The Estée Lauder Companies Third-Quarter Sales Climb 11%

  The Estée Lauder Companies Third-Quarter Sales Climb 11%

         – Earnings Per Share Increases 42% to $.64 before Charges –

                  – Company Raises Full-Year EPS Estimates –

Business Wire

NEW YORK -- May 2, 2014

The Estée Lauder Companies Inc. (NYSE:EL) today reported net sales for its
third quarter ended March 31, 2014 of $2.55 billion, an 11% increase compared
with $2.29 billion in the prior-year quarter. Excluding the impact of foreign
currency translation, net sales increased 12%. The Company reported a 270
basis-point increase in operating margin, and net earnings for the quarter
rose 19% to $213.2 million, compared with $178.8 million last year. Diluted
net earnings per common share rose 20% to $.54, compared with $.45 reported in
the prior year.

Fabrizio Freda, President and Chief Executive Officer, said, “Our excellent
results this quarter reflect our multiple engines of growth across product
categories, countries and channels, enabling us to achieve strong local
currency sales growth in every geographic region. Sales came in higher than
our expectations and we again exceeded our earnings per share forecast. These
results were driven by the broad global demand for our diverse prestige beauty
brands, the strength of our emerging markets, accelerated growth in certain
developed markets and solid progress in skin care.”

During the quarter, the Venezuelan government enacted changes to its foreign
currency exchange rate regulations, which expanded the use of its existing
exchange rate mechanisms and created another mechanism, SICAD II. Based on
these changes, the Company evaluated all rate mechanisms made available by the
Venezuelan government to determine the most appropriate rate to use. As a
result, the Company changed the exchange rate used to remeasure its Venezuelan
net monetary assets to a newly enacted SICAD II rate. Accordingly, the Company
recorded a remeasurement charge of $38.3 million, both before and after tax,
equal to approximately $.10 per diluted share.

Excluding charges, principally related to the Venezuela remeasurement, net
earnings for the three months ended March 31, 2014 were $251.7 million, and
diluted net earnings per common share were $.64, versus $.45 in the prior-year
period.

Additionally, comparisons between the current and prior year third quarters
were affected by the acceleration of $94 million in sales shifted into the
Company’s fiscal 2013 second quarter in advance of the January 2013
implementation of SAP as part of its Strategic Modernization Initiative (SMI).
This amounted to approximately $78 million in operating income, equal to
approximately $.13 per diluted common share.

Excluding the impact of the shift, the Venezuela remeasurement charge and
restructuring activities, net sales in local currency and operating income for
the three months ended March 31, 2014 would have increased 8% and 18%,
respectively. A reconciliation between GAAP and non-GAAP financial measures is
included in this release.

“Our outlook for the balance of the year remains positive and we expect to
achieve our financial objectives,” Mr. Freda said. “We continue to forecast
local currency sales growth of 6% to 7%, and we are raising our earnings per
share guidance to $2.86 to $2.90, before charges and the effect of potential
accelerated sales orders relating to our SMI go-live in July 2014. Driving
this performance will be new and recent product offerings across categories,
particularly in skin care and makeup. For the remainder of the fiscal year we
also expect our growth will continue to be fueled by our success in
high-growth channels and emerging markets, while enhancing our local
relevance. Importantly, our mid-size brands continue to grow faster than the
average, increasing their contribution to the Company’s sales and
profitability, while strengthening our portfolio. We are flexible in our
investment spending, targeting opportunities that provide the highest returns,
promote demand for our brands and foster global growth. At the same time, we
are improving operating leverage and eliminating non-value added costs to
further improve operating margins and profitability.”


