Segment Reporting

9 Months Ended

Nov. 02, 2013

Segment Reporting [Abstract]

SEGMENT REPORTING

SEGMENT REPORTING

The Company determines its segments on the same basis that it uses to allocate resources and assess performance. All of the Company’s segments sell a similar group of products—casual sportswear apparel, personal care products and accessories for men, women and kids and bras, underwear and sleepwear for girls. The Company has three reportable segments: U.S. Stores, International Stores, and Direct-to-Consumer. Corporate functions, interest income and expense, and other income and expense are evaluated on a consolidated basis and are not allocated to the Company’s segments, and therefore are included in Other.

The U.S. Stores reportable segment includes the results of store operations in the United States and Puerto Rico. The International Stores reportable segment includes the results of store operations in Canada, Europe, Asia and Australia. The Direct-to-Consumer reportable segment includes the results of operations directly associated with on-line operations, both U.S. and international.

Operating income is the primary measure of profit the Company uses to make decisions regarding the allocation of resources to its segments. For the U.S. Stores and International Stores reportable segments, operating income is defined as aggregate income directly attributable to individual stores on a four-wall basis plus sell-off of excess merchandise to authorized third-party resellers. Four-wall operating income includes: net sales, cost of merchandise, selling payroll and related costs, rent, utilities, depreciation, repairs and maintenance, supplies and packaging and other store sales-related expenses including credit card and bank fees and indirect taxes. Operating income also reflects pre-opening charges related to stores not yet in operation. For the Direct-to-Consumer reportable segment, operating income is defined as aggregate income attributable to the direct-to-consumer business: net sales, shipping and handling revenue, call center costs, fulfillment and shipping expense, charge card fees and direct-to-consumer operations management and support expenses. The U.S. Stores, International Stores and Direct-to-Consumer segments exclude marketing, general and administrative expense; store management and support functions such as regional and district management and other functions not dedicated to an individual store; and distribution center costs. All costs excluded from the three reportable segments are included in Other.

The following table provides the Company’s segment information for the thirteen and thirty-nine week periods ended November 2, 2013 and October 27, 2012.

	U.S. Stores		International Stores		Direct-to- Consumer Operations		Segment Total		Other(1)			Total
	(in thousands):
Thirteen Weeks Ended November 2, 2013
Net Sales	$	561,788	$	296,937	$	174,568	$	1,033,293	$	—		$	1,033,293
Operating Income (Loss) (2)	29,512		40,641		65,602		135,755		(171,125		)	(35,370		)
Thirteen Weeks Ended October 27, 2012
Net Sales	$	709,517	$	301,818	$	158,314	$	1,169,649	$	—		$	1,169,649
Operating Income (Loss) (4)	155,568		94,416		63,935		313,919		(180,574		)	133,345
	U.S. Stores		International Stores		Direct-to- Consumer Operations		Segment Total		Other(1)			Total
	(in thousands):
Thirty-Nine Weeks Ended November 2, 2013
Net Sales	1,515,079		841,096		461,585		2,817,760		—			2,817,760
Operating Income (Loss) (3)	128,205		160,821		176,793		465,819		(495,946		)	(30,127		)
Thirty-Nine Weeks Ended October 27, 2012
Net Sales	1,815,502		792,552		434,220		3,042,274		—			3,042,274
Operating Income (Loss) (4)	270,180		219,017		152,688		641,885		(512,479		)	129,406

⁽¹⁾  Includes corporate functions such as Design, Merchandising, Sourcing, Planning, Allocation, Store Management and Support, Marketing, Distribution Center Operations, Information Technology, Real Estate, Finance, Legal, Human Resources and other corporate overhead. Operating Income includes: marketing, general and administrative expense; store management and support functions such as regional and district management and other functions not dedicated to an individual store; and distribution center costs.

⁽²⁾  Includes charges for store-related asset impairment, charges related to restructuring plans for the Gilly Hicks brand and charges related to the Company's profit improvement initiative of $51.5 million for U.S. Stores, $32.2 million for International Stores and $12.2 million for Other for the thirteen week period ended November 2, 2013.

⁽³⁾  Includes charges for store-related asset impairment, charges related to restructuring plans for the Gilly Hicks brand and charges related to the Company's profit improvement initiative of $51.5 million for U.S. Stores, $32.2 million for International Stores and $14.7 million for Other for the thirty-nine week period ended November 2, 2013.

⁽⁴⁾  Results reported above have been restated based on the change in accounting principle as noted in Note 3, “CHANGE IN ACCOUNTING PRINCIPLE.”

Geographic Information

Financial information relating to the Company’s operations by geographic area is as follows:

Net Sales:

Net sales includes net merchandise sales through stores and direct-to-consumer operations, including shipping and handling revenue. Direct-to-consumer net sales are reported by geographic area based on the location of the customer.

	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
(in thousands):	November 2, 2013		October 27, 2012		November 2, 2013		October 27, 2012
United States	$	674,871	$	818,558	$	1,807,027	$	2,110,835
Europe	272,212		273,909		776,630		743,834
Other	86,210		77,182		234,103		187,605
Total	$	1,033,293	$	1,169,649	$	2,817,760	$	3,042,274