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SEGMENT REPORTING
 3 Months Ended
Apr. 30, 2017
SEGMENT REPORTING

NOTE E. 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 taxes are calculated at an entity level and are not allocated to our reportable segments.

 

Segment Information

 

In thousands    E-commerce      Retail      Unallocated     Total  

Thirteen weeks ended April 30, 2017

           

Net revenues1

    $ 580,510      $ 530,997      $ —       $ 1,111,507  

Depreciation and amortization expense

      6,967        22,342        15,641       44,950  

Operating income (loss)2

      132,004        21,714        (91,244 )      62,474  

Assets3

      653,898        1,067,169        670,110       2,391,177  

Capital expenditures

      2,870        16,497        12,786       32,153  

Thirteen weeks ended May 1, 2016

           

Net revenues1

    $   576,234      $ 521,583      $ —       $   1,097,817  

Depreciation and amortization expense

      7,614        20,749        12,877       41,240  

Operating income (loss)2

      131,545        30,125        (98,145 )      63,525  

Assets3

      600,053          1,039,580          650,735       2,290,368  

Capital expenditures

      3,849        13,752        10,548       28,149  
1 Includes net revenues related to our international operations (including our operations in Canada, Australia, the United Kingdom and our franchise businesses) of approximately $69.4 million and $69.7 million for the thirteen weeks ended April 30, 2017 and May 1, 2016, respectively.
2 Includes $5.7 million and $13.2 million of severance-related charges for the thirteen weeks ended April 30, 2017 and May 1, 2016, respectively, 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 $57.9 million and $64.4 million as of April 30, 2017 and May 1, 2016, respectively.