The Estée Lauder Companies Reports Solid Fiscal 2013 Second-Quarter Results

  The Estée Lauder Companies Reports Solid Fiscal 2013 Second-Quarter Results

         - Earnings Per Share Rose 14% to $1.16 on 7% Sales Growth -
                                Before Charges

Business Wire

NEW YORK -- February 5, 2013

The Estée Lauder Companies Inc. (NYSE: EL) today reported net sales for its
second quarter ended December 31, 2012 of $2.93 billion, a 7% increase
compared with $2.74 billion in the prior-year quarter. Excluding the impact of
foreign currency translation, net sales also increased 7% from a year ago.
These results were delivered against a 10% local currency sales increase in
the prior-year quarter and continued softness in certain markets, particularly
Southern Europe and Korea. The Company reported a 50-basis-point increase in
operating margin and net earnings for the quarter rose 13% to $447.5 million,
compared with $396.7 million last year. Diluted net earnings per common share
rose 13% to $1.13, compared with $1.00 reported in the prior year. All mention
of net earnings in the body of this release refers to net earnings
attributable to The Estée Lauder Companies Inc., which reflects the adjustment
for noncontrolling interests.

The fiscal 2013 second-quarter results included returns and charges associated
with restructuring activities of $14.6 million ($9.5 million after tax), equal
to $.02 per diluted common share. The fiscal 2012 second quarter results
included returns and charges associated with restructuring activities of $6.1
million ($4.4 million after tax), equal to $.01 per diluted common share.

Excluding these returns and charges in the second quarters of fiscal 2013 and
2012, net sales for the three months ended December 31, 2012 increased 7% to
$2.93 billion and net earnings rose 14% to $457.0 million. Diluted net
earnings per common share rose 14% to $1.16, versus a comparable $1.01 in the
prior-year period. A reconciliation between GAAP and non-GAAP financial
measures is included in this release.

In the second quarter of fiscal 2013, some retailers accelerated their orders
in advance of the Company’s January 2013 implementation of SAP at certain of
its locations and brands. Those additional orders amounted to approximately
$94 million in sales that would have likely occurred in the Company’s fiscal
2013 third quarter. These orders, while planned, were above the Company’s
expectations. Similarly, the Company’s fiscal 2012 second quarter included
approximately $30 million of sales resulting from accelerated retailer orders
in advance of the Company’s January 2012 implementation of SAP at certain of
its locations. Combined, these actions created a difficult comparison between
the fiscal 2013 and fiscal 2012 second quarters of approximately $64 million
in sales and $55 million in operating income, equal to $.09 per diluted common
share. Excluding the impact of the timing of orders and returns and charges
associated with restructuring activities, net sales and operating income would
have increased 5% and 2%, respectively, which was better than expected. The
impact of these shifts by region and product category is included in this
release.

Additionally, in December 2012, the Company amended the agreement related to
the August 2007 sale of Rodan + Fields to receive a fixed amount in lieu of
future consideration and other rights and, as a result, recognized $21.3
million in other income.

Fabrizio Freda, President and Chief Executive Officer, said, “Our performance
this quarter reflected the global appeal of our brands in all regions. These
results demonstrate our ability to continue to grow, on top of the
double-digit trends we generated in the prior year, even in the face of
macro-economic headwinds and challenges in certain international countries.
Organic sales growth for the quarter was in line with our expectations, while
earnings per share exceeded our forecast.

“We began the second half of our fiscal year by successfully launching another
wave of our Strategic Modernization Initiative in early January, a key driver
to achieving additional long-term efficiencies. Our recent increased strategic
marketing spending behind key innovations and existing winning products in
countries with good momentum should help drive sales growth in coming months.
We expect continued solid growth in the U.S., many emerging markets and
e-commerce and improving trends in travel retail. For the full fiscal year, we
are re-affirming our sales growth forecast of between 6% and 7% in local
currency, while raising our earnings per share guidance to $2.51 to $2.59.”

The global prestige beauty industry continues to experience mixed results and
overall growth has slowed from the prior year as the Company expected.
Nonetheless, the Company’s performance was broad-based, generating local
currency sales gains in each of its geographic regions and major product
categories. Sales growth was solid in the United States and certain developed
countries and strong overall in emerging markets.

During the quarter, the Company made substantial progress on its strategic
goals, with a strong improvement in cost of sales as a percentage of net
sales. All product categories and geographic regions benefited from
Company-wide efforts to reduce or eliminate non-value-added costs. In
connection with the long-term strategic plan and certain ongoing initiatives,
the Company realized savings of $26 million during the quarter. As planned,
the Company increased global advertising spending versus the prior-year
quarter to build momentum and gain share in its key markets and product
categories. As a percentage of net sales, certain significant operating
expense categories were lower. Gross margin expanded 80 basis points,
operating expense margin remained unchanged and operating margin rose 80 basis
points, before charges.

                
                
Results by Product Category
                    Three Months Ended December 31
(Unaudited;                                                                   Operating                     Percent
Dollars in          Net Sales                     Percent Change                                      Change
millions)                                                                     Income (Loss)
                    2012          2011            Reported   Local        2012         2011           Reported
                                                    Basis        Currency                                   Basis
                                                                                                                  
Skin Care           $ 1,279.9       $ 1,165.9       10    %      10    %      $  356.7       $  312.2       14    %
Makeup              1,049.3         983.6           7            7            226.5          208.5          9
Fragrance           458.8           441.1           4            5            77.3           73.2           6
Hair Care           131.9           121.4           9            9            10.1           12.5           (19   )
Other               13.2            25.6            (48   )      (49   )      (2.9     )     (3.3     )     12
Subtotal            2,933.1         2,737.6         7            7            667.7          603.1          11
Returns and
charges
associated          (0.1      )     (0.1      )                               (14.6    )     (6.1     )
with
restructuring
activities
Total               $ 2,933.0       $ 2,737.5       7     %      7     %      $ 653.1        $ 597.0        9     %
                                                                                 
                                                                                                                  

The net overall change in net sales and operating income for the quarter were
favorably impacted by the shifts in orders from certain retailers due to the
Company’s implementation of SAP, as previously mentioned, in the following
product categories:

  *Net sales: Skin care, approximately $32 million; makeup, approximately $23
    million; fragrance, approximately $8 million and hair care, approximately
    $1 million.
  *Operating income: Skin care, approximately $27 million; makeup,
    approximately $20 million; fragrance, approximately $7 million; hair care,
    approximately $1 million.

