provide same-day delivery service for our entire assortment. And then third was expand the marketplace. And I guess, to get at a little bit of this, we think the value here is about bringing all those retailers together. That's the value of the membership. We know consumers have different reasons they go to different retailers. Often they come to Target, we really like that. Sometimes they go other places. But bringing all those retailers together on 1 marketplace is incredibly powerful to bring consumers into the Shipt app. And so we've had great conversations with other retailers. We already have great partners in H-E-B, in Publix, in Meijer, Costco, all on the app, and we'll continue to grow that. So we're very interested in continuing to grow that marketplace.

And to the other question, Cathy, John and I, all spent quite a bit of time looking at other same-day delivery options, and we invested a lot of time getting to know the Shipt organization. We were attracted to Shipt and decided to take an ownership position because of that personal connection we saw with their member. And as we spent time and went to Birmingham, worked with some of their shoppers, saw the caliber of people that were shopping for Shipt, these moms who were shopping for moms, the approach they took to really building a relationship, we felt it was so important to own that last mile touch and that human interaction that we think really differentiates Target from anyone else in that space. So we certainly had options to partner with other last mile delivery companies, but we thought Shipt had a very different approach. It wasn't just the transaction, it was building a relationship. And we thought, owning that human touch was very consistent with what we think is our greatest asset, and that's our people that make such a different, as we talk to guests and they describe why do they shop at Target. As said earlier today, most of the time the answer is pretty simple, it's because of our team.

Peter Benedict of Baird. Two questions. First, the cost to upgrade these fulfillment centers, the modernization, John, that you talked about. Can you give us a sense of maybe how much that is going to contribute to capital spend over the next few years? And what's the cadence? How many do you need to do? And when do we get to the endpoint there? And the second point -- question would be on inventory growth. How should we think about that as you kind of clean up the back rooms, you improve the flow of product over the supply chain? How should we think about inventory growth maybe versus sales?

Yes. I think, first on the capital. Cathy has provided the capital guidance. It's all within our capital guidance, everything we've talked about, we have planned for. If that changes, I am sure Cathy will come back and let you know that changes. I think pace, we will know more about that actually near the end of this year than I do right now. We're very focused on getting the Perth Amboy facility up and operating and -- because that's kind of the end state. This is what great will look like. Simultaneous with that, like I said, we're testing how we can start to evolve the broader network into that step-by-step-by-step, and what we're doing this year will be the first step. And we hope to have a decision about perhaps getting to 8 of those, realistically, probably very early next year and then expand from there. Meanwhile, while we're doing that, go back into the local distribution center and say okay, what's the next step we would bring to that in order to move it down the path? So that's kind of the sequence we're thinking about year-over-year. This won't happen over the next 18 months, because it can't. This is a conversation we have internally a lot. If we could like shut down for 9 months and not deliver any product to stores, we could get this done very quickly, but we don't have that ability. We need to keep producing product for the store, or shipping product to the store. So it will be a gradual evolution over time. I mean, the investments will follow that gradual evolution.

Can I answer the inventory question real quick for you? Longer term, as we've talked many times, Peter, we do see the inventory loads, as we move product exactly where we need it, when we need it, will continue to come down. Obviously, we want to make sure we have a great guest experience and we're in stock. And so we're going to balance that as we're evolving supply chain, so -- through this transition period and then obviously, to support all of the wonderful new brands and products we're bringing in.

So just to build on that, it is going to take time. And as you've seen over the last couple of years, with the approach we've taken to a number of initiatives, we're going to test, learn, iterate and then move forward. And it's a same model we took to own brands, starting with Cat & Jack, learning from that success, and now we're building out the portfolio. It's the same approach we took to remodels. We started with 25 stores in L.A. We continue to learn and listen and iterate. And once we saw the right response from the guest and the right return on invested capital, we moved more quickly. We're doing the same thing from a DC standpoint. We're constantly learning and updating our approach. And we think we've got a model that you can expand, but we're going to do that very, very carefully and make sure that we have a system that can be scaled. And when we get there, to Wayne's question, we will see better units of measure flowing into the stores, which will naturally improve inventory levels and working capital. But this is one that's going to take time. To John's point, we are not shutting down our system for 9 months. It's going to be a multiyear journey, but we're going to make sure that we do it right and we get the right returns and continue to provide the right experience for our guests. We got a question upfront here.

It's Greg Melich with MoffettNathanson. So I had a follow-up for Cathy. And then Brian, I had another question. Cathy, the $3.5 billion CapEx that is, I think, about $500 million more than what you were thinking before. Should we think about that -- I know you're not giving long-term guidance, but is that more of a pull-forward of things that you had or more of -- given what you see, there's more stuff you want to lean into this year? And then Brian, I had a follow-up.

