Dennis D'Andrea - Vice President, Investor Relations William P. Lauder - President, Chief Executive Officer, Director Daniel J. Brestle - Chief Operating Officer Richard W. Kunes - Chief Financial Officer, Executive Vice President

Christopher Ferrarra - Merrill Lynch Justin Hott - Bear Stearns Amy Low Chasen - Goldman Sachs William G. Schmitz - Deutsche Bank Linda Bolton Weiser - Oppenheimer & Co. Nik Modi - UBS Filippe Goossens - Credit Suisse Alice Longley - Buckingham Research Lauren R. Lieberman - Lehman Brothers Constance Maneaty - Prudential Javier Escalante - Morgan Stanley

Good day, everyone and welcome to the Estée Lauder Company’s fiscal 2007 third quarter conference call. Today’s call is being recorded and webcast. For opening remarks and introductions, I would like to turn the call over to the Vice President of Investor Relations, Mr. Dennis D'Andrea. Please go ahead, sir. Dennis D'Andrea: Good morning, everyone. On today’s call are William Lauder, President and Chief Executive Officer; Daniel Brestle, Chief Operator Officer; and Rick Kunes, Executive Vice President and Chief Financial Officer. We hope that many of you attended our recent analyst and investor day or participated via the web. Since we didn’t have time during that event for a full presentation on hair care, Dan will review that segment of our business after William’s remarks. Dan will also be available for the Q&A session. Since many of our remarks today contain forward-looking statements, let me refer you to our press release and our reports filed with the SEC where you will find factors that could cause actual results to differ materially from these forward-looking statements. I will turn the call over to William.

Davis Consultants Asia is a multi- disciplined consulting practice focused on business development and advisory services in the data storage industry.: Established in 1994, and headquartered in Kuala Lumpur, Malaysia, Davis Consultants leverages many years of experience and extensive contacts throughout the industry to provide a wide range of services. These include Asia location development, joint venture development, technical & business due-diligence assessments, and buy-side investment research services tailored to our client’s specific needs.: Our mission is to provide efficient, accurate, and timely information and advisories in the data storage industry.: Davis Consultants Asia publishes the Data Storage News Summary® , a news aggregation service, which is distributed by email on a complimentary basis twice per week.: William P. Lauder: Thank you, Dennis. Good morning, everyone. I am pleased you have joined us to discuss our third quarter results. During the period, we continued to achieve solid sales gains, up 7% due to improvement in most product categories and healthy growth in many key countries. Diluted earnings per share from continuing operations were $0.45, in line with our projections. Rick will go into further detail later. Our third quarter performance tracked our expectations. There were, of course, certain highlights, developments and product introductions that I would like to bring to your attention. Let me begin with a broad overview. As we have stressed, we are truly a global company. More than half of our sales were generated outside the U.S. during the quarter. We saw the strongest growth in Europe, the Middle East and Africa, up 13% in local currency, followed by Asia-Pacific. In terms of product categories, hair care showed the biggest improvement, followed by skin care and then makeup. Both Estée Lauder and Clinique, our two core brands, grew on a global basis, fueled by sharply higher foreign sales overall, which more than offset weakness in the U.S. Our high growth brands, M-A-C, Bobbi Brown, La Mer, Jo Malone and Aveda, continued to grow in virtually all regions, in many cases with large double-digit increases. You may recall that one of our long-term goals is to position our brands and offerings to best optimize our portfolio. To that end, we have rolled out brands, developed desirable and effective products, and created promotions geared to different markets, customs, and cultures. In the third quarter, demand for the Estée Lauder brand was particularly strong in Russia, China, and Hong Kong, as well as in the U.K. We believe the brand still has more untapped potential in the U.K., particularly from the upscale [Renutra] franchise, an area where we expect to boost sales. Estée Lauder was ranked number two in retail and prestige distribution in the fast growing Asia-Pacific market. Shipments in the region rose double-digits, with the bulk of business in skin care. Clinique continued its turnaround in Japan and enjoyed healthy gains in Central Europe, Russia, Nordic and Hong Kong. U.S. sales associated with its spring gift with purchase promotion were approximately flat with last year, which is moderately encouraging after some declines. We believe consumers found the editor’s choice gift appealing, so we plan on repeating it with some variations in the fall. Clinique is also enjoying success in All About Eyes Rich, a new line extension that is exceeding our sales forecast. We believe this product holds the potential to become a critical component of our skin care portfolio for years to come, and other skin care introductions, Continuous Rescue, also got off to a strong start. Bobbi Brown is showing terrific momentum, both in the U.S. and abroad. Bobbi has become more visible to generate brand awareness and reach new consumers. Her recent publicity efforts included a television satellite tour to promote her latest book, Bobbi Brown Living Beauty. She appeared on many major media outlets and in nearly every major women’s magazine. The book has sold well, creating interest in her and the brand. As you may know, Bobbi is the beauty editor and a frequent guest on the Today Show, which hopefully transforms viewers into consumers. Additionally, for the