Excluding the impact of the shifts in orders:

  *Reported net sales in skin care, makeup, fragrance and hair care would
    have increased 7%, 4%, 2% and 8%, respectively.
  *Operating results in skin care, makeup, fragrance and hair care would have
    increased/(decreased) 6%, (1)%, (4)% and (34)%, respectively.

Skin Care

  *The skin care category is a strategic priority for the Company. The
    Company gained share in this category during the quarter in certain
    countries where its products are sold. Skin care sales growth was strong,
    particularly in view of the 13% growth reported in the prior-year quarter.
  *The Estée Lauder brand benefited from the recent launches of Perfectionist
    CP+R, Advanced Time Zone, Advanced Night Recovery Eye Serum Infusion and
    the Optimizer line of products, as well as higher sales of Advanced Night
    Repair Synchronized Recovery Complex.
  *The recent launches of The Moisturizing Soft Cream from La Mer and Even
    Better Eyes Dark Circle Corrector from Clinique contributed strong
    incremental sales.
  *Operating income increased double-digits, primarily reflecting improved
    results from higher-margin product launches from the Estée Lauder and La
    Mer brands.

Makeup

  *Higher makeup sales primarily reflected an increase in net sales from the
    Company’s makeup artist brands.
  *Sales growth included the recent launches of Chubby Stick Intense and
    Stay-Matte Oil-Free Makeup from Clinique. Higher sales from existing
    products, such as Chubby Stick Moisturizing Lip Colour and Even Better
    Makeup from Clinique, as well as sales gains from Smashbox, contributed to
    the category’s growth.
  *Makeup operating income increased, primarily reflecting the higher sales.

Fragrance

  *In fragrance, notable sales increases were generated from the recent
    launch of Coach Love and higher-end fragrance products from Jo Malone and
    Tom Ford.
  *These increases were partially offset by lower sales of Estée Lauder
    Sensuous Nude and DKNY Golden Delicious, which were launched in the
    prior-year period, as well as from certain other fragrances.
  *Fragrance operating income increased, primarily reflecting the higher
    sales.

Hair Care

  *Hair care net sales growth was driven by Aveda, reflecting the continued
    success of its Invati line of products and the recent launches of Pure
    Abundance Style Prep and Be Curly Curl Controller.
  *The category also benefited from expanded global distribution, in
    particular to salons and multi-brand specialty retailers.
  *Bumble and bumble posted lower sales to salons and sales declined at Ojon,
    due, in part, to softness of its business in the direct response
    television channel.
  *Hair care operating results decreased, primarily reflecting lower results
    at Bumble and bumble, increased support spending behind new launches and
    additional costs related to distribution expansion initiatives.

                
                
Results by
Geographic       
Region
                    Three Months Ended December 31
(Unaudited;                                                                   Operating                     Percent
Dollars in          Net Sales                     Percent Change                                      Change
millions)                                                                     Income (Loss)
                    2012          2011            Reported   Local        2012         2011           Reported
                                                    Basis        Currency                                   Basis
                                                                                                                  
The Americas        $ 1,140.2       $ 1,071.3       6    %       6    %       $  132.1       $  112.4       18    %
Europe, the
Middle East &       1,105.3         1,046.3         6            7            324.6          310.1          5
Africa.
Asia/Pacific        687.6           620.0           11           9            211.0          180.6          17
Subtotal            2,933.1         2,737.6         7            7            667.7          603.1          11
Returns and
charges
associated          (0.1      )     (0.1      )                               (14.6    )     (6.1     )
with
restructuring
activities
Total               $ 2,933.0       $ 2,737.5       7    %       7    %       $ 653.1        $ 597.0        9     %
                                                                                 
                                                                                                                  

In the quarter, the net overall change in net sales and operating income in
the Company’s geographic regions were favorably impacted by the shifts in
orders from certain retailers as previously mentioned, as follows:

  *Net sales: the Americas, approximately $27 million; Europe, the Middle
    East & Africa, approximately $12 million and Asia/Pacific, approximately
    $25 million.
  *Operating income: the Americas, approximately $22 million; Europe, the
    Middle East & Africa, approximately $9 million; Asia/Pacific,
    approximately $24 million.

Excluding the impact of the shifts in orders:

  *Reported net sales in the Americas, Europe, the Middle East & Africa and
    Asia/Pacific would have increased 4%, 4% and 7%, respectively.
  *Operating income in the Americas, Europe, the Middle East & Africa and
    Asia/Pacific would have increased/(decreased) (2)%, 1% and 5%,
    respectively.

The Americas

  *The net sales increase in the region was primarily attributable to strong
    growth in the United States, which benefited from successful new product
    offerings. The improvement reflects growth from the Company’s makeup
    artist brands and certain heritage and hair care brands.
  *Sales increased in each of the Company’s major product categories, except
    fragrance.
  *The higher sales also reflect double-digit local currency gains in Canada
    and Latin America.
  *Sales to North American department stores grew mid-single digits and sales
    of the Company’s products online grew double-digits.
  *Net sales growth included accelerated retailer orders, as previously
    discussed.
  *Operating income in the Americas increased sharply, primarily reflecting
    the solid sales gains, largely offset by higher strategic investment
    spending in the current-year period.

Europe, the Middle East & Africa

  *In constant currency, net sales increased in the majority of countries in
    the region and in each product category. Economic uncertainties in some
    Southern European countries impacted the beauty markets, but the Company
    continued to generate growth in most markets.
  *In constant currency, double-digit net sales growth was recorded in a
    number of areas, including Switzerland, France, the Nordic countries,
    South Africa and Turkey, while solid sales gains were generated in the
    United Kingdom, Benelux and the Middle East.
  *The higher sales in Switzerland, France, Benelux and Nordic included
    accelerated retailer orders, as previously discussed.
  *The Company’s net sales in travel retail grew high-single digits, while
    retail sales grew double-digits in the quarter, which was more than twice
    the increase in airline passenger traffic. Continued select retailer
    destocking impacted net sales growth.
  *These increases were partially offset by lower net sales, primarily in
    Russia, Spain and Italy.
  *The Company estimates that it gained share in certain countries within its
    distribution in this region during the quarter.
  *Operating income in the region increased, led by travel retail, the United
    Kingdom, the Nordic countries and the Middle East, which were partially
    offset by lower results in Spain and Germany.