Results by Product Category

                Three Months Ended March 31
(Unaudited;                                                     Operating             Percent
Dollars in        Net Sales              Percent Change       Income (Loss)         Change
millions)
                  2014       2013        Reported  Local      2014       2013       Reported
                                          Basis      Currency                         Basis
                                                                                            
Skin Care         $ 1,132.1   $ 1,015.0   12   %     13   %     $  179.0   $  134.4   33    %
Makeup            1,015.7     919.2       10         11         149.9      107.3      40
Fragrance         270.5       233.2       16         16         (1.9     ) (0.2     ) (100  )+
Hair Care         120.8       116.2       4          5          13.2       5.1        100   +
Other             10.7        8.2         30         32         1.6        (3.2     ) 100   +
Subtotal          2,549.8     2,291.8     11         12         341.8      243.4      40
Returns and
charges
associated
with
restructuring     —           —                                 (0.2     ) 1.7
activities
Total             $ 2,549.8   $ 2,291.8   11   %     12   %     $ 341.6    $ 245.1    39    %


The change in net sales and operating income for the quarter was favorably
impacted by the prior year shift 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 $48 million; makeup, approximately $32
    million; fragrance, approximately $10 million; and hair care,
    approximately $4 million.
  *Operating income: Skin care, approximately $40 million; makeup,
    approximately $26 million; fragrance, approximately $9 million; and hair
    care, approximately $3 million.

Excluding the impact of the shift in orders:

  *Reported net sales in skin care, makeup, fragrance and hair care would
    have increased 7%, 7%, 11% and 1%, respectively.
  *Operating results in skin care, makeup, fragrance and hair care would have
    increased/(decreased) 3%, 12%, (100)+% and 63%, respectively.

The current-year period remeasurement of net monetary assets in Venezuela, as
previously mentioned, primarily impacted the operating income of the skin
care, makeup and fragrance product categories by $12 million, $16 million and
$10 million, respectively.

Skin Care

  *The skin care category is a strategic priority and the Company is well
    positioned to capitalize on its strong pipeline of innovative products.
    The Company gained share during the quarter in this category in certain
    countries where its products are sold.
  *Sales reflect the recent launches of the Company’s new Advanced Night
    Repair Synchronized Recovery Complex II and Micro Essence Skin Activating
    Treatment Lotion from Estée Lauder and Dramatically Different Moisturizing
    Lotion + and Even Better Essence Lotion from Clinique.
  *Sales from the reformulated Repairwear Laser Focus by Clinique and
    continued strong growth from the Company’s luxury skin care brand, La Mer,
    also contributed to growth.
  *Operating income increased sharply, including the shift, primarily
    reflecting higher-margin product launches from certain of the Company’s
    heritage brands, as well as increased results from higher-end prestige
    skin care products.

Makeup

  *Higher makeup sales primarily reflected strong growth from the Company’s
    makeup artist brands and from recent launches, such as Pure Color Envy
    Sculpting Lipstick from Estée Lauder and All About Shadow from Clinique.
  *Sales from makeup artist brands benefited from new product offerings, as
    well as expanded distribution in line with the Company’s retail store
    strategy.
  *Increased sales from Smashbox and the Tom Ford line of cosmetics
    contributed to the category’s growth.
  *The increase in makeup operating income primarily reflected improved
    performance from the Company’s makeup artist brands due to the higher
    sales, and certain heritage brands.

Fragrance

  *In fragrance, strong sales growth came from luxury brands Tom Ford and Jo
    Malone. Sales gains were also generated from the recent launches of Estée
    Lauder Modern Muse, Tory Burch and the Michael Kors Fragrance Collection.
  *Fragrance operating loss increased, due to the Venezuela remeasurement
    charge. Operating results also reflected higher net sales from recent
    launches, partially offset by higher investment spending.

Hair Care

  *Hair care net sales growth was primarily driven by Aveda, reflecting gains
    in the salon channel and the continued success of its Dry Remedy and
    Damage Remedy franchises.
  *Sales increased at Bumble and bumble, primarily due to higher sales to
    specialty-multi brand retailers. Ojon sales decreased, primarily due to
    its exit from the direct response television channel.
  *The category growth also benefited from expanded global distribution, in
    particular to specialty-multi brand retailers for Bumble and bumble and to
    salons and travel retail for Aveda.
  *Hair care operating income increased more than 100%, primarily reflecting
    higher net sales driven by expanded global distribution and new product
    launches, as well as lower investment spending.