Yes. So consistent with our strategy Brian had laid out, we intend to remodel. We're seeing the great returns, 2% to 4% lift. We make sure we have great returns on invested capital with those. And as we've seen the remodels perform, we're going to continue to get towards that 1,000 stores that Brian talked about. But -- and by the time we get there, much of our fleet will be much younger in age. Obviously, some of the heavier needs are earlier on, which is why the capital is a little higher. But I would expect we've done -- did $2.5 billion last year, $3.5 billion this year. Obviously, we're not slowing down. We're seeing great return, and we're seeing a great response from our guests. So we're not giving long-term guidance, but you can expect that we'll continue down those stores.

And then Brian, you talked a lot about acceleration, right, what happened last year and it's now time to really accelerate it. Could you talk a little bit more about the brand acceleration? It seems like with 12 brands in 12 months and -- is that a new run rate? I mean, can the organization really be expected to come up with that many new great brands and ideas every year? Or is there a certain amount that you -- or could that become 18 in a year? Or is there a certain amount of product that you're sort of limited on that, ultimately, we only want to change over 1/4 of the SKUs or something like that?

So Greg, I wouldn't expect that to be the long-term run rate. But certainly, as Mark and his team have looked at the portfolio, we've seen opportunities to replace some of the existing brands that have been in our portfolio, fill new white spaces. And over the balance of 2018, we'll continue to bring newness and innovation to own brands. And then we'll continue to listen to the guests, understand category trends and bring great newness and innovation, whether it's with a new own brand or some of the great partnerships we'll continue to bring forward on a limited-time basis like we announced earlier today. So I wouldn't expect that to be the run rate, right, for Mark and his team, but we see significant opportunities to continue to strengthen our own brand portfolio in 2018, and we'll look for further opportunities in the years to come. All right, let's go to -- all the way to the back of the room.

Bill Dreher here from Susquehanna Financial Group. I have a question regarding the renovations and remodels. How do you prioritize the renovations or remodels? So are you working with the stores with the greatest opportunity, the oldest stores, or how do you work on that? And then how do you -- how much of the new store remodel program can be brought in? Not 100% of all the new modules can be brought in. Should we be expecting a similar 70%, 80% of the modules brought in? And how does that roll out?

John, do you want to tell about the remodel strategy?

Yes. So it's a little bit of everything you said, actually. When we're choosing the stores, we have a model that helps us generate age, condition, when's the last time. Part of it that comes into it is how hard is this store shopped, how high-volume is it, what is the average basket, so do they get shopped really hard day in and day out. And then to your point, where can we have the biggest impact, where can we go in and say, look, these 10 stores or dozen stores, we know that they are in need of it and we will have a big impact. So we go through a process. The team recommends those. They have conversations with the senior store leaders as well to get their local viewpoint about what's going on in that marketplace, has somebody opened up 6 grocery stores around us or whatever it is and say, hey, this is one where we could really use the help competitively. So there's multiple pieces we come together with. The team distills that down, and then we come to a consensus about this is the list we're going to go after for this year. As you can imagine, when you're doing 100, that's a lot more difficult when you're doing -- than when you're doing 325. The list gets a lot more easy and a lot less contentious. So it's a great process. The team is already working on 2019 and actually thinking about 2020. So that all happens much further in advance. To your question about what gets put into the remodel, our goal is always to put in as many elements as we can in any individual store. The calibration though is we want to make sure that store can afford to have that much investment, and so lower volume stores get less. And the great thing is, and I've seen this happen multiple times, when we say here's where we're going to draw the line on lower volume stores, Brian challenges the team, go figure out a way to get these 2 more elements into that store. They go back, they value engineer, they find ways to do it more efficiently. Certainly, as we do more scale, that brings efficiency to it. And so we found ways to move some of the elements we really like even into those low-volume remodels.

So I've gotten the note to say it's time wrap up this session. But before we close out, I do want to thank you for joining us in Minneapolis this week. We spent a lot of time debating where to hold this meeting. And really thought, based on the stage of our journey, it was the right time to have you here, so you could see our new renovated downtown store, spend quality time with our leadership team. This morning, we wanted to give you a sense for all of these initiatives we're working on and how they're going to help us create the Target of the future, give you a glimpse into some of the things we're doing from a technology standpoint that's going to make it easier for our guest to shop at Target and easy for our team to support that guest. And I hope, today, we were able to give you a sense for our excitement for 2018. 2017 was a year of significant progress for this team. 2018 is all about acceleration, taking all the learning that we've gathered over the last couple of years and really stepping on the accelerator. And I think we're on our way to creating long-term value for our shareholders, but most importantly, continuing to differentiate our brand and ensuring Target is one of the long-term retail winners as we move forward. So thanks again for joining us. Travel safely. And we look forward to seeing you again later in the year. So thank you.