first time in the U.S., the brand was sold on TV. Bobbi Brown herself appeared on QVC and offered her trademark beauty tips along with compelling product. The inventory sold out in 45 minutes, making it the largest single hour cosmetics launch in the network’s 20-year history. Thanks to the huge success, Bobbi plans to return to the airwaves for another segment this summer. We are pursuing a measured expansion of Jo Malone freestanding stores in order to grow the brand methodically. In France, we are opening a store in Cannes next week in time for the upcoming celebrity-studded film festival. Other retail locations are planned for Paris and Leone, as well as the GUM Department Store in Moscow, its first store in Russia. Let me turn to distribution. We had great success in travel retail, one of the highest margin channels. Sales rose solid double digits in the quarter, with favorable results across all regions. Several factors are fueling the growth. Airline passenger traffic remains healthy and is growing, aided by sharp increases in Chinese travelers. Construction of airport terminals is booming. Moreover, the amount of retail space inside them is expanding, including more stores for arriving passengers who can shop while waiting for their luggage. In addition, we are seeing improvements in the appearance and management of airport stores. We have launched nine brands in the channel since 2005 and introduced many exclusive products and collections that have been well received. Overall, we believe there is a lot of untapped potential in the travel retail arena. Just 30% of global travelers step foot in airport stores, and only 10% of all travelers make a purchase. The ban on carrying liquids onto planes has not affected us to any material degree and although this is a distribution channel subject to risk, we are optimistic about the growth potential, assuming international relations remain stable. We have continued to expand geographically, another of our mandates, making more brands and products available in emerging as well as established locales. Of recent note, Origins has expanded in the French pharmacy channel, Estée Lauder unveiled an elegant shop in Hanoi, and Aveda launched a lifestyle salon and spa in Madrid. We have previously discussed, with our strategic modernization initiative, which we expect will streamline and integrate our business processes. Aveda will be the first operating unit to implement the new system when it goes live next week. This is a major component of our goal to make our operations more efficient and achieve cost excellence. I hope to be able to discuss Aveda’s success with the project during our next call. Now, I will turn the floor over to Dan Brestle who will discuss our hair care business. Dan. Daniel J. Brestle: Thank you, William. Today I want to take just a few minutes to describe some of our opportunities in hair care. Our hair care business is showing consistently strong gains, and we believe has good growth potential. This quarter, sales rose 21% and operating income was up over 50%. Hair care is the largest segment of the global beauty industry, with approximately $34 billion per year in manufacturer sales. Although much of these sales are happening in mass, the salon channel continues to show promise because the fastest growing categories are hair color and styling products, which benefit from the expertise of a hair stylist. Salons are a significant channel for hair care in the U.S., representing 31% of the $8.5 billion business. The figure for the top five western European countries is just a bit less, while Asia a bit more, with Japan accounting for half of that region. Our strategy is to focus on the top tier of these salons, those with favorable demographics, a discerning brand selection and premium pricing. Premium retail resonates with premium salon services. While hair care represents a substantial portion of the global beauty business, it is only 5% of our business, so there is opportunity for us on many levels. Over 95% of our hair care business is done through Aveda and Bumble and bumble brands. The hair care business supports three of our key objectives. First, it furthers our mission to diversify distribution by fueling growth in the salon and spa channels and in company-owned Aveda stores. Second, this is a global beauty industry category that we believe holds a lot of potential in top tier salons. There is substantial room to expand this business on a global scale by leveraging off our historic brand building strengths. Aveda is sold in over 25 countries but only 20% of its sales this year will be generated outside of the U.S. International penetration is even lower for Bumble and bumble. Lastly, these two brands enable us to gain a foothold in the only major beauty category in which we do not have significant presence. To illustrate our strong position in the U.S., consider this statistic; among the top 200 fastest growing salons in the U.S., 71% carry Aveda and/or Bumble and bumble. Additionally, 94 out of the 200 are Aveda concept salons, which sell Aveda exclusively. Our strategy also results in the highest productivity per door among the salon hair care brands. The average U.S. salon purchases 15,600 per year in product. Salons that sell Bumble and bumble purchased twice that amount, and salons that sell Aveda purchased an average 48,000, more than three times the industry average. So how will we continue to grow these brands to support our corporate imperatives? For Aveda, we expect double-digit growth in sales and earnings to continue through expansion in existing markets and opening new markets. The North American business is driven by organic growth at salon and freestanding stores, acquisition of distributors, stylist education and greater penetration of hair color. Aveda is currently the number three professional spa brand in the U.S., but we want to be number one and we will continue to pursue this