Results by Geographic Region

                Three Months Ended March 31
(Unaudited;                                                     Operating            Percent
Dollars in        Net Sales              Percent Change       Income (Loss)       Change
millions)
                  2014       2013        Reported  Local      2014       2013      Reported
                                          Basis      Currency                        Basis
                                                                                           
The Americas      $ 1,072.0   $ 988.1     8    %     10   %     $  111.5   $  68.0   64    %
Europe, the
Middle East &     959.4       847.9       13         12         160.2      137.5     17
Africa.
Asia/Pacific      518.4       455.8       14         18         70.1       37.9      85
Subtotal          2,549.8     2,291.8     11         12         341.8      243.4     40
Returns and
charges
associated
with
restructuring     —           —                                 (0.2     ) 1.7
activities
Total             $ 2,549.8   $ 2,291.8   11   %     12   %     $ 341.6    $ 245.1   39    %


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

  *Net sales: the Americas, approximately $29 million; Europe, the Middle
    East & Africa, approximately $15 million; and Asia/Pacific, approximately
    $50 million.
  *Operating income: the Americas, approximately $23 million; Europe, the
    Middle East & Africa, approximately $12 million; and Asia/Pacific,
    approximately $43 million.

Excluding the impact of the shift in orders:

  *Reported net sales in the Americas, Europe, the Middle East & Africa and
    Asia/Pacific would have increased 5%, 11% and 2%, respectively.
  *Operating income in the Americas, Europe, the Middle East & Africa and
    Asia/Pacific would have increased/(decreased) 22%, 7% and (13)%,
    respectively.

The Americas

  *Net sales in the United States increased, reflecting growth from the
    Company’s makeup artist and luxury brands and certain heritage brands.
    Sales also increased in Latin America and Canada.
  *Sales of the Company’s online business grew double digits.
  *Operating income in the Americas rose, reflecting the increased sales and
    a more measured approach to spending. Additionally, operating income in
    the region reflects the charge of $38.3 million in the current-year period
    to remeasure net monetary assets in Venezuela.

Europe, the Middle East & Africa

  *In constant currency, net sales increased in each major product category
    and in virtually all countries in the region. The Company estimates that
    it continued to outperform prestige beauty in many markets.
  *The net sales increase was led by double-digit growth in a number of
    areas, including the United Kingdom, Germany, Switzerland, Turkey, France
    and Russia. Net sales growth in Switzerland and France were due, in part,
    to the accelerated retailer orders, as previously discussed. Certain
    European countries continued to experience soft retail environments.
  *In travel retail, sales increased high-single digits, primarily reflecting
    higher sales from the Company’s luxury brands, an increase in global
    airline passenger traffic and expanded distribution.
  *Operating income increased, as higher results from the United Kingdom,
    Switzerland, France and Russia were partially offset by lower operating
    results in Spain and certain Eastern European countries.

Asia/Pacific

  *Constant currency net sales increased in the majority of countries in the
    region. The strongest growth was generated in China, Japan, Hong Kong,
    Taiwan and Australia. The sales increase in China, Hong Kong and Taiwan
    reflect the shift in retailer orders, as previously discussed.
  *Sales were lower in Thailand, Korea and the Philippines.
  *The Company estimates that it gained share in certain countries within its
    points of distribution during the quarter.
  *In Asia/Pacific, operating income increased, led by China, Japan, Korea
    and Taiwan. Results in China and Taiwan primarily reflect the impact from
    the accelerated retailer orders. Lower operating results were posted in
    Hong Kong and the Philippines.

