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SEGMENT REPORTING
 6 Months Ended
Aug. 04, 2013
SEGMENT REPORTING

NOTE D. SEGMENT REPORTING

We have two reportable segments, direct-to-customer and retail. The direct-to-customer segment has seven merchandising concepts (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, PBteen, West Elm, Rejuvenation and Mark and Graham) which sell our products through our e-commerce websites and direct-mail catalogs. Our direct-to-customer merchandising concepts are operating segments, which have been aggregated into one reportable segment, direct-to-customer. The retail segment has five merchandising concepts (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and Rejuvenation) which sell our products through our retail stores. Our retail merchandising concepts are operating segments, which have been aggregated into one reportable segment, retail. Management’s expectation is that the overall economic characteristics of each of our operating segments will be similar over time based on management’s judgment that the operating segments have had similar historical economic characteristics and are expected to have similar long-term financial performance in the future.

These reportable segments are strategic business units that offer similar home-centered products. They are managed separately because the business units utilize two distinct distribution and marketing strategies. Based on management’s best estimate, our operating segments include allocations of certain expenses, including advertising and employment costs, to the extent they have been determined to benefit both channels. These operating segments are aggregated at the channel level for reporting purposes due to the fact that our brands are interdependent for economies of scale and we do not maintain fully allocated income statements at the brand level. As a result, material financial decisions related to the brands are made at the channel level. Furthermore, it is not practicable for us to report revenue by product group.

We use operating income to evaluate segment profitability. Operating income is defined as earnings (loss) before net interest income or expense and income taxes. Unallocated costs before interest and income taxes include corporate employee-related costs, occupancy expenses (including depreciation expense), administrative costs and third party service costs, primarily in our corporate systems, corporate facilities and other administrative departments. Unallocated assets include corporate cash and cash equivalents, deferred income taxes, the net book value of corporate facilities and related information systems, and other corporate long-lived assets.

Income tax information by reportable segment has not been included as income taxes are calculated at a company-wide level and are not allocated to each reportable segment.

Segment Information

 

Dollars in thousands    Direct-to-
Customer		      Retail      Unallocated     Total  

Thirteen weeks ended August 4, 2013

           

Net revenues1

    $ 477,657       $  504,552       $ 0      $ 982,209   

Depreciation and amortization expense

      6,096         19,535         11,592        37,223   

Operating income (loss)

      114,491         34,609         (71,014 )      78,086   

Capital expenditures

      9,993         24,428         15,912        50,333   

Thirteen weeks ended July 29, 2012

           

Net revenues1

    $ 414,361       $ 459,922       $ 0      $ 874,283   

Depreciation and amortization expense

      5,677         17,497         9,350        32,524   

Operating income (loss)

      95,223         38,602         (63,722 )      70,103   

Capital expenditures

      7,482         16,808         17,499        41,789   

Twenty-six weeks ended August 4, 2013

           

Net revenues1

    $ 896,741       $ 973,276       $ 0      $ 1,870,017   

Depreciation and amortization expense

      12,922         38,752         22,158        73,832   

Operating income (loss)

      210,432         68,625         (137,188 )      141,869   

Assets2

      470,792         937,720         715,666        2,124,178   

Capital expenditures

      19,699         45,150         32,928        97,777   

Twenty-six weeks ended July 29, 2012

           

Net revenues1

    $ 788,768       $ 903,129       $ 0      $ 1,691,897   

Depreciation and amortization expense

      11,294         35,556         18,468        65,318   

Operating income (loss)

      173,178         72,955         (126,707 )      119,426   

Assets2

      373,340         881,375         735,169        1,989,884   

Capital expenditures

      12,758         26,080         30,770        69,608   

 

1

Includes net revenues of approximately $50.4 million and $31.6 million for the thirteen weeks ended August 4, 2013 and July 29, 2012, respectively, and $98.5 million and $62.2 million for the twenty-six weeks ended August 4, 2013 and July 29, 2012, respectively, related to our foreign operations.
2

Includes approximately $55.5 million and $26.5 million of long-term assets as of August 4, 2013 and July 29, 2012, respectively, related to our foreign operations.