Levi Strauss & Co.

Company Profile
Publication Date: 23 May 2010

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TABLE OF CONTENTS

TABLE OF CONTENTS
Company Overview..............................................................................................4 Key Facts...............................................................................................................4 SWOT Analysis.....................................................................................................5

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Levi Strauss & Co.

Company Overview

COMPANY OVERVIEW
Levi Strauss & Co. (Levi Strauss or the company) is a privately-held branded apparel company. The company designs and markets jeans and other casual wear for men, women and children. Levi Strauss operates in the Americas, Europe, and Asia Pacific. The company is headquartered in San Francisco, California and employs about 11,800 people. The company recorded revenues of $4,105.8 million during the financial year ended November 2009 (FY2009), a decrease of 6.7% compared with 2008. This decrease reflects unfavorable changes in foreign currency exchange rates across all regions, particularly in Europe. The operating profit of Levi Strauss was $378.1 million in FY2009, a decrease of 28% compared with 2008, driven by declines in Europe primarily reflecting the unfavorable impact of currency, the wholesale channel declines and continued investment in retail expansion. The net profit was $151.9 million in FY2009, a decrease of 33.8% compared with 2008.

KEY FACTS
Head Office Levi Strauss & Co. Levi Strauss & Co. 1155 Battery Street San Francisco California 94111 USA 1 415 501 6000 1 405 501 7112 http://www.levistrauss.com

Phone Fax Web Address

Revenue / turnover 4,105.8 (USD Mn) Financial Year End Employees November 11,800

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SWOT Analysis

SWOT ANALYSIS
Levi Strauss is a privately-held branded apparel company. Levi Strausss brands are one of the most widely recognized brands in the history of the apparel industry.The brand is associated with American culture. This has helped Levi Strauss to expand its product line worldwide. However, intense competition in the apparel industry could adversely affect the companys sales and market share. Strengths Established brand portfolio encourage repeat purchases Global footprint-in developed and developing economies Multiple distribution channels increases market penetration opportunities Opportunities Increasing online retail sales amidst economic turmoil The Go Forth brand campaign to connect with consumer sentiments Opportunities in developing markets such as India and China Weaknesses Heavy pension expenses increase vulnerability to financial markets

Threats Global economic downturn creates challenging retail environment Dependence on selected wholesalersKohls and JC Penney

Strengths

Established brand portfolio encourage repeat purchases Levi Strausss brands are one of the most widely recognized brands in the history of the apparel industry. The brand is associated with American culture. Levi Strauss designs and markets jeans under the brands: Levis; Dockers; and Signature by Levi Strauss & Co. (Signature). Each brand differentiates itself through a selection of exclusive product. The Levis brand, which appeals to consumers of all ages and lifestyles, is among the most recognized in the apparel industry. Consumers around the world recognize the distinctive traits of Levis jeansthe double arc of stitching, known as the Arcuate Stitching Design, and the red Tab Device, a fabric tab stitched into the back right pocket. The Dockers brand, on the other hand, is positioned as the khaki alternative. The Signature by Levi Strauss & Co. brand offers denim jeans and related apparel to the value-conscious consumers. Levi

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SWOT Analysis

Strauss leverages its established brand portfolio to build customer recall and encourage repeat purchases. Global footprint-in developed and developing economies Levi Strauss operates in the Americas, Europe and Asia Pacific. The regions includes established markets such as the US, Japan, Canada and France, and emerging markets, such as India, China, Brazil and Russia. In addition, Levi Strauss also operates in Turkey, Middle East and North Africa. Although the companys brands are recognized as authentically American, Levi Strauss derived more than half of its regional operating income from Europe and the Asia Pacific. The company generated about two fifths of its net revenues and operating income from its European and Asia Pacific businesses in 2009. Levi Strauss has capitalized upon its global footprint to further drive growth, invigorating its presence in mature markets and capitalizing on opportunities in the emerging markets. Multiple distribution channels increase market penetration opportunities Levi Strauss possesses multiple distribution channels to sell its products. The company sells its products in 55,000 retail locations and in more than 110 countries. This include approximately 1,900 retail stores dedicated to its brands, including both franchised and company-operate stores. Levi Strauss distributes Levis 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. The company also distributes Levis and Dockers products through online stores. The Signature brand is primarily sold through mass channel retailers in the US and Canada and through mass and other value-oriented retailers and franchised stores in the Asia Pacific region. Presence across multiple channels of distribution increases Levi Strausss market penetration opportunities and revenue-generating capacity.