Nine-Month Results

  *For the nine months ended March 31, 2014, the Company reported net sales
    of $8.24 billion, a 6% increase from $7.77 billion in the comparable
    prior-year period. Excluding the impact of foreign currency translation,
    net sales increased 7%. Net sales grew in each of the Company’s geographic
    regions and product categories.
  *The Company reported net earnings of $946.4 million for the nine months
    ended March 31, 2014, a 2% increase compared with $925.8 million in the
    same period last year. Diluted net earnings per common share for the nine
    months ended March 31, 2014 increased 2% to $2.40, compared with $2.35
    reported in the prior-year period.
  *The fiscal 2014 nine-month results included the remeasurement charge of
    $38.3 million related to Venezuela, as previously mentioned.
  *The fiscal 2013 nine-month results included charges associated with
    restructuring activities of $13.3 million ($8.9 million after tax), equal
    to $.02 per diluted common share. Additionally, during the nine months
    ended March 31, 2013, the Company recorded a pre-tax charge of $19.1
    million ($12.2 million after tax), for the extinguishment of debt, equal
    to $.03 per diluted common share.
  *Excluding these charges, net earnings for the nine months ended March 31,
    2014 rose 4% to $983.5 million and diluted net earnings per common share
    increased 4% to $2.50, versus a comparable $2.40 in the prior-year period.

Cash Flows

  *For the nine months ended March 31, 2014, net cash flows provided by
    operating activities increased 25% to $1,169.4 million, compared with
    $934.2 million in the prior-year period.
  *The increase primarily reflected the higher net earnings and a net
    increase in cash from certain working capital components.

Outlook for Fiscal 2014 Full Year

The Company expects global prestige beauty to grow approximately 3% to 4%,
tempered by continued softness in certain European countries and Korea, and
slower near-term growth in China and the United States. The Company expects to
further improve its gross and operating margins by leveraging its strong sales
growth and continuing to reduce non-value-added costs.

  *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% versus the prior-year period.
  *Diluted net earnings per common share, including the charge related to the
    Venezuela remeasurement and the effect of potential accelerated retailer
    orders, are projected between $2.90 to $2.97.
  *As mentioned previously in this press release, the impact of the Venezuela
    remeasurement is equal to $.10 per diluted common share.
  *Diluted net earnings per share, before the charge related to the Venezuela
    remeasurement and the effect of potential accelerated retailer orders, are
    projected between $2.86 to $2.90. The approximately 1% negative currency
    impact on the sales growth equates to about $.02 of earnings per share.
  *July 2014 SMI Implementation:
    The Company expects to roll out the last major wave of SMI in July 2014 in
    certain of its locations. In advance of this implementation, the Company
    expects some retailers will accelerate sales orders that would normally
    occur in its fiscal 2015 first quarter into the fiscal 2014 fourth quarter
    to provide adequate safety stock to mitigate any potential short-term
    business interruption associated with the SMI rollout. Those additional
    orders are estimated to amount to between $125 million and $150 million of
    sales, equal to $.14 to $.17 per diluted common share.


Reconciliation between
GAAP and non-GAAP           Net Sales Growth          
estimates
                               Reported        Constant     Diluted
(Unaudited)                    Basis          Currency     Earnings
                                                            Per Share
Full-year forecast
including the Venezuela
charge and fiscal 2015
accelerated
retailer orders                6% – 7%  ^(1)   7% – 8%      $2.90 – $2.97 ^(1)
Non-GAAP
Venezuela charge               —               —            .10
                                                                          
Full-year forecast
excluding the                  6% – 7%         7% – 8%      3.00 – 3.07

Venezuela charge
                                                                          
Impact of fiscal 2015          ~(1)%           ~(1)%        (.14 – .17    )
accelerated orders
                                                                          
Full-year forecast
excluding the Venezuela        5% – 6%         6% – 7%      $2.86 – $2.90
charge and accelerated
retailer orders
^(1) Represents GAAP estimates.


