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SEGMENT REPORTING
 9 Months Ended
Oct. 30, 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, deferred income taxes 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 October 30, 2016

           

Net revenues1

    $ 648,743       $ 596,642       $ —        $ 1,245,385   

Depreciation and amortization expense

      7,812         21,676         14,888        44,376   

Operating income (loss)2

      150,164         47,080         (87,265 )      109,979   

Capital expenditures

      5,231         25,820         18,241        49,292   

Thirteen weeks ended November 1, 2015

           

Net revenues1

    $ 628,191       $ 603,891       $ —        $ 1,232,082   

Depreciation and amortization expense

      7,856         20,880         13,124        41,860   

Operating income (loss)

      137,828         49,213         (76,358 )      110,683   

Capital expenditures

      4,819         25,239         19,162        49,220   

Thirty-nine weeks ended October 30, 2016

           

Net revenues1

    $ 1,824,660       $ 1,677,571       $ —        $ 3,502,231   

Depreciation and amortization expense

      23,415         63,764         40,566        127,745   

Operating income (loss) 2

      414,442         110,422         (268,084 )      256,780   

Assets3

      664,105         1,118,913         670,314        2,453,332   

Capital expenditures

      13,673         64,699         48,797        127,169   

Thirty-nine weeks ended November 1, 2015

           

Net revenues1

    $   1,730,677       $   1,659,109       $ —       $   3,389,786   

Depreciation and amortization expense

      24,156         61,433         39,504        125,093   

Operating income (loss)

      387,863         117,842           (239,751 )      265,954   

Assets3

      666,993         1,151,657         617,026        2,435,676   

Capital expenditures

      13,337         68,432         54,300        136,069   
1 Includes net revenues related to our international operations (including our operations in Canada, Australia, the United Kingdom and our franchise businesses) of approximately $82.8 million and $80.0 million for the thirteen weeks ended October 30, 2016 and November 1, 2015, respectively, and $232.5 million and $201.7 million for the thirty-nine weeks ended October 30, 2016 and November 1, 2015, respectively.
2 Includes $1.2 million and $14.4 million for the thirteen and thirty-nine weeks ended October 30, 2016, respectively, of severance-related reorganization charges due to a reduction of headcount, 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 $59.2 million and $60.6 million as of October 30, 2016 and November 1, 2015, respectively.