Weaknesses

Heavy pension expenses increase vulnerability to financial markets Levi Strauss has pension plans for its employees.These pension benefits obligations have increased the companys liabilities substantially. The pension benefit obligation at the end of the year 2009 was $1,061.3 millionof which 35.8% was unfunded in 2009. In 2008, the pension benefit obligation was $840.7 millionof which 28.4% was unfunded. The companys pension expense has increased to $38 million in 2009. Corporate expenses in 2009 reflect the higher pension expense, resulting from the decline in the fair value of pension plan assets in 2008 due to deteriorating conditions in the global financial markets. Moreover it is expected that higher pension expenses will continue in 2010. Levi Strausss future annual funding requirements may increase to as much as $140 million in 2011. Levi Strausss pension liabilities may impair its liquidity and place it at a competitive disadvantage compared to some of its competitors who do not have such cash requirements.

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SWOT Analysis

Opportunities

Increasing online retail sales amidst economic turmoil Levi Strauss sells its products online through its brand-dedicated websiteswww.levi.com and www.dockers.com. With more consumers comfortable with shopping online and retailers investing more in their online operations, the online sales have been steadily growing. Although the US retail sales have been heavily hit by the economic turmoil, the online retail sales recorded a growth rate of 11% in 2009 compared to 2.5% growth for all retail sales for 2010 as expected by National Retail Federation. Consumers are prioritizing price over other criteria for selecting products. Online sales in the US are expected to grow at a compound annual growth rate, CAGR (2009-2014) of 10% to reach $248.7 billion by 2014, growing 60% from 2009. Levi Strausss products are also sold through authorized third party internet sites. With its strong brand equity and presence in online retail format, Levi Strauss can expect topline growth in this channel. The Go Forth brand campaign to connect with consumer sentiments Levi Strauss has recently positioned its brand to capture the customers needs (customer frame of reference). Levi Strauss has aligned its recent marketing campaign to the general economic malaise and associated weakness in the consumers sentiments. To weather the current economic conditions, the Levis brand announced the launch of Go Forth, a brand campaign which will position Levis as the brand for pioneers who are in the process of building a new America. Levi Strauss intends to remind consumers that Levis are jean for self reliance. This campaign presents an optimistic tone in a time of pessimism in the US. With this new positioning, Levi Strauss expects to connect with American citizens and increase footfall to Levis stores. Opportunities in developing markets such as India and China There exist opportunity for Levi Strauss to penetrate emerging economies like India and China. According to IMF, the real GDP growth rate of advanced economies came down to 0.8% in 2008 from 2.7% in 2007. Almost all these economies posted negative growth in 2009 (-3.7%). In spite of global economic slowdown, emerging and developing economies recorded a real GDP growth rate of 6.1% in 2008. The same trend exhibited in 2007 (with a growth rate of 8.3%) and 2009 (a GDP growth rate of 1.5%). The robust growth in GDP in emerging economies has resulted in increased disposable incomes in these markets. Net revenues of Levi Strauss in the Asia Pacific region (excluding Japan) increased in 2008 and in 2009. Levi Strauss is also expanding its brand-dedicated store network in these regions. Levi's opened its 501st store in China and Levi Strauss is also set to launch a new global brand in China. Levi Strausss focus on China and India will help the company weather the current slowdown in developed countries to an extent, and will also facilitate long-term growth.

Threats

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SWOT Analysis

Global economic downturn creates challenging retail environment Customer traffic is generally driven by consumer preferences and spending trends; due to an economic downturn the consumer confidence in the US is down. As a result spending is also on decline. As of February 2010, the unemployment rate was at 9.7% and although the pace of increase in the rate has reduced, the unemployment is still expected to be high during most part of 2010. Furthermore, the current slowdown in the US has dampened consumer confidence.The US consumer confidence index fell to 46 in February 2010 compared with 56.5 in January 2010. In line with low consumer confidence, Levi Strauss witnessed declines in net revenues of its Dockers brand in the Americas. In the US, sales were also affected by more markdowns on Dockers products, the company's khaki and sportswear line have been in the midst of a revamp of styles and fits. The Dockers brand has been hardest hit by the US economic downturn, more so than Levi Strauss' jeans business. Continuing economic pressures in the US in terms of access to credit, volatility in investment returns, real estate market and employment concerns, will impact consumer discretionary spending adversely and increase pressure on Levis Strauss to innovate and realign its marketing strategy. Dependence on selected wholesalersKohls and JC Penney Net sales derived from the top ten largest customers totaled approximately 36% and 37% of total net revenues in 2009 and 2008, respectively. Levi Strausss largest customer in 2009, Kohls Corporation, accounted for nearly 10% of net revenues in 2009, and its largest customer in 2008, JC Penney, accounted for nearly 8% of net revenues in 2008. Though the company has long-standing relationships with its wholesale customers, it does not have long-term contracts with them. As a result, purchases generally occur on an order-by-order basis, and the relationship, as well as particular orders, can generally be terminated by either party at any time. If any major customer decreases or ceases its purchases from the company Levi Strausss business and financial condition will be adversely affected.

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