Center of Culture

AT THE CENTER OF CULTURE 2017 ANNUAL REPORT DEAR SHAREHOLDERS, 2017 was a turning point for the business, with the highest annual revenue growth rate that this company has delivered in a decade. Revenues grew 8 percent on a reported basis (7 percent in constant currency).* As our business accelerated, we stepped up investments in our brands with incremental spending behind the global Live in Levi’s® advertising campaign, the new Dockers® Always On campaign (supporting the Smart 360 Flex™ launch) and our ecommerce business. In part because of these incremental investments, our reported adjusted EBIT finished flat versus prior year.** CHIP BERGH Our strategies are working. Today, we have a more diversified business President and than we did five years ago. We are unlocking growth in categories that Chief Executive Officer have high growth potential to offset some of our low growth businesses. Our balanced portfolio delivered 9 percent growth for the Levi’s® brand for the full year – across every channel, in all three regions and across men’s, women’s, tops and bottoms. Our international business is now 52 percent of our total business, which is the largest it’s been in a decade. Our direct-to-consumer business is now 30 percent of the total company and grew double digits in 2017. Our Levi’s® women’s business, which relaunched in 2015, has grown 10 quarters in a row, with double-digit growth in five of those quarters. Our tops business grew 35 percent last year, driven by the Trucker jacket, which celebrated its 50th anniversary, and our Levi’s® Batwing T-shirt, which has become a fashion item in many markets around the world. We have strengthened the financial health of our business and continued to increase shareholder value. Our net debt is the lowest it has been since 2000 at $444 million and is less than half of what it was five years ago. We have $1.4 billion in available liquidity and have stepped up dividends annually, delivering $70 million in 2017. Our stock price at the end of the year was $87.25 per share, which represents a more than 26 percent increase over the valuation in December 2016. Finally, our momentum was strong as we closed out the fiscal year, with revenue up 13 percent on a reported basis in the fourth quarter (11 percent in constant currency) and adjusted EBIT up 7 percent.** Growth remained balanced, with all three regions and all channels growing in Q4. * All revenue growth commentary is referring to constant currency unless otherwise noted. ** See our fourth quarter & fiscal year 2017 earnings release which is available on levistrauss.com for a reconciliation of GAAP financial measures to the following non-GAAP financial measures: adjusted EBIT, net debt and free cash flow. LS&CO. FISCAL YEAR 2017** NET REVENUE* GROSS MARGIN +7.0% 52.3% 50.2% 49.4% 50.5% 51.2% +2.6% +3.1% +1.8% +1.2% 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 ADJUSTED EBIT FREE CASH FLOW $504M $292M $467M $479M $480M $481M $284M $158M $123M $81M 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 * All revenue growth commentary is referring to constant currency unless otherwise noted. ** See our fourth quarter & fiscal year 2017 earnings release which is available on levistrauss.com for a reconciliation of GAAP financial measures to the following non-GAAP financial measures: adjusted EBIT, net debt and free cash flow. Here are some of the key highlights and opportunities from this year, mapped against our four strategic priorities: GROW OUR PROFITABLE CORE Our core business is comprised of Levi’s® men’s bottoms globally; Dockers® men’s bottoms in the US; our top ten wholesale customers and our five largest mature markets: the U.S., France, Germany, Mexico and the U.K. These large, well-developed businesses generate high revenue, cash and earnings, but the majority of them are expected to be low growth. This year, our core business performance has been mixed. Our men’s total bottoms business declined 2 percent, driven by a 17 percent decline in Dockers® men’s bottoms, while the Levi’s® men’s bottoms business was flat. We are addressing the Dockers® business and launched the Smart 360 Flex Khaki this year, which has shown promising early results. Our U.S. business grew 2 percent this year, which is notable given the current challenges with the U.S. wholesale environment. Our U.S. wholesale business was flat, despite roughly 300 door closures amongst our largest customers, making this a pretty significant achievement. The other top mature global markets outside of the U.S. — France, Germany, Mexico and the U.K. — collectively grew 13 percent. These teams have been disciplined and focused, working to seize opportunities and raise the bar for success. EXPAND FOR MORE