Asia/Pacific

  *In the region, the Company’s strongest local currency sales growth was
    generated in China and Hong Kong, primarily reflecting strong sales of
    skin care products. In China, the increase reflected sales to new
    consumers in expanded distribution in tier two and three cities. Japan and
    Taiwan posted solid sales gains.
  *Net sales growth in China, Hong Kong and Taiwan included accelerated
    retailer orders, as previously discussed.
  *The region’s sales growth of 9% improved upon the prior-year quarter, when
    sales grew 18% in constant currency.
  *The increases in certain Asian countries were partially offset by lower
    net sales, predominantly in Korea, reflecting difficult economic
    conditions and competitive pressures. Sales in Australia also declined.
    The Company expects to see continued weakness in prestige beauty in Korea,
    which also impacted the travel retail business there.
  *The Company estimates that for the quarter it gained share in certain
    countries, including China, within its points of distribution.
  *In Asia/Pacific, operating income increased, with China, Hong Kong and
    Taiwan reporting the largest increases, primarily reflecting the impact
    from the timing of orders. Lower results were recorded primarily in Korea
    and Australia.

Six-Month Results

  *For the six months ended December 31, 2012, the Company reported net sales
    of $5.48 billion, a 5% increase from $5.21 billion in the comparable
    prior-year period. Excluding the impact of foreign currency translation,
    net sales increased 6%. Net sales grew in each of the Company’s geographic
    regions and major product categories. These results were delivered against
    a 12% local currency sales increase in the six months ended December 31,
    2011.
  *The fiscal 2013 six-month results comparison was favorably impacted by the
    acceleration of sales orders from certain retailers previously discussed.
  *The Company reported net earnings of $747.0 million for the six months
    ended December 31, 2012, an 11% increase from the $675.3 million in the
    same period last year. Diluted net earnings per common share for the six
    months ended December 31, 2012 increased 11% to $1.89, compared with $1.70
    reported in the prior-year period.
  *The fiscal 2013 six-month results included returns and charges associated
    with restructuring activities of $15.0 million ($9.9 million after tax),
    equal to $.03 per diluted common share. Additionally, during the six
    months ended December 31, 2012, the Company redeemed $230.1 million
    principal amount of its 7.75% Senior Notes due 2013. As a result, the
    Company recorded a pre-tax charge to earnings of $19.1 million ($12.2
    million after tax), for the impact of the extinguishment of debt, equal to
    $.03 per diluted common share.
  *The fiscal 2012 six-month results included returns and charges associated
    with restructuring activities of $10.2 million ($7.3 million after tax),
    equal to $.02 per diluted common share.
  *Excluding these returns and charges, net sales for the six months ended
    December 31, 2012 increased 5% to $5.48 billion, net earnings rose 13% to
    $769.1 million and diluted net earnings per common share rose 13% to
    $1.95, versus a comparable $1.72 in the prior-year period.

Cash Flows

  *For the six months ended December 31, 2012, net cash flows provided by
    operating activities increased 7% to $655.1 million, compared with $610.2
    million in the prior-year period.
  *The increase primarily reflected the higher net earnings and an increase
    in other liabilities, partially offset by a net decrease in cash from
    certain working capital components.
  *Days of inventory at December 31, 2012 were 15 days higher compared to
    December 31, 2011. This increase primarily reflects the building of
    inventory in advance of the Company’s January 2013 implementation of SAP
    at certain locations.
  *During the six months, the Company used operating cash flows primarily for
    the repurchase of shares of the Company’s Class A Common Stock and capital
    expenditures, including increased expenses related to the Company’s
    Strategic Modernization Initiative (SMI). Cash on hand was also used for
    the payment of the annual dividend, which reflected a 37% increase over
    the previous dividend rate.

Outlook for Fiscal 2013 Third Quarter and Full Year

The Company has benefited from the strength in prestige beauty in North
America and China. While overall the Company’s business is performing well,
certain Southern European countries and Korea continue to face weakness due to
economic uncertainties.

Specifically, in the context of its strategy, during fiscal 2013 the Company
expects to continue to increase gross margins and reduce operating expenses,
which allows it to increase global advertising spending and finance SMI, while
increasing profitability. Investment in advertising behind strong innovations
should continue to create growth well beyond the industry average. In fiscal
2013, the Company is rebalancing its quarterly advertising spending over the
year, with the largest increases occurring in the fiscal second and third
quarters, compared to prior-year levels.

Third Quarter

  *Net sales are forecasted to increase between 3% and 4% in constant
    currency.
  *Foreign currency translation is expected to be minimal.
  *Comparisons with the current fiscal year third quarter will be affected by
    the accelerated sales orders shifted into the Company’s fiscal 2013 and
    2012 second quarters, from its respective third quarters, in advance of
    the Company’s implementation of SAP at certain business units in January
    of both fiscal years. Combined, these actions create a difficult
    comparison between the fiscal 2013 and fiscal 2012 third quarters of
    approximately $64 million in sales, or 3%, and $55 million in operating
    income.
  *Diluted net earnings per common share, including charges associated with
    restructuring activities, are projected to be $.28 to $.32.
  *The Company expects to take charges associated with restructuring
    activities in its fiscal 2013 third quarter of about $3 million. The
    recording of charges will depend on when the relevant accounting criteria
    are met.
  *Diluted net earnings per common share before charges associated with
    restructuring activities are projected to be in the range of $.28 to $32.
  *In connection with its long-term strategic plan, as well as certain
    ongoing initiatives, the Company expects to realize savings of
    approximately $10 million in the third quarter of fiscal 2013.