channel. The brand is fueling organic comp store growth through recruitment of new consumers using a broad range of products and sampling, as well as rewarding loyal customers. Our Pure Privilege loyalty program, in which participants earn points redeemable for products or services, is exceeding our expectations. Additionally, online is both a strong sales growth area and a leading source of referrals to concept salons. The international business is driven by expansion in Japan, the recent launch in Spain, and solid growth in Italy, Germany, and the U.K. Importantly, the brand is demonstrating similar passion abroad as it does at home. Stylists associated with Aveda recently won five of nine German Hairdresser of the Year awards. We plan to open four concept salons in Madrid in the fourth quarter and are evaluating several other prime markets, such as France and China. Overall, Aveda plans to increase salon distribution in a controlled and deliberate manner. A major brand equity study we conducted showed that 91% of the salon professionals and 61% of the consumers were aware of the Aveda mission; to care for the world we live in. And 70% of both groups found it relevant to them personally. Many respond to the authenticity of Aveda. The company is the largest corporate purchaser of wind energy in Minnesota, where 100% of the electrical usage at the brand’s distribution center and main manufacturing plant is offset by wind energy purchases. This year, the brand is focusing on its philanthropic efforts on clean water rights. At Bumble and bumble, double-digit sales and profit growth is also continuing. In the U.S., Bumble is focusing on stylist education, connecting with network salons through regional events and hair shows. Market research shows a very powerful support and interest in the existing network and potential new salons. Bumble and bumble expects to expand further in the U.S. because of the strong demand for the brand. For Bumble and bumble, international expansion is in its infancy. The brand is planting seeds in the form of hair shows, sampling, fashion shows and photo shoots, which generate lots of buzz. The brand plans to substantially increase distribution in international markets over the next several years. Now I would like to hand it over to Rick Kunes, our Chief Financial Officer, to take you through the financial details. Rick. Richard W. Kunes: Thank you, Dan and good morning, everyone. My discussions today will focus on our results from continuing operations. For the quarter, we reported sales of $1.69 billion, a solid 7% increase over last year’s quarter. In local currency, sales rose 5%. Net earnings from continuing operations for the quarter increased 48% to $93.8 million, compared with $63.2 million last year. Diluted EPS rose 53% to $0.45 versus $0.29 last year. This performance was as we projected on our last call. Our prior year third quarter results included a special charge of $51.6 million, equal to $0.15 per share, related to our cost savings initiative. As always, let me refer you to today’s press release for the details of our net sales and operating income by product category and geographic region. During the quarter, we began to anniversary store closures that took place in February 2006 resulting from the consolidation of Federated and May. We are not yet seeing the full benefit from the merger since the performance of the May company doors that converted to Macy’s continues to lag the Federated legacy doors. As has been the case this fiscal year, the Americas region and each of our product categories, except hair care, was adversely impacted by fewer department store doors resulting from the merger. Reported skin care sales growth nearly broke the double digit market with a solid performance from our European and Asian businesses, while more moderate growth was reported in the Americas. Our makeup artist brands continued to lead the makeup category, with double-digit growth worldwide. The Europe and Asia regions each generated strong double-digit growth, fueling the increase in this category. Fragrance sales decreased, as the category was up against a difficult comparison to last year, when sales rose 11% in local currency. While we enjoyed solid results from some new and recently introduced fragrances, principally in Europe, we experienced lower sales of certain existing products in the Americas. Geographically, our international business again led our growth this quarter. In Europe, the Middle East and Africa, despite coming off high single digit local currency growth last year, we grew net sales a solid 13% for the quarter. A few key businesses drove this performance, including travel retail and our largest market in the region, the United Kingdom, which posted healthy double-digit increases. Russia, one of our emerging markets, reported another outstanding quarter. All countries in Asia-Pacific posted local currency sales increases, with the exception of Thailand. The increases generally reflect a strong economy in the region. Japan, our largest affiliate in the region, was up mid single digits in the quarter. New points of distribution in the region also added to sales growth. In the Americas, net sales decreased. The decline reflects weakness in our core brands in the U.S., which continue to face competitive pressures and retailer consolidation. As I mentioned, during the quarter we have finally reached the anniversary of store closures resulting from the Federated-May merger. There continues to be softness in the May doors that converted to Macy’s, while Federated legacy doors are up nicely. We expect this will continue to affect our sales but ease over the remainder of our fiscal year. As we said on the last call, there were strong orders from retailers during the middle of the second quarter which, as expected, somewhat impacted replenishment shipments this quarter. Also contributing to the decrease was the timing and level of