Overview

Our Company

We design and market jeans, casual and dress pants, tops, jackets, footwear and related accessories for men, women and children under our Levi's®, Dockers® and Signature by Levi Strauss & Co.tm ("Signature") brands around the world. We also license our trademarks in many countries throughout the world for a wide array of products, including accessories, pants, tops, footwear, home and other products.

Our business is operated through three geographic regions: Americas, Europe and Asia Pacific. Our products are sold in approximately 55,000 retail locations in more than 110 countries. We support our brands through a global infrastructure, both sourcing and marketing our products around the world. We distribute our Levi's® and Dockers® products primarily through chain retailers and department stores in the United States and primarily through department stores, specialty retailers and franchised stores outside of the United States. We also distribute our Levi's® and Dockers® products through our online stores, and 414 company-operated stores located in 26 countries, including the United States. These stores generated approximately 11% of our net revenues in 2009. We distribute products under the Signature brand primarily through mass channel retailers in the United States and Canada and mass and other value-oriented retailers and franchised stores in Asia Pacific.

We derived 43% of our net revenues and 42% of our regional operating income from our Europe and Asia Pacific businesses in 2009. Sales of Levi's® brand products represented approximately 79% of our total net sales in 2009. Pants, including jeans, casual pants and dress pants, represented approximately 85% of our total units sold in 2009, and men's products generated approximately 73% of our total net sales.

Trends Affecting our Business

We believe the key business and marketplace factors affecting us include the following:

• Continuing pressures in the U.S. and global economy related to the global economic downturn, access to credit, volatility in investment returns, real estate market and employment concerns, and other similar elements that impact consumer discretionary spending, are creating a challenging retail environment for us and our customers. We and our customers are responding by adjusting business practices such as tightly managing inventories.

• Wholesaler/retailer dynamics are changing as the wholesale channels continue to consolidate and many of our wholesale customers face slowed growth prospects. As a result, many of our customers are building competitive exclusive or private-label offerings and desire increased returns on investment through increased margins and inventory turns. In response, many apparel wholesalers, including us, seek to strengthen relationships with customers through efforts such as investment in new products, marketing programs, fixtures and collaborative planning systems.

• Many apparel companies, including us, that have traditionally relied on wholesale distribution channels continue to invest in expanding their own retail store distribution network, which has raised competitiveness in the retail market. We have increased our investment in our retail network, and will continue to do so, which while benefiting revenue and gross profit, will likely increase selling expense and capital expenditures.

• Apparel markets have matured in certain geographic locations such as the United States, Japan, Western Europe and Canada, due in part to demographic shifts and the existence of appealing discretionary purchase alternatives and the increasing availability of on-trend lower-priced apparel offerings. Opportunities for major brands are increasing in rapidly growing developing markets such as India, China, Brazil and Russia.

• More competitors are seeking growth globally and are raising the competitiveness of the international markets in which we already have an established presence.

• The global nature of our business exposes us to earnings volatility resulting from exchange rate fluctuations.

• Brand and product proliferation continues around the world as we and other companies compete through differentiated brands and products targeted for specific consumers, price-points and retail segments. In addition, the ways of marketing these brands are changing to new mediums, challenging the effectiveness of more mass-market approaches such as television advertising.

• Quality low-cost sourcing alternatives continue to emerge around the world, resulting in pricing pressure and minimal barriers to entry for new competitors. This proliferation of low-cost sourcing alternatives enables competitors to attract consumers with a constant flow of competitively-priced new products that reflect the newest styles, bringing additional pressure on us and other wholesalers and retailers to shorten lead-times and reduce costs. In response, we must continue to seek efficiencies throughout our global supply chain.

These factors contribute to a global market environment of intense competition, constant product innovation and continuing cost pressure throughout the supply chain, from manufacturer to consumer, and combine with the global economic downturn to create a challenging commercial and economic environment. We expect these factors to continue into the foreseeable future.

Our 2009 Results

Our 2009 results reflect the difficult economic conditions that continue to persist in most markets around the world. In response to these conditions, we focused on our inventory management and cost-cutting initiatives and sought opportunities to invest in initiatives to grow our business. We expanded our company-operated retail network by more than 150 stores, the majority of which we added through acquisitions that we completed during the year.

• Net revenues. Our consolidated net revenues decreased by 7% compared to 2008, a decrease of 3% on a constant-currency basis. Increased sales from new company-operated and franchised stores, as well as growth in revenues associated with the Levi's® brand, were more than offset by wholesale channel declines in Europe and declines in the net revenues of our Dockers® brand in the Americas.

• Operating income. Our operating income decreased by $147 million, and our consolidated operating margin in 2009 declined to 9% as compared to 12% in 2008, driven by declines in our Europe region, primarily reflecting the unfavorable impact of currency, the wholesale channel declines and our continued investment in retail expansion. These declines were partially offset by our cost management initiatives as well as lower costs associated with our conversion to an enterprise resource planning ("ERP") system in the United States.

