Segment Reporting

9 Months Ended

Oct. 29, 2016

Segment Reporting

Segment Reporting

14.  Segment Reporting

In the first quarter of 2016, we revised our segment reporting presentation to reflect changes in how we manage our business, including resource allocation and performance assessment. Specifically, we are now presenting expenses related to our shared services platform separately from the results of our operating segments to promote enhanced comparability of our operating segments. Previously, these shared service expenses were primarily included in our retail segment. Comparable prior period information has been recast to reflect our revised segment presentation.

Our operations are conducted in two reportable segments, retail and corporate apparel, based on the way we manage, evaluate and internally report our business activities.

The retail segment includes the results from our four retail merchandising brands: Men’s Wearhouse/Men’s Wearhouse and Tux, Jos. A. Bank, Moores Clothing for Men (“Moores”) and K&G.  These four brands are operating segments that have been aggregated into the retail reportable segment.  MW Cleaners is also aggregated in the retail segment as these operations have not had a significant effect on our revenues or expenses.  Specialty apparel merchandise offered by our four retail merchandising concepts include suits, suit separates, sport coats, slacks, business casual, sportswear, outerwear, dress and casual shirts, shoes and accessories for men. Ladies’ career apparel, sportswear and accessories, including shoes, as well as children’s apparel are also offered at most of our K&G stores.  Tuxedo and suit rentals are offered at our Men’s Wearhouse/Men’s Wearhouse and Tux, Jos. A. Bank and Moores retail stores and our tuxedo shops within Macy’s stores.

The corporate apparel segment includes the results from our corporate apparel and uniform operations conducted by Twin Hill in the U.S. and Dimensions, Alexandra, and Yaffy in the United Kingdom (“UK”), which provide clothing uniforms and workwear to workforces.  The Twin Hill and UK operations constitute one operating segment.

We measure segment profitability based on operating income, defined as income before interest expense, interest income, gain (loss) on extinguishment of debt, net and income taxes, before shared service expenses. Shared service expenses include costs incurred and directed primarily by our corporate offices that are not allocated to segments.

Additional net sales information is as follows (in thousands):

	For the Three Months Ended				For the Nine Months Ended
	October 29, 2016		October 31, 2015		October 29, 2016		October 31, 2015
Net sales:
MW(1)	$	461,806	$	465,396	$	1,386,347	$	1,391,782
Jos. A. Bank		165,992		198,936		530,482		636,704
K&G		70,874		72,733		252,007		257,448
Moores		56,520		55,862		166,203		173,281
MW Cleaners		8,497		8,460		25,073		25,356
Total retail segment		763,689		801,387		2,360,112		2,484,571
Total corporate apparel segment		83,245		64,059		225,328		186,038
Total net sales	$	846,934	$	865,446	$	2,585,440	$	2,670,609

⁽¹⁾ MW includes Men’s Wearhouse, Men’s Wearhouse and Tux, Joseph Abboud and tuxedo shops within Macy’s.

The following table sets forth supplemental products and services sales information for the Company (in thousands):

	For the Three Months Ended				For the Nine Months Ended
	October 29, 2016		October 31, 2015		October 29, 2016		October 31, 2015
Net sales:
Men's tailored clothing product	$	326,741	$	351,269	$	1,025,495	$	1,109,665
Men's non-tailored clothing product		230,146		245,250		718,233		756,699
Ladies' clothing product		15,626		16,228		55,940		56,827
Other		2,533		3,127		6,992		8,735
Total retail clothing product		575,046		615,874		1,806,660		1,931,926
Rental services		138,724		132,443		403,564		392,621
Alteration services		41,422		44,610		124,815		134,668
Retail dry cleaning services		8,497		8,460		25,073		25,356
Total alteration and other services		49,919		53,070		149,888		160,024
Corporate apparel clothing product		83,245		64,059		225,328		186,038
Total net sales	$	846,934	$	865,446	$	2,585,440	$	2,670,609

Operating income (loss) by reportable segment, shared service expense, and the reconciliation to earnings (loss) before income taxes is as follows (in thousands):

	For the Three Months Ended				For the Nine Months Ended
	October 29, 2016		October 31, 2015		October 29, 2016		October 31, 2015
Operating income (loss):
Retail	$	97,629	$	512	$	278,732	$	233,143
Corporate apparel		10,314		2,623		24,288		6,429
Shared service expense		(46,887)		(39,536)		(151,338)		(122,561)
Operating income		61,056		(36,401)		151,682		117,011
Interest income		52		50		102		140
Interest expense		(25,476)		(26,457)		(77,853)		(79,475)
Gain (loss) on extinguishment of debt, net		1,808		—		1,737		(12,675)
Earnings (loss) before income taxes	$	37,440	$	(62,808)	$	75,668	$	25,001

As a result of our revised segment presentation, total assets for our reportable segments have changed. There were no changes to consolidated total assets. Total assets by reportable segment are as follows (in thousands):

	October 29,		October 31,		January 30,
	2016		2015		2016
Segment assets:
Retail	$	1,719,572	$	2,802,991	$	1,705,728
Corporate apparel		196,085		216,920		211,820
Shared services(1)		259,472		492,468		326,771
Total assets	$	2,175,129	$	3,512,379	$	2,244,319

⁽¹⁾ Shared service assets consist primarily of cash and cash equivalents, assets related to our distribution network and tax-related assets.