fragrance shipments compared to last year -- in particular, certain Tommy Hilfiger products. Moving on to gross margin, we had a 90 basis point improvement this quarter to 74.8%, a decrease in obsolescence charges, a change in the mix of our business, and favorable exchange rates all contributed to the improvement. Our operating expenses for the quarter as a percentage of sales decreased to 65.5% from 66.5% last year. The prior year quarter included a $52 million charge related to our cost savings initiative, which was equal to approximately 330 basis points. On an apples-to-apples basis, operating expenses as a percentage of sales increased. We experienced a higher level of selling, general and administrative expenses, which reflected higher demonstration and education costs of beauty advisors and makeup artists, as well as organizational costs to establish the platform on which we intend to build our pharmacy channel business in Europe. Lower sales in the Americas, as well as incremental spending for our strategic modernization initiative, also negatively impacted our operating expense margin. As a result, operating income rose to $56.7 million, a 190 basis point improvement in margin over the prior-year period, which was negatively impacted by the 330 basis point cost savings initiative charge. Looking at operating results by category, hair care had the largest gains, reflecting strong sales. Skin care was relatively flat, as international improvement, tempered by investment in the pharmacy channel in Europe were offset by domestic declines. Makeup was down, primarily due to challenges among core brands, while fragrance decrease reflecting the timing and level of shipments, principally certain Tommy Hilfiger products in the U.S. By region, operating profits increased internationally but declined in the Americas. In the Americas, operating income decreased, reflecting lower sales coupled with spending behind strategic initiatives that are intended to drive future sales growth. The additional spending supports both our core brands and the development of new brands in the U.S. Partially offsetting these results were improved operating income from our hair care and online businesses. In Europe, the Middle East, and Africa, travel retail, the U.K. and Russia led the operating income increase. Slightly offsetting these gains were lower results in France and Spain. Asia-Pacific generated the highest operating income growth percentage, with virtually all countries posting increases. Gains in Hong Kong, China and Korea accounted for the majority of the increase. The effective tax rate for the quarter was 35.4%. Now let me turn to our cash flow and balance sheet. Cash flows from operating activities were $456 million for the nine months ended March 31, 2007, compared with $476 million last year. The change primarily reflects higher inventory levels, driven by new and emerging international countries, planned promotional activities, and added safety stock in anticipation of the SMI implementation at our Aveda manufacturing facility. Accounts receivable balances were up, primarily because of the significant international sales growth. In addition, cash flows this year were impacted by cash payments we made related to last fiscal year’s cost-savings initiative. Our day sales outstanding at March 31, 2007 were consistent with last year at 51 days. Inventory days were higher at 168 days compared with 158 days last year. The increase in inventory days reflects the reasons I just described. During the quarter, we repurchased approximately 16 million shares of our class A common stock for $750 million in an overnight share repurchase agreement. All shares repurchased have been placed into treasury. The total shares repurchased for the nine months is approximately 22.5 million shares, returning $1 billion to stockholders. To fund the initial purchase, we borrowed approximately $700 million under our commercial paper program, supplemented by cash on hand. This week we issued and sold long-term notes to refinance a substantial portion of the commercial paper. Our key return ratios continue to improve, including our return on invested capital ratio, which increased nicely during the quarter. Year-to-date, we spent $212 million for capital expenditures, which includes incremental spending for our company wide systems initiative. For the full year, we continue to expect capital expenditures of approximately $290 million. For fiscal ’07, we anticipate between $675 million and $700 million of cash flow from operations, depending on our working capital performance. Now I will update you on a few assumptions for the fiscal year. We continue to estimate sales growth of approximately 6% to 7% in constant currency. We estimate that foreign currency translation will add 2% to our reported top line. We continue to anticipate solid growth in all regions. We are comfortable narrowing our full year estimate of diluted EPS from continuing operations to between $2.15 and $2.20. We expect improvements in gross margin to mostly offset increased operating expenses, resulting in a relatively consistent operating margin versus last year. Our gross margin should benefit from supply chain savings, product mix, and lower promotional spending. In operating expenses, we continue to be impacted this year by planned higher levels of investment spending behind new product launches and new channel initiatives, more spending on selling and training, as well as for our faster growing and developing brands, and incremental spending related to our strategic modernization initiative and IT security enhancements. The $30 million of savings resulting from our cost savings initiatives of last year will be realized and are included in our overall expectations. At this time, we expect our effective tax rate will be approximately 35.5% for fiscal 2007. That concludes my comments and we will be happy to take your questions now.