Full Year

  *Net sales are forecasted to grow between 6% and 7% in constant currency.
  *Foreign currency translation is expected to negatively impact sales by
    approximately 1.0% versus the prior year.
  *The Company is raising the range of its diluted net earnings per share
    estimate, including charges associated with restructuring activities and
    the impact of the early extinguishment of debt, to $2.44 to $2.52.
  *The Company expects to take charges associated with restructuring
    activities in fiscal 2013 of about $25 million, equal to approximately
    $.04 per diluted common share. The recording of charges will depend on
    when the relevant accounting criteria are met.
  *As mentioned in this press release, the impact of the extinguishment of
    debt is equal to $.03 per diluted common share.
  *Diluted net earnings per share before charges associated with
    restructuring activities and the impact of the early extinguishment of
    debt are now projected to be $2.51 to $2.59, up 11% to 14%.
  *The Company’s broad-based growth is expected to continue ahead of the
    prestige beauty industry for the full fiscal year.
  *On a product category basis, in constant currency, hair care and skin care
    are expected to be the leading sales growth categories, followed by makeup
    and fragrance.
  *Geographic region net sales growth in constant currency is expected to be
    led by Asia/Pacific, followed by Europe, the Middle East & Africa and the
    Americas.
  *In connection with its long-term strategic plan, as well as certain
    ongoing initiatives, the Company expects to realize savings of between $50
    million and $75 million during fiscal 2013.

Forward-Looking Statements

The forward-looking statements in this press release, including those
containing words like “expect,” “plans,” “may,” “could,” “anticipate,”
“estimate,” “projected,” “forecasted,” those in Mr. Freda’s remarks and those
in the “Outlook for Fiscal 2013 Third Quarter and Full Year” section involve
risks and uncertainties. Factors that could cause actual results to differ
materially from those forward-looking statements include the following:

     increased competitive activity from companies in the skin care, makeup,
(1)  fragrance and hair care businesses, some of which have greater resources
     than the Company does;
     the Company’s ability to develop, produce and market new products on
(2)  which future operating results may depend and to successfully address
     challenges in the Company’s business;
     consolidations, restructurings, bankruptcies and reorganizations in the
     retail industry causing a decrease in the number of stores that sell the
(3)  Company’s products, an increase in the ownership concentration within the
     retail industry, ownership of retailers by the Company’s competitors or
     ownership of competitors by the Company’s customers that are retailers
     and our inability to collect receivables;
(4)  destocking and tighter working capital management by retailers;
     the success, or changes in timing or scope, of new product launches and
(5)  the success, or changes in the timing or the scope, of advertising,
     sampling and merchandising programs;
(6)  shifts in the preferences of consumers as to where and how they shop for
     the types of products and services the Company sells;
     social, political and economic risks to the Company’s foreign or domestic
(7)  manufacturing, distribution and retail operations, including changes in
     foreign investment and trade policies and regulations of the host
     countries and of the United States;
     changes in the laws, regulations and policies (including the
     interpretations and enforcement thereof) that affect, or will affect, the
     Company’s business, including those relating to its products or
(8)  distribution net works, changes in accounting standards, tax laws and
     regulations, environmental or climate change laws, regulations or
     accords, trade rules and customs regulations, and the outcome and expense
     of legal or regulatory proceedings, and any action the Company may take
     as a result;
     foreign currency fluctuations affecting the Company’s results of
     operations and the value of its foreign assets, the relative prices at
(9)  which the Company and its foreign competitors sell products in the same
     markets and the Company’s operating and manufacturing costs outside of
     the United States;
     changes in global or local conditions, including those due to the
     volatility in the global credit and equity markets, natural or man-made
     disasters, real or perceived epidemics, or energy costs, that could
     affect consumer purchasing, the willingness or ability of consumers to
     travel and/or purchase the Company’s products while traveling, the
(10) financial strength of the Company’s customers, suppliers or other
     contract counterparties, the Company’s operations, the cost and
     availability of capital which the Company may need for new equipment,
     facilities or acquisitions, the returns that the Company is able to
     generate on its pension assets and the resulting impact on its funding
     obligations, the cost and availability of raw materials and the
     assumptions underlying the Company’s critical accounting estimates;
     shipment delays, commodity pricing, depletion of inventory and increased
     production costs resulting from disruptions of operations at any of the
     facilities that manufacture nearly all of the Company’s supply of a
(11) particular type of product (i.e., focus factories) or at the Company’s
     distribution or inventory centers, including disruptions that may be
     caused by the implementation of SAP as part of the Company’s Strategic
     Modernization Initiative or by restructurings;
     real estate rates and availability, which may affect the Company’s
(12) ability to increase or maintain the number of retail locations at which
     the Company sells its products and the costs associated with the
     Company’s other facilities;
(13) changes in product mix to products which are less profitable;
     the Company’s ability to acquire, develop or implement new information
     and distribution technologies and initiatives on a timely basis and
(14) within the Company’s cost estimates and the Company’s ability to maintain
     continuous operations of such systems and the security of data and other
     information that may be stored in such systems or other systems or media;
     the Company’s ability to capitalize on opportunities for improved
(15) efficiency, such as publicly-announced strategies and restructuring and
     cost-savings initiatives, and to integrate acquired businesses and
     realize value therefrom;
     consequences attributable to local or international conflicts around the
(16) world, as well as from any terrorist action, retaliation and the threat
     of further action or retaliation;
(17) the timing and impact of acquisitions and divestitures, which depend on
     willing sellers and buyers, respectively, and;
     additional factors as described in the Company’s filings with the
(18) Securities and Exchange Commission, including its Annual Report on Form
     10-K for the fiscal year ended June 30, 2012.

The Company assumes no responsibility to update forward-looking statements
made herein or otherwise.

The Estée Lauder Companies Inc. is one of the world’s leading manufacturers
and marketers of quality skin care, makeup, fragrance and hair care products.
The Company’s products are sold in over 150 countries and territories under
the following brand names: Estée Lauder, Aramis, Clinique, Prescriptives, Lab
Series, Origins, M•A•C, Bobbi Brown, Tommy Hilfiger, Kiton, La Mer, Donna
Karan, Aveda, Jo Malone, Bumble and bumble, Darphin,  Michael Kors, American
Beauty, Flirt!, GoodSkin Labs, Grassroots Research Labs, Tom Ford, Coach,
Ojon, Smashbox, Ermenegildo Zegna, Aerin Beauty and Osiao.

An electronic version of this release can be found at the Company’s website,
www.elcompanies.com.