• Cash flows. Cash flows provided by operating activities were $389 million in 2009 as compared to $225 million in 2008. The impact on our operating cash flows from the decline in our net revenues was more than offset by our inventory management initiatives and lower operating expenses. Increased cash used for investing activities in 2009 reflects our business acquisitions in the Americas and Europe as well as our foreign exchange management activities.

Our Objectives

Our key long-term objectives are to strengthen our brands globally in order to deliver sustainable profitable growth, continue to generate strong cash flow and reduce our debt. Critical strategies to achieve these objectives include driving continued product and marketing innovation that builds upon our leadership position in the jean and khaki categories, driving sales growth through enhancing relationships with wholesale customers and expanding our dedicated store network, capitalizing on our global footprint to maximize opportunities in targeted growth markets, and continuously enhancing our productivity. Investments in initiatives in 2010 to support the execution of our strategies and achieve our long-term objectives will likely result in an increase in advertising and selling expenses, a lower operating margin, and higher capital expenditures during the 2010 fiscal year.

Financial Information Presentation

Fiscal year. Our fiscal year ends on the last Sunday of November in each year, although the fiscal years of certain foreign subsidiaries are fixed at November 30 due to local statutory requirements. Apart from these

subsidiaries, each quarter of fiscal years 2009, 2008 and 2007 consisted of 13 weeks, with the exception of the fourth quarter of 2008, which consisted of 14 weeks.

Segments. We manage our business according to three regional segments: the Americas, Europe and Asia Pacific.

Classification. Our classification of certain significant revenues and expenses reflects the following:

• Net sales is primarily comprised of sales of products to wholesale customers, including franchised stores, and direct sales to consumers at our company-operated and online stores and at our company-operated shop-in-shops located within department stores. It includes discounts, allowances for estimated returns and incentives.

• Licensing revenue consists of royalties earned from the use of our trademarks by third-party licensees in connection with the manufacturing, advertising and distribution of trademarked products.

• Cost of goods sold is primarily comprised of product costs, labor and related overhead, sourcing costs, inbound freight, internal transfers, and the cost of operating our remaining manufacturing facilities, including the related depreciation expense.

• Selling costs include, among other things, all occupancy costs associated with our company-operated stores and our company-operated shop-in-shops.

• We reflect substantially all distribution costs in selling, general and administrative expenses, including costs related to receiving and inspection at distribution centers, warehousing, shipping to our customers, handling, and certain other activities associated with our distribution network.

Constant currency. Constant-currency comparisons are based on translating local currency amounts in both periods at the foreign exchange rates used in the Company's internal planning process for the current year. We routinely evaluate our financial performance on a constant-currency basis in order to facilitate period-to-period comparisons without regard to the impact of changing foreign currency exchange rates.

Results of Operations

2009 compared to 2008

The following table summarizes, for the periods indicated, the consolidated statements of income, the changes in these items from period to period and these items expressed as a percentage of net revenues:

                                                                                      Year Ended
                                                                                                       November 29,       November 30,
                                                                                          %                2009               2008
                                                November 29,       November 30,        Increase          % of Net           % of Net
                                                    2009               2008           (Decrease)         Revenues           Revenues
                                                                                (Dollars in millions)

Net sales                                      $      4,022.9     $      4,303.1             (6.5 )%            98.0 %             97.8 %
Licensing revenue                                        82.9               97.8            (15.3 )%             2.0 %              2.2 %

Net revenues                                          4,105.8            4,400.9             (6.7 )%           100.0 %            100.0 %
Cost of goods sold                                    2,132.4            2,261.1             (5.7 )%            51.9 %             51.4 %

Gross profit                                          1,973.4            2,139.8             (7.8 )%            48.1 %             48.6 %
Selling, general and administrative expenses          1,590.1            1,606.5             (1.0 )%            38.7 %             36.5 %
Restructuring charges, net                                5.2                8.2            (36.7 )%             0.1 %              0.2 %

Operating income                                        378.1              525.1            (28.0 )%             9.2 %             11.9 %
Interest expense                                       (148.7 )           (154.1 )           (3.5 )%            (3.6 )%            (3.5 )%
Loss on early extinguishment of debt                        -               (1.4 )         (100.0 )%               -                  -
Other expense, net                                      (38.3 )             (1.4 )         2634.4 %             (0.9 )%               -

Income before income taxes                              191.1              368.2            (48.1 )%             4.7 %              8.4 %
Income tax expense                                       39.2              138.9            (71.8 )%             1.0 %              3.2 %

Net income                                     $        151.9     $        229.3            (33.8 )%             3.7 %              5.2 %

