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SEGMENT REPORTING
 6 Months Ended
Jul. 31, 2016
SEGMENT REPORTING

NOTE E. SEGMENT REPORTING

We have two reportable segments, e-commerce and retail. The e-commerce segment has the following merchandising strategies: Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm, PBteen, Williams-Sonoma Home, Rejuvenation and Mark and Graham, which sell our products through our e-commerce websites and direct-mail catalogs. Our e-commerce merchandising strategies are operating segments, which have been aggregated into one reportable segment, e-commerce. The retail segment has the following merchandising strategies: Williams-Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and Rejuvenation, which sell our products through our retail stores. Our retail merchandising strategies 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 products for the home. 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 (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, prepaid expenses, 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

 

In thousands    E-commerce      Retail      Unallocated     Total  

Thirteen weeks ended July 31, 2016

           

Net revenues1

    $ 599,683       $ 559,346       $ —        $ 1,159,029   

Depreciation and amortization expense

      7,989         21,339         12,801        42,129   

Operating income (loss)

      132,733         33,217         (82,674 )      83,276   

Capital expenditures

      4,593         25,127         20,008        49,728   

Thirteen weeks ended August 2, 2015

           

Net revenues1

    $ 569,913       $ 557,115       $ —        $ 1,127,028   

Depreciation and amortization expense

      8,198         20,403         13,154        41,755   

Operating income (loss)

      122,461         40,503         (79,621 )      83,343   

Capital expenditures

      4,582         23,265         18,618        46,465   

Twenty-six weeks ended July 31, 2016

           

Net revenues1

    $ 1,175,917       $ 1,080,929       $ —        $ 2,256,846   

Depreciation and amortization expense

      15,603         42,088         25,678        83,369   

Operating income (loss)2

      264,278         63,342         (180,819 )      146,801   

Assets3

      627,532         1,051,184         694,848        2,373,564   

Capital expenditures

      8,442         38,879         30,556        77,877   

Twenty-six weeks ended August 2, 2015

           

Net revenues1

    $   1,102,486       $   1,055,218       $ —        $   2,157,704   

Depreciation and amortization expense

      16,300         40,553         26,380        83,233   

Operating income (loss)

      250,035         68,629           (163,393 )      155,271   

Assets3

      658,803         1,101,441         635,727        2,395,971   

Capital expenditures

      8,518         43,193         35,138        86,849   
1  Includes net revenues related to our international operations (including our operations in Canada, Australia, the United Kingdom and our franchise businesses) of approximately $80.0 million and $66.9 million for the thirteen weeks ended July 31, 2016 and August 2, 2015, respectively, and $149.7 million and $121.7 million for the twenty-six weeks ended July 31, 2016 and August 2, 2015, respectively.
2  Includes $13.2 million of severance-related reorganization charges due to a reduction of headcount in the first quarter of fiscal 2016, primarily in our corporate functions, which is recorded as selling, general and administrative expense within the unallocated segment.
3  Includes long-term assets related to our international operations of approximately $60.7 million and $60.0 million as of July 31, 2016 and August 2, 2015, respectively.