                              – Tables Follow –

                                                                                              
                                                                                                           
THE ESTÉE LAUDER COMPANIES INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited; In millions, except per share data and percentages)
                                                                                                           
                     Three Months Ended                  Percent       Six Months Ended                    Percent
                     December 31                         Change        December 31                         Change
                       2012           2011                            2012           2011
                                                                                                                
Net Sales (A)        $ 2,933.0         $ 2,737.5         7    %        $ 5,482.5         $ 5,214.2         5    %
Cost of Sales         568.0            551.0                          1,107.2          1,085.3
(A)
Gross Profit          2,365.0          2,186.5         8    %         4,375.3          4,128.9         6    %
                                                                                                                
Gross Margin           80.6    %         79.9    %                       79.8    %         79.2    %
                                                                                                                
Operating
expenses:
Selling,
general and            1,698.6           1,576.7                         3,226.5           3,084.4
administrative
Restructuring
and other              13.3              6.1                             13.7              10.8
charges (A)
Impairment of
other                 —                6.7                            —                6.7
intangible
assets (B)
                      1,711.9          1,589.5         8    %         3,240.2          3,101.9         4    %
Operating              58.3    %         58.1    %                       59.1    %         59.5    %
Expense Margin
                                                                                                                
Operating              653.1             597.0           9    %          1,135.1           1,027.0         11   %
Income
                                                                                                                
Operating              22.3    %         21.8    %                       20.7    %         19.7    %
Income Margin
                                                                                                                
Interest               13.4              16.6                            29.2              32.6
expense, net
Interest
expense on
debt                   —                 —                               19.1              —
extinguishment
(C)
Other income          21.3             10.5                           23.1             10.5
(D)
Earnings
before Income          661.0             590.9           12   %          1,109.9           1,004.9         10   %
Taxes
                                                                                                                
Provision for         211.6            192.5                          360.9            327.9
income taxes
Net Earnings           449.4             398.4           13   %          749.0             677.0           11   %
                                                                                                                
Net earnings
attributable
to                    (1.9    )        (1.7    )                      (2.0    )        (1.7    )
noncontrolling
interests
Net Earnings
Attributable
to The Estée         $ 447.5           $ 396.7           13   %        $ 747.0           $ 675.3           11   %
Lauder
Companies Inc.
                                                                                                                
                                                                                                                
Net earnings
attributable
to The Estée
Lauder
Companies Inc.
per common
share:
Basic                $ 1.16            $ 1.03            13   %        $ 1.93            $ 1.74            11   %
Diluted                1.13              1.00            13   %          1.89              1.70            11   %
                                                                                                                
Weighted
average common
shares
outstanding:
Basic                  387.4             386.8                           387.6             388.7
Diluted                394.7             395.2                           395.1             397.3
                                                                                                                
                                                                                                                

(A) In February 2009, the Company announced the implementation of a
multi-faceted cost savings program (the “Program”) to position it to achieve
long-term profitable growth. As of December 31, 2012, the Company closed the
Program. As a result of the closure of the Program and evaluation of the
initiatives that have been implemented as of December 31, 2012, the Company
anticipates total cumulative restructuring charges and other costs to
implement those initiatives to total between $325 million and $350 million,
before taxes. Since the inception of the Program, the Company approved cost
savings initiatives to resize the organization, reorganize certain functions,
turnaround or exit unprofitable operations and outsource certain services.

Restructuring and other charges - Three months ended December 31, 2012 and
2011

For the three months ended December 31, 2012 and 2011, aggregate restructuring
charges of $13.3 million and $3.9 million, respectively, were recorded in the
Company’s consolidated statements of earnings related to the Program. These
charges primarily reflected employee-related costs, asset write-offs, contract
terminations and other exit costs.

For the three months ended December 31, 2012, the Company recorded $0.1
million, reflecting sales returns associated with restructuring activities and
a write-off of inventory of $1.2 million, associated with exiting unprofitable
operations. The Company recorded other charges in connection with the
implementation of the Program for the three months ended December 31, 2011 of
$2.2 million, primarily related to consulting and other professional services.
During the three months ended December 31, 2011, the Company recorded $0.1
million, reflecting sales returns (less a related cost of sales of $0.1
million) associated with restructuring activities.

Total charges associated with restructuring activities included in operating
income for the three months ended December 31, 2012 and 2011, were $14.6
million and $6.1 million, respectively.

Restructuring and other charges - Six months ended December 31, 2012 and 2011

For the six months ended December 31, 2012 and 2011, aggregate restructuring
charges of $13.6 million and $6.9 million, respectively, were recorded in the
Company’s consolidated statements of earnings related to the Program. These
charges primarily reflected employee-related costs, asset write-offs, contract
terminations and other exit costs.

The Company recorded other charges in connection with the implementation of
the Program for the six months ended December 31, 2012 and 2011 of $0.1
million and $3.9 million, respectively, primarily related to consulting and
other professional services.

For the six months ended December 31, 2012, the Company recorded $0.1 million,
reflecting sales returns associated with restructuring activities and a
write-off of inventory of $1.2 million associated with exiting unprofitable
operations. During the six months ended December 31, 2011, the Company
recorded an adjustment to reduce the reserve for anticipated returns
associated with restructuring activities of $0.6 million.

Total charges associated with restructuring activities included in operating
income for the six months ended December 31, 2012 and 2011, were $15.0 million
and $10.2 million, respectively.

(B) The Company performs annual impairment tests for each of its reporting
units. In addition, the Company may perform interim impairment tests as a
result of changes in circumstances and certain financial indicators. Such
tests may conclude that the carrying value of certain assets exceed their
estimated fair values, resulting in the recognition of impairment charges.

During the second quarter of fiscal 2012, the Company recognized an impairment
charge related to the Ojon reporting unit of $6.7 million for its trademark.

(C) In the first quarter of fiscal 2013, the Company redeemed $230.1 million
principal amount of its 7.75% Senior Notes due November 1, 2013. As a result,
the Company recorded a pre-tax charge to earnings of $19.1 million.

(D) In December 2012, the Company amended the agreement related to the August
2007 sale of Rodan + Fields to receive a fixed amount in lieu of future
contingent consideration and other rights. As a result of the amended
agreement, the Company recognized $21.3 million as other income in the
consolidated statement of earnings, net of discount and unpaid contingent
consideration earned during the fiscal 2013 first quarter in accordance with
the original terms.

In November 2011, the Company settled a commercial dispute with third parties
that was outside its normal operations. In connection therewith, the Company
received a $10.5 million cash payment, which has been classified as other
income in the consolidated statement of earnings.

