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Segment Reporting
 12 Months Ended
Jan. 29, 2017
Segment Reporting

Note K: Segment Reporting

We have two reportable segments, e-commerce and retail. The e-commerce segment has the following merchandise 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 merchandise strategies are operating segments, which have been aggregated into one reportable segment, e-commerce. The retail segment, which includes our franchise operations, has the following merchandise strategies: Williams Sonoma, Pottery Barn, Pottery Barn Kids, West Elm and Rejuvenation, which sell our products through our retail stores. Our retail merchandise 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  

Fiscal 2016

           

Net revenues1

    $   2,633,602      $   2,450,210      $ —     $   5,083,812  

Depreciation and amortization expense

      31,135        86,228        55,832       173,195  

Operating income (loss)2

      606,286        231,929        (365,616 )      472,599  

Assets3

      614,213        1,077,593        785,073       2,476,879  

Capital expenditures

      21,479        102,859        73,076       197,414  

Fiscal 2015

           

Net revenues1

    $ 2,522,580      $ 2,453,510      $ —     $ 4,976,090  

Depreciation and amortization expense

      32,056        83,027        52,677       167,760  

Operating income (loss)

      562,081        239,288        (312,735 )      488,634  

Assets3

      625,951        1,049,892        741,584       2,417,427  

Capital expenditures

      22,293        102,717        77,925       202,935  

Fiscal 2014

           

Net revenues1

    $ 2,370,694      $ 2,328,025      $              —     $ 4,698,719  

Depreciation and amortization expense

      32,116        80,154        50,003       162,273  

Operating income (loss)

      560,396        248,535        (306,666 )      502,265  

Assets3

      600,503        1,028,293        701,481       2,330,277  

Capital expenditures

      41,633        97,247        65,920       204,800  

 

1  Includes net revenues related to our international operations (including our operations in Canada, Australia, the United Kingdom and our franchise businesses) of approximately $321.2 million, $298.9 million and $235.8 million in fiscal 2016, fiscal 2015 and fiscal 2014, respectively.
2  Includes approximately $14.4 million in fiscal 2016 for severance related reorganization charges due to headcount reduction, primarily in our corporate functions, which is recorded in selling, general and administrative expenses within the unallocated segment.
3  Includes long-term assets related to our international operations of approximately $59.2 million, $61.7 million and $58.3 million in fiscal 2016, fiscal 2015 and fiscal 2014, respectively.