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				39 Weeks Ended
(in thousands)	November 2, 2018		October 27, 2017		November 2, 2018		October 27, 2017
Net revenue:
Apparel	$	279,620	$	263,309	$	794,788	$	743,794
Non-apparel	40,238		37,303		97,286		91,148
Service and other	21,712		24,877		57,266		61,102
Total net revenue	$	341,570	$	325,489	$	949,340	$	896,044

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 income (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.

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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)	November 2, 2018		October 27, 2017		November 2, 2018		October 27, 2017
Net revenue:
Direct	$	313,778	$	290,326	$	863,753	$	778,554
Retail	27,792		35,163		85,587		117,490
Total net revenue	$	341,570	$	325,489	$	949,340	$	896,044



	13 Weeks Ended						39 Weeks Ended
(in thousands)	November 2, 2018			October 27, 2017			November 2, 2018			October 27, 2017
Adjusted EBITDA:
Direct	$	30,284		$	29,100		$	68,379		$	54,018
Retail	(3,595		)	(6,003		)	(7,763		)	(7,405		)
Corporate / other	(11,001		)	(10,245		)	(28,179		)	(25,635		)
Total adjusted EBITDA	$	15,688		$	12,852		$	32,437		$	20,978
(Gain) loss on property and equipment	(162		)	89			121			151
Transfer of corporate functions	4			475			10			2,401
Depreciation and amortization	7,361			6,347			20,420			19,031
Operating income (loss)	$	8,485		$	5,941		$	11,886		$	(605	)
Interest expense	7,303			6,350			21,216			18,642
Other expense (income), net	1,866			(576		)	5,317			(1,812		)
Income tax (benefit) expense	(3,978		)	5			(10,026		)	(5,878		)
NET INCOME (LOSS)	$	3,294		$	162		$	(4,621	)	$	(11,557	)



	13 Weeks Ended				39 Weeks Ended
(in thousands)	November 2, 2018		October 27, 2017		November 2, 2018		October 27, 2017
Depreciation and amortization:
Direct	$	6,887	$	5,747	$	18,692	$	17,015
Retail	177		285		752		992
Corporate / other	297		315		976		1,024
Total depreciation and amortization	$	7,361	$	6,347	$	20,420	$	19,031



(in thousands)	November 2, 2018		October 27, 2017		February 2, 2018
Total Assets:
Direct	$	961,289	$	934,508	$	856,986
Retail	55,511		67,965		49,933
Corporate / other	131,918		118,007		217,216
Total assets	$	1,148,718	$	1,120,480	$	1,124,135



	13 Weeks Ended				39 Weeks Ended
(in thousands)	November 2, 2018		October 27, 2017		November 2, 2018		October 27, 2017
Capital expenditures:
Direct	$	9,129	$	8,791	$	29,591	$	29,004
Retail	1,828		—		3,569		10
Corporate / other	$	—	$	129	$	—	$	129
Total capital expenditures	$	10,957	$	8,920	$	33,160	$	29,143