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SEGMENT REPORTING
 9 Months Ended
Nov. 02, 2014
SEGMENT REPORTING

NOTE D. SEGMENT REPORTING

We have two reportable segments, e-commerce (formerly direct-to-customer) and retail. The e-commerce segment has seven merchandising concepts (Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, PBteen, Rejuvenation and Mark and Graham) which sell our products through our e-commerce websites and direct-mail catalogs. Our e-commerce merchandising concepts are operating segments, which have been aggregated into one reportable segment, e-commerce. 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 administrative and systems 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    E-commerce1      Retail      Unallocated     Total  

Thirteen weeks ended November 2, 2014

           

Net revenues2

    $ 586,976       $   556,186       $ 0      $ 1,143,162   

Depreciation and amortization expense

      8,471         20,344         12,988        41,803   

Operating income (loss)

      136,617         49,973         (81,870 )      104,720   

Capital expenditures

      5,451         29,005         13,695        48,151   

Thirteen weeks ended November 3, 2013

           

Net revenues2

    $ 511,874       $ 539,674       $ 0      $ 1,051,548   

Depreciation and amortization expense

      6,165         19,655         11,760        37,580   

Operating income (loss)

      117,086         49,300         (73,892 )      92,494   

Capital expenditures

      8,797         26,152         12,510        47,459   

Thirty-Nine weeks ended November 2, 2014

           

Net revenues2

    $ 1,600,854       $ 1,555,740       $ 0      $ 3,156,594   

Depreciation and amortization expense

      23,608         60,062         37,465        121,135   

Operating income (loss)

      378,365         117,227         (231,210 )      264,382   

Assets3

      623,674         1,087,683         592,590        2,303,947   

Capital expenditures

      28,326         63,253         40,091        131,670   

Thirty-Nine weeks ended November 3, 2013

           

Net revenues2

    $ 1,408,615       $ 1,512,950       $ 0      $ 2,921,565   

Depreciation and amortization expense

      19,087         58,407         33,918        111,412   

Operating income (loss)

      327,518         117,925         (211,080 )      234,363   

Assets3

      540,534         1,034,476         651,432        2,226,442   

Capital expenditures

      28,496         71,302         45,438        145,236   
1  Prior to the third quarter of fiscal 2014, we referred to the e-commerce channel as the direct-to-customer channel.
2  Includes net revenues of approximately $54.6 million and $51.5 million for the thirteen weeks ended November 2, 2014 and November 3, 2013, respectively, and $161.1 million and $150.0 million for the thirty-nine weeks ended November 2, 2014 and November 3, 2013, respectively, related to our foreign operations.
3  Includes approximately $64.4 million and $59.3 million of long-term assets as of November 2, 2014 and November 3, 2013, respectively, related to our foreign operations.