Conference Call

The Estée Lauder Companies will host a conference call at 9:30 a.m. (ET)
today, May 2, 2014 to discuss its results. The dial-in number for the call is
888-294-4716 in the U.S. or 706-902-0101 internationally (conference ID
number: 30824577). The call will also be webcast live at
http://investors.elcompanies.com.

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 2014 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
(3)    the 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
(7)    domestic 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 networks, 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
(11)   supply of a 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
(16)   the 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, 2013.
       
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, Osiao, Marni and Tory Burch.

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


THE ESTÉE LAUDER COMPANIES INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited; In millions, except per share data and percentages)

                  Three Months Ended          Percent  Nine Months Ended           Percent
                     March 31                      Change    March 31                      Change
                       2014         2013                      2014         2013
                                                                                               
Net Sales            $ 2,549.8     $ 2,291.8       11   %    $ 8,243.5     $ 7,774.3       6   %
Cost of Sales         498.7        443.1                    1,624.4      1,550.3
Gross Profit          2,051.1      1,848.7       11   %     6,619.1      6,224.0       6   %
                                                                                               
Gross Margin           80.4    %     80.7    %                 80.3    %     80.1    %
                                                                                               
Operating
expenses:
Selling,
general and            1,709.5       1,605.3                   5,173.9       4,831.8
administrative
(A)
Restructuring
and other             —            (1.7    )                (2.2    )    12.0
charges (B)
                      1,709.5      1,603.6       7    %     5,171.7      4,843.8       7   %
                                                                                               
Operating              67.0    %     70.0    %                 62.7    %     62.3    %
Expense Margin
                                                                                               
Operating              341.6         245.1         39   %      1,447.4       1,380.2       5   %
Income
                                                                                               
Operating              13.4    %     10.7    %                 17.6    %     17.8    %
Income Margin
                                                                                               
Interest               12.3          12.6                      38.2          41.8
expense, net
Interest
expense on
debt                   —             —                         —             19.1
extinguishment
(C)
Other income          —            —                        —            23.1
(D)
Earnings
before Income          329.3         232.5         42   %      1,409.2       1,342.4       5   %
Taxes
                                                                                               
Provision for         115.6        53.6                     458.5        414.5
income taxes
Net Earnings           213.7         178.9         19   %      950.7         927.9         2   %
                                                                                               
Net earnings
attributable
to                    (0.5    )    (0.1    )                (4.3    )    (2.1    )
noncontrolling
interests
Net Earnings
Attributable
to The Estée
Lauder
Companies Inc.       $ 213.2       $ 178.8         19   %    $ 946.4       $ 925.8         2   %
                                                                                               
                                                                                               
Net earnings
attributable
to The Estée
Lauder
Companies
Inc. per
common share:
Basic                $ .55         $ .46           20   %    $ 2.44        $ 2.39          2   %
Diluted                .54           .45           20   %      2.40          2.35          2   %
                                                                                               
Weighted
average common
shares
outstanding:
Basic                  385.8         387.2                     387.3         387.5
Diluted                392.1         394.0                     394.1         394.7

    
      During the quarter, based on recent changes to Venezuela’s foreign
      currency exchange rate regulations, the Company changed the exchange
(A)   rate used to remeasure its Venezuelan net monetary assets to a newly
      enacted SICAD II rate. Accordingly, the Company recorded a remeasurement
      charge of $38.3 million, both before and after tax, equal to
      approximately $.10 per diluted common share.
      
      During the second quarter of fiscal 2013, the Company closed its
      multi-faceted cost savings program implemented in February 2009 (the
(B)   “Program”) and will continue to execute all remaining initiatives
      through fiscal 2014. The impact of returns, charges and adjustments
      related to the Program for each fiscal period are set forth in tables
      that follow these notes.
      
      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
(C)   result, the Company recorded a pre-tax charge of $19.1 million ($12.2
      million after tax), for the impact of the extinguishment of debt, equal
      to $.03 per diluted common share.
      