Net revenues

The following table presents net revenues by reporting segment for the periods indicated and the changes in net revenues by reporting segment on both reported and constant-currency bases from period to period:

                                                   Year Ended
                                                                 % Increase (Decrease)
                        November 29,       November 30,          As              Constant
                            2009               2008           Reported           Currency
                                              (Dollars in millions)

  Net revenues:
  Americas             $      2,357.7     $      2,476.4            (4.8 )%           (3.2 )%
  Europe                      1,042.1            1,195.6           (12.8 )%           (3.3 )%
  Asia Pacific                  706.0              728.9            (3.2 )%           (0.9 )%

  Total net revenues   $      4,105.8     $      4,400.9            (6.7 )%           (2.9 )%

Total net revenues decreased on both reported and constant-currency bases for the year ended November 29, 2009, as compared to the prior year. Reported amounts were affected unfavorably by changes in foreign currency exchange rates across all regions, particularly in Europe.

Americas. On both reported and constant-currency bases, net revenues in our Americas region decreased in 2009. Currency affected net revenues unfavorably by approximately $39 million.

Net revenues decreased due to the weak economic environment, lower demand for our U.S. Dockers® brand products, and lower sales of Signature products. These declines were partially offset by increased Levi's® brand revenues driven by strong performance of our men's and boy's products and growth in the Juniors business in our wholesale channel, and increased revenues from our retail network from our July 13, 2009, acquisition of the operating rights to 73 Levi's® and Dockers® outlet stores from Anchor Blue Retail Group, Inc.

As compared to prior year, 2009 also reflects the loss of customers due to bankruptcy in the second and third quarters of 2008. In addition, 2008 was adversely impacted by issues we encountered during our stabilization of an ERP system in the United States in the beginning of the second quarter of 2008.

Europe. Net revenues in Europe decreased on both reported and constant-currency bases. Currency affected net revenues unfavorably by approximately $118 million.

The region's depressed retail environment drove net revenue declines across most markets, primarily due to lower sales in our wholesale channels. This was partially offset by the impact of our business acquisitions and our expanding company-operated retail network throughout the region.

Asia Pacific. Net revenues in Asia Pacific decreased on both reported and constant-currency bases. Currency affected net revenues unfavorably by approximately $17 million.

Net revenues in the region decreased primarily due to lower sales in Japan. These declines were offset by strong performance in most other markets in the region, driven by product promotions and the continued expansion of our brand-dedicated store network.

Gross profit

The following table shows consolidated gross profit and gross margin for the periods indicated and the changes in these items from period to period:

                                                 Year Ended
                                                                         %
                               November 29,       November 30,       Increase
                                   2009               2008          (Decrease)
                                            (Dollars in millions)

         Net revenues         $      4,105.8     $      4,400.9            (6.7 )%
         Cost of goods sold          2,132.4            2,261.1            (5.7 )%

         Gross profit         $      1,973.4     $      2,139.8            (7.8 )%

         Gross margin                   48.1 %             48.6 %

Compared to the prior year, gross profit declined in 2009 primarily due to the unfavorable impact of currency across all regions, which totaled approximately $128 million. Excluding the effects of currency, the impact of our lower net revenues to gross profit was partially offset by a slight improvement in gross margin, primarily driven by our Americas region, due to the strong performance of the Levi's® brand, and the increased contribution from our company-operated retail network, which has a higher gross margin than our wholesale business.

Our gross margins may not be comparable to those of other companies in our industry, since some companies may include costs related to their distribution network and occupancy costs associated with company-operated stores in cost of goods sold.

Selling, general and administrative expenses

The following table shows our selling, general and administrative expenses ("SG&A") for the periods indicated, the changes in these items from period to period and these items expressed as a percentage of net revenues:

                                                                             Year Ended
                                                                                               November 29,        November 30,
                                                                                 %                 2009                2008
                                     November 29,        November 30,        Increase            % of Net            % of Net
                                         2009                2008           (Decrease)           Revenues            Revenues
                                                                       (Dollars in millions)

Selling                             $        498.9      $        438.9             13.6 %               12.1 %              10.0 %
Advertising and promotion                    266.1               297.9            (10.6 )%               6.5 %               6.8 %
Administration                               366.6               364.3              0.7 %                8.9 %               8.3 %
Other                                        458.5               505.4             (9.3 )%              11.2 %              11.5 %

Total SG&A                          $      1,590.1      $      1,606.5             (1.0 )%              38.7 %              36.5 %

Compared to the prior year, total SG&A expenses declined in 2009 due to a favorable currency impact of approximately $62 million.

Selling. Selling expenses increased across all business segments, primarily reflecting additional company-operated stores, partially offset by a favorable currency impact of $25 million in 2009.