This earnings release includes some non-GAAP financial measures relating to
charges associated with restructuring activities, the extinguishment of debt
and accelerated orders associated with the Company’s implementation of SAP.
The following is a reconciliation between the non-GAAP financial measures and
the most directly comparable GAAP measure for certain consolidated statements
of earnings accounts before and after the returns and charges associated with
restructuring activities, the extinguishment of debt and accelerated orders
associated with the Company’s implementation of SAP. The Company uses the
non-GAAP financial measure, among other things, to evaluate its operating
performance and the measure represents the manner in which the Company
conducts and views its business. Management believes that excluding these
items that are special in nature or that are not comparable from period to
period helps investors and others compare operating performance between two
periods. While the Company considers the non-GAAP measures useful in analyzing
its results, it is not intended to replace, or act as a substitute for, any
presentation included in the consolidated financial statements prepared in
conformity with GAAP.

The Company operates on a global basis, with the majority of its net sales
generated outside the United States. Accordingly, fluctuations in foreign
currency exchange rates can affect the Company’s results of operations.
Therefore, the Company presents certain net sales information excluding the
effect of foreign currency rate fluctuations to provide a framework for
assessing the performance of its underlying business outside the United
States. Constant currency information compares results between periods as if
exchange rates had remained constant period-over-period. The Company
calculates constant currency information by translating current-period results
using prior-year period weighted-average foreign currency exchange rates.

                                                                                                                   
                                                                                                                                         
THE ESTÉE LAUDER COMPANIES INC.

Reconciliation of Certain Consolidated Statements of Earnings Accounts Before and After Returns and Charges

(Unaudited; In millions, except per share data and percentages)
                                                                                                                                         
                          Three Months Ended                                  Three Months Ended
                        
                          December 31, 2012                                   December 31, 2011
                                                                                                                                % Change
                                                            Before                                             Before
                                            Returns/                                            Returns/                        versus Prior
                         As Reported                 Returns/          As Reported                Returns/
                                            Charges                                             Charges                         Year Before
                                                            Charges                                            Charges
                                                                                                                                Returns/Charges
Net Sales                 $ 2,933.0         $ 0.1           $ 2,933.1         $ 2,737.5         $ 0.1          $ 2,737.6        7        %
Cost of sales              568.0            (1.2  )        566.8            551.0            0.1           551.1
                                                                                                                                         
Gross Profit                2,365.0           1.3             2,366.3           2,186.5           0.0            2,186.5        8        %
Gross Margin                80.6    %                         80.7    %         79.9    %                        79.9    %
                                                                                                                                         
Operating                  1,711.9          (13.3 )        1,698.6          1,589.5          (6.1 )        1,583.4        7        %
expenses
Operating
Expense                     58.3    %                         57.9    %         58.1    %                        57.9    %
Margin
                                                                                                                                         
Operating                   653.1             14.6            667.7             597.0             6.1            603.1          11       %
Income
Operating                   22.3    %                         22.8    %         21.8    %                        22.0    %
Income Margin
                                                                                                                                         
Provision for               211.6             5.1             216.7             192.5             1.7            194.2
income taxes
Net Earnings
Attributable                                                                                                                             
to
The Estée
Lauder                      447.5             9.5             457.0             396.7             4.4            401.1          14       %
CompaniesInc.
                                                                                                                                         
Diluted net
earnings
attributable
to The Estée
Lauder
Companies
Inc. per
common share                1.13              .02             1.16              1.00              .01            1.01           14       %


                                                                                                                                         
                                                                                                                                         

                                                                                                                     
                         Six Months Ended                                    Six Months Ended

                         December 31, 2012                                   December 31, 2011
                                                                                                                                  % Change
                                                           Before                                              Before
                                           Returns/                                            Returns/                           versus Prior
                         As Reported                 Returns/          As Reported                 Returns/
                                           Charges                                             Charges                            Year Before
                                                           Charges                                             Charges
                                                                                                                                  Returns/Charges
Net Sales                $ 5,482.5         $ 0.1           $ 5,482.6         $ 5,214.2         $ (0.6  )       $ 5,213.6          5        %
Cost of sales             1,107.2          (1.2  )        1,106.0          1,085.3          —              1,085.3
                                                                                                                                           
Gross Profit               4,375.3           1.3             4,376.6           4,128.9           (0.6  )         4,128.3          6        %
Gross Margin               79.8    %                         79.8    %         79.2    %                         79.2    %
                                                                                                                                           
Operating                 3,240.2          (13.7 )        3,226.5          3,101.9          (10.8 )        3,091.1          4        %
expenses
Operating                  59.1    %                         58.9    %         59.5    %                         59.3    %
Expense Margin
                                                                                                                                           
Operating                  1,135.1           15.0            1,150.1           1,027.0           10.2            1,037.2          11       %
Income
Operating                  20.7    %                         20.9    %         19.7    %                         19.9    %
Income Margin
                                                                                                                                           
Interest
expense on                 19.1              (19.1 )         —                 —                 —               —
debt
extinguishment
                                                                                                                                           
Provision for              360.9             12.0            372.9             327.9             2.9             330.8
income taxes
Net Earnings
Attributable
to
The Estée
Lauder                     747.0             22.1            769.1             675.3             7.3             682.6            13       %
Companies Inc.
                                                                                                                                           
                                                                                                                                           
Diluted net
earnings
attributable
to The Estée
Lauder
Companies
Inc. per                   1.89              .06             1.95              1.70              .02             1.72             13       %
common share
                                                                                                                                           
                                                                                                                                           

                                                                                                              
                                                                                                                                    
THE ESTÉE LAUDER COMPANIES INC.

