SEGMENT REPORTING

The Company is a leading multi-channel retailer of casual clothing, accessories, footwear, and home products, and has two reportable segments: Direct and Retail. Product revenue is divided by product categories: Apparel and Non-apparel. The Non-apparel revenue includes 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				26 Weeks Ended
(in thousands)	August 3, 2018		July 28, 2017		August 3, 2018		July 28, 2017
Net revenue:
Apparel	$	256,457	$	250,318	$	515,740	$	481,255
Non-apparel	30,584		29,665		56,476		53,736
Service and other	20,904		22,207		35,554		35,564
Total net revenue	$	307,945	$	302,190	$	607,770	$	570,555

The Company identifies reportable segments according to how business activities are managed and evaluated. Each of the Company’s reportable segments are strategic business units that offer similar products and services but are either shipped directly from its warehouses (Direct) or sold through 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 Net loss appearing on the Condensed Consolidated Statements of Operations net of Income tax benefit, Other income, net, Interest expense, Depreciation and amortization and certain 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 any periods presented.

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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 and through Company Operated stores. 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.

•

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				26 Weeks Ended
(in thousands)	August 3, 2018		July 28, 2017		August 3, 2018		July 28, 2017
Net revenue:
Direct	$	276,602	$	259,938	$	549,975	$	488,228
Retail	31,343		42,252		57,795		82,327
Total net revenue	$	307,945	$	302,190	$	607,770	$	570,555



	13 Weeks Ended						26 Weeks Ended
(in thousands)	August 3, 2018			July 28, 2017			August 3, 2018			July 28, 2017
Adjusted EBITDA:
Direct	$	15,761		$	13,080		$	38,095		$	24,918
Retail	398			1,859			(4,168		)	(1,288		)
Corporate / other	(8,434		)	(8,110		)	(17,177		)	(15,505		)
Total adjusted EBITDA	$	7,725		$	6,829		$	16,750		$	8,125
(Gain) loss on property and equipment	(52		)	—			284			62
Transfer of corporate functions	5			480			6			1,926
Depreciation and amortization	6,897			6,175			13,058			12,683
Operating income (loss)	$	875		$	174		$	3,402		$	(6,546	)
Interest expense	7,001			6,167			13,913			12,292
Other (income) expense, net	(412		)	(494		)	3,452			(1,236		)
Income tax benefit	(429		)	(1,619		)	(6,048		)	(5,883		)
NET LOSS	$	(5,285	)	$	(3,880	)	$	(7,915	)	$	(11,719	)



	13 Weeks Ended				26 Weeks Ended
(in thousands)	August 3, 2018		July 28, 2017		August 3, 2018		July 28, 2017
Depreciation and amortization:
Direct	$	6,234	$	5,489	$	11,805	$	11,267
Retail	293		353		575		707
Corporate / other	370		333		678		709
Total depreciation and amortization	$	6,897	$	6,175	$	13,058	$	12,683



(in thousands)	August 3, 2018		July 28, 2017		February 2, 2018
Total Assets:
Direct	$	856,293	$	846,313	$	856,986
Retail	53,379		73,953		49,933
Corporate / other	220,771		202,139		217,216
Total assets	$	1,130,443	$	1,122,405	$	1,124,135



	13 Weeks Ended				26 Weeks Ended
(in thousands)	August 3, 2018		July 28, 2017		August 3, 2018		July 28, 2017
Capital expenditures:
Direct	$	9,874	$	8,832	$	20,462	$	20,213
Retail	1,581		9		1,741		10
Total capital expenditures	$	11,455	$	8,841	$	22,203	$	20,223