Segment Reporting

9 Months Ended

Oct. 30, 2015

Segment Reporting [Abstract]

Segment Reporting

SEGMENT REPORTING

The Company is a leading multi-channel retailer of casual clothing, accessories and footwear, as well as home products, and has two reportable segments: Direct and Retail. Both segments sell similar products and provide services. Product revenues are divided by product categories: Apparel and Non-apparel. The Non-apparel revenues include accessories, footwear, and home goods. Services and other revenue includes embroidery, monogramming, gift wrapping, shipping and other services. Net revenue is aggregated by product category in the following table:

	13 Weeks Ended				39 Weeks Ended
(in thousands)	October 30, 2015		October 31, 2014		October 30, 2015		October 31, 2014
Net revenue:
Apparel	$	272,228	$	300,398	$	783,841	$	862,044
Non-apparel	40,708		50,210		106,536		127,524
Services and other	21,498		22,474		55,858		61,219
Total net revenue	$	334,434	$	373,082	$	946,235	$	1,050,787

The Company identifies reportable segments according to how business activities are managed and evaluated. Each of the Company’s operating segments are reportable segments and are strategic business units that offer similar products and services but are sold either directly from its warehouses (Direct) or through its retail stores (Retail). Adjusted EBITDA is the primary measure used to make decisions on allocating resources and assessing performance of each operating segment. Adjusted EBITDA is computed as Income before taxes appearing on the Condensed Consolidated and Combined Statements of Operations net of interest expense, depreciation and amortization and other significant items that while periodically affecting the Company's results, may vary significantly from period to period and may have a disproportionate effect in a given period, which may affect comparability of results. Reportable segment assets are those directly used in or clearly allocable to an operating segment’s operations. Depreciation, amortization, and property and equipment expenditures are recognized in each respective segment. There were no material transactions between reporting segments for the Third Quarter 2015 and Third Quarter 2014 and Year to Date 2015 and Year to Date 2014.

• The Direct segment sells products through the Company’s e-commerce websites and direct mail catalogs. Operating costs consist primarily of direct marketing costs (catalog and e-commerce marketing costs); order processing and shipping costs; direct labor and benefits costs and facility costs. Assets primarily include goodwill and trade name intangible assets, inventory, accounts receivable, prepaid expenses (deferred catalog costs), technology infrastructure, and property and equipment.

• The Retail segment sells products and services through dedicated Lands’ End Shops at Sears across the United States, the Company’s stand-alone Lands’ End Inlet stores and international shop-in-shops. Operating costs consist primarily of labor and benefits costs; rent, CAM and occupancy costs; distribution costs; and in-store marketing costs. Assets primarily include retail inventory, fixtures and leasehold improvements.

• The Corporate segment records revenues related to a licensing agreement with Sears Holdings Management Corporation, a subsidiary of Sears Holdings Corporation, whereby royalties are paid in consideration for sharing or use of intellectual property. Corporate overhead and other expenses include unallocated shared-service costs, which primarily consist of employee services and financial services, legal and corporate expenses. These expenses include labor and benefits costs, corporate headquarters occupancy costs and other administrative expenses. Assets include corporate headquarters and facilities, corporate cash and cash equivalents and deferred income taxes.

Financial information by segment is presented in the following tables.

SUMMARY OF SEGMENT DATA

	13 Weeks Ended				39 Weeks Ended
(in thousands)	October 30, 2015		October 31, 2014		October 30, 2015		October 31, 2014
Net revenue:
Direct	$	287,778	$	320,286	$	805,886	$	888,889
Retail	46,597		52,776		140,166		161,831
Corporate / other	59		20		183		67
Total net revenue	$	334,434	$	373,082	$	946,235	$	1,050,787

	13 Weeks Ended						39 Weeks Ended
(in thousands)	October 30, 2015			October 31, 2014			October 30, 2015			October 31, 2014
Adjusted EBITDA:
Direct	$	36,951		$	47,767		$	85,316		$	115,550
Retail	(1,714		)	816			(907		)	4,102
Corporate / other	(8,689		)	(8,658		)	(25,191		)	(25,788		)
Total adjusted EBITDA	$	26,548		$	39,925		$	59,218		$	93,864

	13 Weeks Ended				39 Weeks Ended
(in thousands)	October 30, 2015		October 31, 2014		October 30, 2015		October 31, 2014
Depreciation and amortization:
Direct	$	3,385	$	3,822	$	10,280	$	11,682
Retail	510		643		1,506		1,938
Corporate / other	365		337		1,088		1,009
Total depreciation and amortization	$	4,260	$	4,802	$	12,874	$	14,629

(in thousands)	October 30, 2015		October 31, 2014		January 30, 2015
Total assets:
Direct	$	1,166,991	$	1,127,221	$	1,023,364
Retail	79,492		80,406		67,765
Corporate / other	142,873		146,386		262,308
Total assets	$	1,389,356	$	1,354,013	$	1,353,437

	13 Weeks Ended				39 Weeks Ended
(in thousands)	October 30, 2015		October 31, 2014		October 30, 2015		October 31, 2014
Capital expenditures:
Direct	$	4,415	$	4,962	$	17,717	$	10,393
Retail	95		310		148		452
Corporate / other	87		153		252		296
Total capital expenditures	$	4,597	$	5,425	$	18,117	$	11,141