SUMMARY OF CONSOLIDATED RESULTS

(Unaudited; Dollars in millions)
                                                                                                                                    
                    Three Months                                                       Six Months
                                                        Percent Change                                                   Percent Change
                    Ended December 31                                                  Ended December 31
                    2012           2011              Reported    Local          2012           2011             Reported    Local
                                                        Basis          Currency                                            Basis          Currency
NET SALES                                                                                               
By Region:
The Americas        $ 1,140.2         $ 1,071.3         6     %        6      %        $ 2,322.3         $ 2,176.7         7     %        7     %
Europe, the
Middle East &       1,105.3           1,046.3           6              7               1,930.2           1,904.5           1              5
Africa.
Asia/Pacific        687.6             620.0             11             9               1,230.1           1,132.4           9              8
Subtotal            2,933.1           2,737.6           7              7               5,482.6           5,213.6           5              6
Returns
associated
with
restructuring       (0.1      )       (0.1      )                                      (0.1      )       0.6
activities
Total               $ 2,933.0         $ 2,737.5         7     %        7      %        $ 5,482.5         $ 5,214.2         5     %        6     %
                                                                                                                                                
By Product
Category:
Skin Care           $ 1,279.9         $ 1,165.9         10    %        10     %        $ 2,393.4         $ 2,238.8         7     %        8     %
Makeup              1,049.3           983.6             7              7               2,009.7           1,912.4           5              6
Fragrance           458.8             441.1             4              5               806.4             797.9             1              3
Hair Care           131.9             121.4             9              9               245.8             225.2             9              10
Other               13.2              25.6              (48   )        (49    )        27.3              39.3              (31   )        (31   )
Subtotal            2,933.1           2,737.6           7              7               5,482.6           5,213.6           5              6
Returns
associated
with
restructuring       (0.1      )       (0.1      )                                      (0.1      )       0.6
activities
Total               $ 2,933.0         $ 2,737.5         7     %        7      %        $ 5,482.5         $ 5,214.2         5     %        6     %
                                                                                                                                                
                                                                                                                                                
OPERATING
INCOME (LOSS)
By Region:
The Americas        $ 132.1           $ 112.4           18    %                        $ 304.4           $ 261.6           16    %
Europe, the
Middle East &       324.6             310.1             5                              521.5             497.8             5
Africa.
Asia/Pacific        211.0             180.6             17                             324.2             277.8             17
Subtotal            667.7             603.1             11                             1,150.1           1,037.2           11
Charges
associated
with
restructuring       (14.6     )       (6.1      )                                      (15.0     )       (10.2     )
activities
Total               $ 653.1           $ 597.0           9     %                        $ 1,135.1         $ 1,027.0         11    %
                                                                                                                                                
By Product
Category:
Skin Care           $ 356.7           $ 312.2           14    %                        $ 615.7           $ 535.9           15    %
Makeup              226.5             208.5             9                              387.8             368.1             5
Fragrance           77.3              73.2              6                              130.7             121.5             8
Hair Care           10.1              12.5              (19   )                        20.8              17.6              18
Other               (2.9      )       (3.3      )       12                             (4.9      )       (5.9      )       17
Subtotal            667.7             603.1             11                             1,150.1           1,037.2           11
Charges
associated
with
restructuring       (14.6     )       (6.1      )                                      (15.0     )       (10.2     )
activities
Total               $ 653.1           $ 597.0           9     %                        $ 1,135.1         $ 1,027.0         11    %
                                                                                                                                                
                                                                                                                                                

                       THE ESTÉE LAUDER COMPANIES INC.

As part of the Company’s Strategic Modernization Initiative, the Company
anticipates the continued migration of its operations to SAP-based
technologies, with the majority of its locations being enabled through 2014.
As a result, the Company has experienced, and may continue to experience,
fluctuations in its net sales and operating results resulting from accelerated
orders from certain of its retailers to provide adequate safety stock to
mitigate any potential short-term business interruption associated with the
SAP rollout. In particular, approximately $94 million of accelerated orders
were recorded as net sales in the fiscal 2013 second quarter that likely would
have occurred in the fiscal 2013 third quarter. In addition, approximately $30
million of accelerated orders were recorded as net sales in the fiscal 2012
second quarter that would have occurred in the fiscal 2012 third quarter.

Combined, these actions created a difficult comparison between the fiscal 2013
second quarter and the fiscal 2012 second quarter of approximately $64 million
in net sales and approximately $55 million in operating income and impacted
the Company’s operating margin comparisons. The Company believes the
presentation of certain comparative information in the discussions of the
quarterly results in this release that exclude the impact of the timing of
these orders is useful in analyzing the net sales and operating results of its
business.

                                                                                                                              
                                                                                                                                                           
Reconciliation of Certain Consolidated Statements of Earnings Accounts Before and After

Returns and Charges and Accelerated Orders Associated with the Company’s Implementation of SAP

(Unaudited; In millions, except per share data and percentages)
                                                                                                                                                           
                     Three Months Ended                                                 Three Months Ended
                                                                                      
                     December 31, 2012                                                  December 31, 2011
                                                                                                                                                           % Change
                     As               Returns/         SAP             Before           As               Returns/         SAP             Before           versus
                    Reported        Charges         Adjust-         Charges         Reported        Charges          Adjust-         Charges         Prior
                                                       ments           /SAP                                               ments           /SAP             Year Before
                                                                                                                                                           Charges/SAP
Net Sales            $2,933.0         $ 0.1            $ (94.3 )       $2,838.8         $2,737.5         $ 0.1            $ (29.6 )       $2,708.0         5%
Cost of              568.0            (1.2     )       (16.2   )       550.6            551.0            0.1              (6.4    )       544.7
sales
                                                                                                                                                           
Gross Profit         2,365.0          1.3              (78.1   )       2,288.2          2,186.5          0.0              (23.2   )       2,163.3          6%
Gross Margin         80.6     %                                        80.6     %       79.9     %                                        79.9     %
                                                                                                                                                           
Operating            1,711.9          (13.3    )       —               1,698.6          1,589.5          (6.1     )       —               1,583.4          7%
expenses
Operating
Expense              58.3     %                                        59.8     %       58.1     %                                        58.5     %
Margin
                                                                                                                                                           
Operating            653.1            14.6             (78.1   )       589.6            597.0            6.1              (23.2   )       579.9            2%
Income
Operating
Income               22.3     %                                        20.8     %       21.8     %                                        21.4     %
Margin
                                                                                                                                                           
Provision
for income           211.6            5.1              (25.0   )       191.7            192.5            1.7              (7.8    )       186.4
taxes
Net Earnings
Attributable
to
The Estée
Lauder               447.5            9.5              (53.1   )       403.9            396.7            4.4              (15.4   )       385.7            5%
Companies
Inc.
                                                                                                                                                           
Diluted net
earnings
attributable
to The Estée
Lauder
Companies
Inc. per
common share         1.13             .02              (.13    )       1.02             1.00             .01              (.04    )       .98              5%
                                                                                                                                                           
                                                                                                                                                           

                                                                                                                                   
                                                                                                                                                                  
THE ESTÉE LAUDER COMPANIES INC.