The businesses in this category are underdeveloped businesses with significant growth potential, which include women’s, tops, the value segment, and from a geographic standpoint, China, India and Russia. Our focus on these businesses over the last five years has helped to diversify our portfolio and position Levi’s® as more of a lifestyle brand. The Levi’s® brand strengthened its connection with a younger demographic, and I’m especially proud of our most recent ad for the Live in Levi’s® campaign, “Circles.” This piece garnered more than 1.6 billion impressions across TV, digital, social and cinema since it aired in September, and it was one of the top-10, most-viewed ads on YouTube in 2017. The Levi’s® Women’s business grew 24 percent this year, with growth across all regions and channels, fueled by the success of the 700 series and healthy sales of tops. Women’s has now crossed $1 billion in sales and represents nearly one quarter of our global business. Our overall Tops business continued to deliver, growing 35 percent for the year, led by the iconic trucker jacket, and our branded T-shirt business. This included strong sales of our Levi’s® Batwing tee, which was a runaway success around the world this year. Our Tops business has a lot of potential, and we will continue to expand it in 2018. In the value segment, Signature by Levi Strauss & Co.™ and Denizen® collectively grew more than 20 percent this year. Both brands delivered growth in men’s, women’s, and kids and we’ve gained additional floor space within our current retailers, as well as new doors. These value brands are an important part of our strategy to expand for more, helping us reach an important consumer segment and diversify our business. And we made progress in our key international growth markets, with 3 percent net revenue growth in China, 8 percent in India, and 9 percent in Russia. In China, we’re focused on improving partner profitability, pricing and product assortment while strengthening brand engagement both in store and online. BECOME A LEADING OMNI-CHANNEL RETAILER Our focus on becoming a leading omni-channel retailer is driven by the desire to provide a seamless shopping experience to the consumer across multiple channels and to have more control of our brands, as part of the recognition that we expect wholesale to continue to be challenged. Over the last six years, we have driven significant growth in our direct-to-consumer business, which is now more than 30 percent of our total business. This is a higher gross margin business that still has much more potential. We maintained steady double-digit growth in our direct-to-consumer channel — increasing 15 percent for the year — with gains driven primarily by our existing retail footprint and broader product assortment. We continued to strengthen our retail channel, opening a Levi’s® flagship store in Osaka, and renovating key locations like SoHo in New York. Our ecommerce business has continued to make significant improvements, delivering more than 20 percent growth for the year on a global basis. We also continued to invest in innovation, with a focus on fit and style, while increasing our ecommerce presence with the launch of new websites in Canada, Mexico, Norway and Switzerland. We are also working more closely with our customers on their ecommerce sites, recognizing the value of optimizing all of our consumer touchpoints in the entire marketplace ecosystem. ACHIEVE OPERATIONAL EXCELLENCE We continue to improve our execution around the world and drive higher productivity so that we can keep investing in initiatives that will allow us to compete in the marketplace. Our gross margins in 2017 grew 110 basis points to 52.3 percent. This increase was driven by the growth of our high margin business in international and direct-to-consumer around the world. We invested most of these profits in higher levels of advertising support and we’re continuing to invest in foundational capabilities and technology for driving omni-channel. ® Levi’s® Virtual Stylist Levi’s Made & Crafted™ Levi’s® x Off-White c/o Virgil Authorized Vintage Abloh™ Levi’s® Levi’s® Dockers® ‘Always On’ Osaka (Japan) store SOHO (NYC) store ad campaign Denizen® x Axe Dockers® Levi’s® “Circles” brand promotion New Outlet store ad campaign CHANGING THE WORLD Our success as a company extends beyond our top and bottom line. We have made an outsized impact on the world by leading with our values, changing the world one step at a time. In 2017, we contributed more than $9 million to nonprofit partners who are fighting for equality and protecting our planet, volunteered more than 50,000 hours and donated nearly 150,000 pieces of clothing to those in need.

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