      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
(D)   future contingent consideration and other rights. As a result of the
      amended agreement, the Company recognized $23.1 million, equal to $.04
      per diluted common share as other income in the consolidated statement
      of earnings for the nine months ended March 31, 2013.
      


THE ESTÉE LAUDER COMPANIES INC.
SUMMARY OF CONSOLIDATED RESULTS
(Unaudited; Dollars in millions)

                   Nine Months Ended March 31
                  Net Sales                 Percent Change           Operating               Percent
                                                                        Income (Loss)           Change
                    2014         2013        Reported    Local        2014        2013        Reported
                                              Basis        Currency                             Basis
Results by
Geographic                                                                                           
Region
                                                                                                      
The Americas        $ 3,469.0     $ 3,310.4   5        %   6        %   $ 419.7     $ 372.4     13    %
Europe, the
Middle East &       3,031.6       2,778.1     9            8            673.4       659.0       2
Africa
Asia/Pacific        1,742.8       1,685.9     3            7            352.2       362.1       (3    )
Subtotal            $8,243.4      $7,774.4    6            7            $1,445.3    $1,393.5    4
Returns and
charges
associated
with
restructuring       0.1           (0.1      )                           2.1         (13.3     )
activities
Total               $ 8,243.5     $ 7,774.3   6        %   7        %   $ 1,447.4   $ 1,380.2   5     %
                                                                                                      
Results by
Product
Category
                                                                                                      
Skin Care            $ 3,564.4   $ 3,408.4   5        %   6        %   $   758.6   $   750.1   1     %
Makeup                3,145.8     2,928.9     7            8            564.5       495.1       14
Fragrance             1,115.7     1,039.6     7            8            95.5        130.5       (27   )
Hair Care             380.7       362.0       5            6            29.3        25.9        13
Other                 36.8        35.5        4            5            (2.6      ) (8.1      ) 68
Subtotal              8,243.4     7,774.4     6            7            1,445.3     1,393.5     4
Returns and
charges
associated
with
restructuring         0.1         (0.1      )                           2.1         (13.3     )
activities
Total                 $ 8,243.5   $ 7,774.3   6        %   7        %   $ 1,447.4   $ 1,380.2   5     %
______________

This earnings release includes some non-GAAP financial measures relating to
charges associated with restructuring activities, the Venezuela remeasurement,
the extinguishment of debt and the accelerated orders associated with the
Company’s SMI rollout. The following are reconciliations between the non-GAAP
financial measures and the most directly comparable GAAP measures for certain
consolidated statements of earnings accounts before and after the charges
associated with restructuring activities, the Venezuela remeasurement, the
extinguishment of debt and the accelerated orders. The Company uses these
non-GAAP financial measures, among other things, to evaluate its operating
performance and the measures represent the manner in which the Company
conducts and views its business. Management believes that excluding these
items 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, they are 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                  
                   March 31, 2014                            March 31, 2013
                                              Before                                 Before        % Change
                   As Reported   Returns/   Returns/       As          Returns/  Returns/      versus Prior
                                  Charges     Charges        Reported     Charges    Charges       Year Before
                                                                                                   Returns/Charges
Net Sales           $2,549.8      $ 0.0     $2,549.8       $2,291.8     $ 0.0      $2,291.8      11       %
Cost of              498.7          (0.2  )   498.5          443.1        0.0        443.1
sales
                                                                                                            
Gross Profit         2,051.1        0.2       2,051.3        1,848.7      0.0        1,848.7       11       %
Gross Margin         80.4     %               80.4     %     80.7     %              80.7     %
                                                                                                            
Operating            1,709.5        (38.3 )   1,671.2        1,603.6      1.7        1,605.3       4        %
expenses
Operating
Expense              67.0     %               65.5     %     70.0     %              70.1     %
Margin
                                                                                                            