Reconciliation of Certain Consolidated Statements of Earnings Accounts Before and After

Returns and Charges and Accelerated Orders Associated with the Company’s Implementation of SAP

(Unaudited; In millions, except per share data and percentages)
                                                                                                                                                                  
                        Six Months Ended                                                   Six Months Ended

                        December 31, 2012                                                  December 31, 2011
                                                                                                                                                                  % Change
                        As               Returns/         SAP             Before           As               Returns/         SAP               Before             versus
                        Reported         Charges         Adjust-         Charges          Reported        Charges          Adjust-           Charges           Prior
                                                          ments           /SAP                                               ments             /SAP               Year Before
                                                                                                                                                                  Charges/SAP
Net Sales               $5,482.5         $ 0.1            $ (94.3 )       $5,388.3         $5,214.2         $(0.6    )       $ (29.6 )         $5,184.0           4%
Cost of sales           1,107.2          (1.2     )       (16.2   )       1,089.8          1,085.3          —                (6.4    )         1,078.9
                                                                                                                                                                  
Gross Profit            4,375.3          1.3              (78.1   )       4,298.5          4,128.9          (0.6     )       (23.2   )         4,105.1            5%
Gross Margin            79.8     %                                        79.8     %       79.2     %                                          79.2     %
                                                                                                                                                                  
Operating               3,240.2          (13.7    )       —               3,226.5          3,101.9          (10.8    )       —                 3,091.1            4%
expenses
Operating               59.1     %                                        59.9     %       59.5     %                                          59.6     %
Expense Margin
                                                                                                                                                                  
Operating               1,135.1          15.0             (78.1   )       1,072.0          1,027.0          10.2             (23.2   )         1,014.0            6%
Income
Operating               20.7     %                                        19.9     %       19.7     %                                          19.6     %
Income Margin
                                                                                                                                                                  
Interest
expense on
debt
extinguishment          19.1             (19.1    )       —               —                —                —                —                 —
                                                                                                                                                                  
Provision for           360.9            12.0             (25.0   )       347.9            327.9            2.9              (7.8    )         323.0
income taxes
Net Earnings
Attributable to
The Estée
Lauder
Companies Inc.          747.0            22.1             (53.1   )       716.0            675.3            7.3              (15.4   )         667.2              7%
                                                                                                                                                                  
Diluted net
earnings
attributable to The
Estée
Lauder Companies
Inc. per
common share            1.89             .06              (.13    )       1.81             1.70             .02              (.04    )         1.68               8%
                                                                                                                                                                  
                                                                                                                                                                  

The impact of accelerated orders from certain retailers associated with the
Company’s implementation of SAP on net sales and operating results by product
category and geographic region is as follows:

                                              
(Unaudited;           Three Months Ended               Three Months Ended
In millions)          December 31, 2012                December 31, 2011
                   Net        Operating         Net       Operating
                      Sales          Results           Sales         Results
Product
Category:
Skin Care             $   48         $    40           $  16         $    13
Makeup                    32              26              9               6
Fragrance                 10              9               2               2
Hair Care                 4               3               3               2
Other                    —              —              —              —
Total                 $   94         $    78           $  30         $    23
                                                                          
Region:
The Americas          $   29         $    23           $  2          $    1
Europe, the
Middle East &             15              12              3               3
Africa
Asia/Pacific             50             43             25             19
Total                 $   94         $    78           $  30         $    23
                                                                          
                                                                          

                                                        
                                                                   
THE ESTÉE LAUDER COMPANIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; In millions)
                                                                   
                                December 31      June 30        December 31
                                 2012              2012            2011
                          
ASSETS
Current Assets
Cash and cash                    $  1,323.6        $ 1,347.7       $  999.1
equivalents
Accounts
receivable,                      1,531.7           1,060.3         1,383.7
net
Inventory and
promotional                      994.1             983.6           898.9
merchandise,
net
Prepaid
expenses and                     491.6             463.5           471.6
other current
assets
Total Current                    4,341.0           3,855.1         3,753.3
Assets
                                                                   
Property,
Plant and                        1,301.6           1,231.8         1,151.4
Equipment, net
Other Assets                     1,527.5           1,506.1         1,437.5
Total Assets                     $  7,170.1        $ 6,593.0       $  6,342.2
                                                                   
LIABILITIES AND EQUITY
Current
Liabilities
Current debt                     $  26.0           $ 219.0         $  143.8
Accounts                         345.7             493.8           384.8
payable
Other current                    1,680.5           1,413.0         1,493.5
liabilities
Total Current                    2,052.2           2,125.8         2,022.1
Liabilities
                                                                   
Noncurrent
Liabilities
Long-term debt                   1,330.1           1,069.1         1,068.7
Other
noncurrent                       664.7             650.6           607.7
liabilities
Total
Noncurrent                       1,994.8           1,719.7         1,676.4
Liabilities
                                                                   
Total Equity                     3,123.1           2,747.5         2,643.7
Total
Liabilities                      $  7,170.1        $ 6,593.0       $  6,342.2
and Equity
                                                                      
                                                 
                                                                      

SELECT CASH FLOW DATA
                                            
(Unaudited; In millions)
                                                                             
                                                  Six Months Ended
                                                  December 31
                                                  2012             2011
Cash Flows from Operating Activities                           
Net earnings                                      $ 749.0           $ 677.0
Depreciation and amortization                       156.8             141.0
Deferred income taxes                               (22.3  )          (13.6  )
Impairment of other intangible assets               —                 6.7
Other items                                         69.9              56.8
Changes in operating assets and
liabilities:
Increase in accounts receivable, net                (444.9 )          (494.4 )
Decrease in inventory and promotional               11.7              59.2
merchandise
Increase in other assets, net                       (31.5  )          (12.3  )
Increase in accounts payable and other             166.4            189.8
liabilities
Net cash flows provided by operating              $ 655.1           $ 610.2
activities
                                                                             
Capital expenditures                                205.4             181.5
Payments to acquire treasury stock                  326.5             522.4
Dividends paid                                      279.5             204.0

Contact:

The Estée Lauder Companies Inc.
Investor Relations:
Dennis D’Andrea, 212-572-4384
or
Media Relations:
Alexandra Trower, 212-572-4430