Advertising and promotion. The decrease in advertising and promotion expenses was attributable to the effects of currency and planned reduction of our advertising activities in most markets as compared to the prior year.

Administration. Administration expenses include corporate expenses and other administrative charges. Currency favorably impacted these expenses by $13 million in 2009. Reflected in 2009 are increased pension expense of approximately $38 million and costs associated with our business acquisitions during the year, while 2008 included higher costs associated with our conversion to an ERP system in the United States as well as various other corporate initiatives.

Other. Other SG&A costs include distribution, information resources, and marketing organization costs, gain or loss on sale of assets and other operating income. Currency favorably impacted these expenses by $14 million in 2009. The decrease in expenses was primarily due to lower distribution costs, resulting from actions we have taken in recent years to restructure our distribution center operations and the decline in sales volume, as well as lower marketing organization costs.

Operating income

The following table shows operating income by reporting segment and certain components of corporate expense for the periods indicated, the changes in these items from period to period and these items expressed as a percentage of net revenues:

                                                                                 Year Ended
                                                                                                 November 29,        November 30,
                                                                                    %                2009                2008
                                           November 29,      November 30,       Increase           % of Net            % of Net
                                               2009              2008          (Decrease)          Revenues            Revenues
                                                                                    (Dollars in millions)

Operating income:
Americas                                   $       346.3     $       346.9            (0.2 )%             14.7 %              14.0 %
Europe                                             154.8             257.9           (40.0 )%             14.9 %              21.6 %
Asia Pacific                                        91.0              99.5            (8.6 )%             12.9 %              13.7 %

Total regional operating income                    592.1             704.3           (15.9 )%             14.4 %*             16.0 %*
Corporate:
Restructuring charges, net                           5.2               8.2           (36.7 )%              0.1 %*              0.2 %*
Other corporate staff costs and expenses           208.8             171.0            22.1 %               5.1 %*              3.9 %*

Corporate expenses                                 214.0             179.2            19.4 %               5.2 %*              4.1 %*

Total operating income                     $       378.1     $       525.1           (28.0 )%              9.2 %*             11.9 %*

Operating margin                                     9.2 %            11.9 %

* Percentage of consolidated net revenues

Currency unfavorably affected operating income by approximately $66 million in 2009.

Regional operating income. The following describes the changes in operating income by segment for the year ended November 29, 2009, as compared to the prior year:

• Americas. Operating income decreased due to the unfavorable impact of currency. Excluding currency, operating income increased due to an improved operating margin, driven by the improved gross margin and lower SG&A expenses in the region.

• Europe. The decrease in the region's operating income was due to the unfavorable impact of currency, as well as a decline in operating margin. The decline in operating margin is due to the sales decline in our wholesale channel and higher expenses from our retail network, which reflects our increasing investment in company-operated store expansion and acquisitions in 2009.

• Asia Pacific. Operating income decreased due to the unfavorable impact of currency, as the decline in Japan's operating income was substantially offset by the revenue growth and lower SG&A expenses in most other markets in the region.

Corporate. Corporate expense is comprised of net restructuring charges and other corporate expenses, including corporate staff costs. Corporate expenses in 2009 reflect the higher pension expense, resulting from the decline in the fair value of our pension plan assets in 2008, higher severance costs for headcount reductions, and increased incentive compensation accruals, relating to greater achievement against our internally-set objectives. These increases were partially offset by a decline in corporate staff costs in 2009, reflecting our cost-cutting initiatives.

Corporate expenses in 2009 and 2008 include amortization of prior service benefit of $39.7 million and $41.4 million, respectively, related to postretirement benefit plan amendments in 2004 and 2003. We will continue to amortize the prior service benefit in the future; however, it will decline in 2010 by approximately $10 million, in relation to the expected service lives of the employees affected by these plan changes. We also expect the higher

pension expenses to continue in 2010, despite a recovery in asset values, as changes in the financial markets during 2009, including a decrease in corporate bond yield indices, drove a reduction in the discount rates used to measure our benefit obligations. Higher pension expense may potentially extend into future periods should market conditions persist. For more information, see Note 8 to our audited consolidated financial statements included in this report.

Interest expense

Interest expense was $148.7 million for the year ended November 29, 2009, as compared to $154.1 million in the prior year. Lower average borrowing rates and lower debt levels in 2009, resulting primarily from our required payments on the trademark tranche of our senior secured revolving credit facility, caused the decrease.

The weighted-average interest rate on average borrowings outstanding for 2009 was 7.44% as compared to 8.09% for 2008.

Other expense, net

Other expense, net, primarily consists of foreign exchange management activities and transactions. For the year ended November 29, 2009, we recorded net expense of $38.3 million compared to $1.4 million for the prior year. The increase in expense primarily reflects losses in 2009 on foreign exchange derivatives which economically hedge future cash flow obligations of our foreign operations, . . .