Operating            341.6          38.5      380.1          245.1        (1.7   )   243.4         56       %
Income
Operating
Income               13.4     %               14.9     %     10.7     %              10.6     %
Margin
                                                                                                            
Provision
for income           115.6          0.0       115.6          53.6         (0.7   )   52.9
taxes
Net Earnings
Attributable
to
The Estée
Lauder               213.2          38.5      251.7          178.8        (1.0   )   177.8         42       %
Companies
Inc.
                                                                                                            
Diluted net
earnings
attributable
to The Estée
Lauder
Companies
Inc. per             .54            .10       .64            .45          .00        .45           42       %
common share


                  Nine Months Ended                       Nine Months Ended                   
                     March 31, 2014                            March 31, 2013
                                                Before                                 Before        % Change
                     As Reported   Returns/   Returns/       As          Returns/  Returns/      versus Prior
                                    Charges     Charges        Reported     Charges    Charges       Year Before
                                                                                                     Returns/Charges
Net Sales             $8,243.5      $     )   $8,243.4       $7,774.3     $ 0.1      $7,774.4      6       %
                                      (0.1
Cost of sales          1,624.4        (0.2  )   1,624.2        1,550.3      (1.2   )   1,549.1
                                                                                                             
Gross Profit           6,619.1        0.1       6,619.2        6,224.0      1.3        6,225.3       6       %
Gross Margin           80.3     %               80.3     %     80.1     %              80.1     %
                                                                                                             
Operating              5,171.7        (36.1 )   5,135.6        4,843.8      (12.0  )   4,831.8       6       %
expenses
Operating              62.7     %               62.3     %     62.3     %              62.2     %
Expense Margin
                                                                                                             
Operating              1,447.4        36.2      1,483.6        1,380.2      13.3       1,393.5       6       %
Income
Operating              17.6     %               18.0     %     17.8     %              17.9     %
Income Margin
                                                                                                             
Interest
expense on
debt
extinguishment         —              —         —              19.1         (19.1  )   —
                                                                                                             
Provision for          458.5          (0.9)     457.6          414.5        11.3       425.8
income taxes
Net Earnings
Attributable
to
The Estée
Lauder                 946.4          37.1      983.5          925.8        21.1       946.9         4       %
Companies Inc.
                                                                                                             
Diluted net
earnings
attributable
to The Estée
Lauder
Companies
Inc. per               2.40           .09       2.50           2.35         .05        2.40          4       %
common share


                       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
calendar 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 SMI 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.

This action created a favorable comparison between the fiscal 2014 and fiscal
2013 third quarters of approximately $94 million in net sales and
approximately $78 million in operating income, equal to $.13 per diluted
common share 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
                                                                                                    
                            March 31, 2014                      March 31, 2013
                                                                                                             % 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          $2,549.8   $ 0.0        $ —    $2,549.8     $2,291.8   $ 0.0      $ 94.3    $2,386.1         7%
Cost of            498.7      (0.2     )   —      498.5        443.1      0.0        16.2      459.3
sales
                                                                                                                  
Gross Profit       2,051.1    0.2           —      2,051.3      1,848.7    0.0        78.1      1,926.8           6%
Gross Margin       80.4     %                      80.4     %   80.7     %                      80.8       % 
                                                                                                                  
Operating          1,709.5    (38.3    )   —      1,671.2      1,603.6    1.7        —         1,605.3           4%
expenses
Operating
Expense            67.0     %                      65.5     %   70.0     %                      67.3       % 
Margin
                                                                                                                  
Operating          341.6      38.5          —      380.1        245.1      (1.7     ) 78.1      321.5             18%
Income
Operating
Income             13.4     %                      14.9     %   10.7     %                      13.5       % 
Margin
                                                                                                                  
Provision
for income         115.6      0.0           —      115.6        53.6       (0.7     ) 25.0      77.9
taxes
Net Earnings
Attributable
to
The Estée
Lauder
Companies          213.2      38.5          —      251.7        178.8      (1.0     ) 53.1      230.9             9%
Inc.
                                                                                                                  
Diluted net
earnings
attributable
to The Estée
Lauder
Companies
Inc. per
common share       .54        .10           —      .64          .45        .00        .13       .59               10%
                                                                                                                  

                       THE ESTÉE LAUDER COMPANIES INC.

