Segment Reporting

12 Months Ended

Jan. 27, 2017

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 sales 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:

(in thousands)	Fiscal 2016		Fiscal 2015		Fiscal 2014
Net revenue:
Apparel	$	1,086,439	$	1,156,047	$	1,248,847
Non-apparel	168,945		183,073		220,385
Services and other	80,376		80,658		86,121
Total Net revenue	$	1,335,760	$	1,419,778	$	1,555,353

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 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 years ended January 27, 2017, January 29, 2016 and January 30, 2015.

• 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 Lands’ End 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 inventory in the retail stores, fixtures and leasehold improvements.

• 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 as follows:

(in thousands)	Fiscal 2016		Fiscal 2015		Fiscal 2014
Net revenue:
Direct	$	1,149,149	$	1,214,993	$	1,320,642
Retail	186,390		204,566		234,632
Corporate/other	221		219		79
Total Net revenue	$	1,335,760	$	1,419,778	$	1,555,353

(in thousands)	Fiscal 2016			Fiscal 2015			Fiscal 2014
Adjusted EBITDA:
Direct	$	78,582		$	141,936		$	192,763
Retail	(5,560		)	(520		)	7,161
Corporate/other	(33,190		)	(34,128		)	(35,626		)
Total adjusted EBITDA	$	39,832		$	107,288		$	164,298
Loss on disposal of property and equipment	672			44			239
Product recall	(212		)	(3,371		)	4,713
Depreciation and amortization	19,003			17,399			19,703
Intangible asset impairment	173,000			98,300			—
Operating (loss) income	$	(152,631	)	$	(5,084	)	$	139,643
Interest expense	24,630			24,826			20,494
Other income, net	1,619			(671		)	(1,408		)
Income tax (benefit) expense	(69,098		)	(9,691		)	46,758
Net (loss) income	$	(109,782	)	$	(19,548	)	$	73,799

(in thousands)	Fiscal 2016		Fiscal 2015		Fiscal 2014
Depreciation and amortization:
Direct	$	15,877	$	13,916	$	15,640
Retail	1,674		2,029		2,618
Corporate/other	1,452		1,454		1,445
Total Depreciation and amortization	$	19,003	$	17,399	$	19,703

(in thousands)	January 27, 2017		January 29, 2016
Total assets:
Direct	$	805,201	$	953,502
Retail	69,792		69,321
Corporate/other	239,398		258,703
Total assets	$	1,114,391	$	1,281,526

(in thousands)	Fiscal 2016		Fiscal 2015		Fiscal 2014
Capital expenditures:
Direct	$	32,590	$	21,630	$	15,160
Retail	635		318		1,004
Corporate/other	94		276		444
Total capital expenditures	$	33,319	$	22,224	$	16,608

The geographical allocation of Net revenue is based upon country of order fulfillment. Other foreign amounts represent orders fulfilled from the United States and shipped to customers in another country. The following presents summarized geographical information:

(in thousands)	Fiscal 2016		Fiscal 2015		Fiscal 2014
Net revenue:
United States	$	1,143,529	$	1,211,226	$	1,309,252
Europe	125,410		136,890		159,796
Asia	50,030		51,808		56,014
Other foreign	16,791		19,854		30,291
Total Net revenue	$	1,335,760	$	1,419,778	$	1,555,353

(in thousands)	January 27, 2017		January 29, 2016
Property and equipment, net:
United States	$	113,045	$	98,153
Europe	9,075		10,980
Asia	716		698
Total Property and equipment, net	$	122,836	$	109,831

Other than the United States, no one country is greater than 10% of total Net revenue or of total Property and equipment, net.