Excluding the impact of the prior-year period shift in orders associated with
the Company’s implementation of SMI, the returns and charges associated with
restructuring activities and the Venezuela remeasurement charge, net sales and
operating results for the three months ended March 31, 2014 would have
increased/(decreased) as follows:


(Unaudited)                         Net Sales As Adjusted     
                                       Reported      Local          Operating
                                      Basis       Currency       Results As
                                                                    Adjusted
Product Category:                                                 
Skin Care                                 7   %          7    %        9    %
Makeup                                    7              7             25
Fragrance                                 11             11            5
Hair Care                                 1              2             62
Other                                     26             27            100  +
Total                                     7   %          8    %        18   %
                                                                            
Region:
The Americas                              5   %          7    %        64   %
Europe, the Middle East & Africa          11             10            7
Asia/Pacific                              2              6             (13  )
Total                                     7   %          8    %        18   %
                                                                            


THE ESTÉE LAUDER COMPANIES INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; In millions)

                                  March 31     June 30       March 31
                                     2014          2013            2013
ASSETS                                                           
Current Assets
Cash and cash equivalents              $ 1,530.2     $ 1,495.7       $ 1,438.6
Accounts receivable, net               1,399.0       1,171.7         1,361.9
Inventory and promotional              1,215.4       1,113.9         989.3
merchandise, net
Prepaid expenses and other             547.2         515.9           496.4
current assets
Total Current Assets                   4,691.8       4,297.2         4,286.2
                                                                     
Property, Plant and Equipment,         1,434.9       1,350.7         1,296.0
net
Other Assets                           1,519.3       1,497.3         1,512.9
Total Assets                           $ 7,646.0     $ 7,145.2       $ 7,095.1
                                                                     
LIABILITIES AND EQUITY
Current Liabilities
Current debt                           $ 18.4        $ 18.3          $ 20.0
Accounts payable                       512.5         481.7           388.2
Other current liabilities              1,508.4       1,434.6         1,507.7
Total Current Liabilities              2,039.3       1,934.6         1,915.9
                                                                     
Noncurrent Liabilities
Long-term debt                         1,327.7       1,326.0         1,329.2
Other noncurrent liabilities           596.6         582.7           643.2
Total Noncurrent Liabilities           1,924.3       1,908.7         1,972.4
                                                                     
Total Equity                           3,682.4       3,301.9         3,206.8
Total Liabilities and Equity           $ 7,646.0     $ 7,145.2       $ 7,095.1



SELECT CASH FLOW DATA
(Unaudited; In millions)

                                                    Nine Months Ended
                                                     March 31
                                                     2014          2013
Cash Flows from Operating Activities                             
Net earnings                                         $ 950.7        $ 927.9
Depreciation and amortization                          280.0          247.2
Deferred income taxes                                  (33.7   )      (43.3  )
Loss on Venezuela remeasurement                        38.3           2.8
Other items                                            130.3          96.8
Changes in operating assets and liabilities:
Increase in accounts receivable, net                   (226.7  )      (297.0 )
Increase in inventory and promotional merchandise,     (87.4   )      (4.2   )
net
Increase in other assets, net                          (65.1   )      (24.0  )
Increase in accounts payable and other liabilities    183.0         28.0
Net cash flows provided by operating activities      $ 1,169.4      $ 934.2
                                                                             
Capital expenditures                                 $ 342.8        $ 305.5
Payments to acquire treasury stock                     600.3          363.2
Dividends paid                                         225.2          349.3


Contact:

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