(Operator Instructions) Our first question comes from Christopher Ferrarra with Merrill Lynch. Christopher Ferrarra - Merrill Lynch: Good morning. I wanted to ask about the spring gift with purchase program. I guess you guys said it was flat. Is that in the absolute or is that on a same-store basis? Could you talk about the swing in number of I guess same-store sales or the number of stores it was applicable to in the quarter, just to get an idea of what kind of traction it gained? Daniel J. Brestle: Chris, the number referred to was the Clinique gifts and they were flat on the same-store basis. Our Lauder brand was somewhat less than that, but we were very encouraged with the Clinique results. Christopher Ferrarra - Merrill Lynch: Just out of curiosity, with the editor’s choice flowing through, why was flat good for you guys? Your expectations weren’t a little higher than that? Daniel J. Brestle: No, it is our intent and our investment against gifts to keep it flat to a little plus. It is a strategy. We don’t intend to disproportionately growth gift. We would like it to be in that range so our basic business will fuel the future growth. That is what we have told everyone probably for four quarters now, and gift has been a struggling vehicle for us. Christopher Ferrarra - Merrill Lynch: Thanks.

Your next question comes from Justin Hott with Bear Stearns. Justin Hott - Bear Stearns: Thanks. First of all, the timing of the fragrance shipments, could you let us know how much that impacted you in the quarter? Richard W. Kunes: There were two things related to fragrance that impacted us. One was the 11% growth last year with the strong launch of Sean John and Amber Nude, the Estée Lauder fragrance. And the other was the broader distribution of some Tommy fragrances. We had shipments in the third quarter of last year which we really didn’t anniversary this year. Some of that is in the fourth quarter and some of it was just strong performance last year. Justin Hott - Bear Stearns: Rick, is there any way to quantify that? Richard W. Kunes: The breakdown of the two, no. Maybe Dennis can give a little more color to it from some information that he may be able to get a hold of, if you wanted to call him later. I don’t have the numbers in front of me. Justin Hott - Bear Stearns: The other question is on hair care. I am a little confused on the timing of mentioning hair care on this call. We just had an analyst meeting about a month ago. Why bring up the Aveda and Bumble and bumble distribution strategy now? William P. Lauder: Sure. I think if you will recall, we actually were not able to discuss in detail the hair care business at our analyst call, just because we had so much to cover. So what we said at that time was that we would on this call give a little bit more color to the hair care business, and that is what Dan was attempting to do. Justin Hott - Bear Stearns: Would we call it more of a distribution strategy or a store opening strategy? Is it going to be more new markets or U.S. markets, just to some up what you were saying? William P. Lauder: I think the comment would be E, all of the above. How you distinguish between distribution and store opening, distribution is amongst the strategy store opening. Justin Hott - Bear Stearns: Salons you don’t own. William P. Lauder: Well, we do not own salons. Excuse me, Bumble and bumble own -- Justin Hott - Bear Stearns: Not Aveda salons, I’m sorry. Aveda products in non-Aveda salons. William P. Lauder: Products in non-Aveda salons we will continue to push both through the Aveda and Bumble and bumble brands to expand into the right salons for these brands, so they can continue to be the leading brands in prestige salons. As well, as you heard, we are talking about, we are focusing our efforts in expanding the Aveda brand in a number of international markets and looking very seriously at the opportunities for Bumble and bumble in a handful of markets where it does not already have a presence. Justin Hott - Bear Stearns: One last quick question; China. I know you gave a number saying it as up. Could you quantify that a little bit further -- strong double digits? William P. Lauder: China was up very strong double digits. They continue to do very well there and we are very pleased with our results. Justin Hott - Bear Stearns: Thank you.

Your next question comes from Amy Chasen with Goldman Sachs. Amy Low Chasen - Goldman Sachs: I just wanted to spend a little bit more time on the U.S. sales deceleration. Last quarter you were able to give us some sense of how your department store business did in the U.S. relative to the non-U.S. department store business. Could you help us with that this quarter? Richard W. Kunes: Amy, I can give you a little bit of color on sales in the Americas, and certainly as you know, we manage the business on a full-year basis and we are expecting growth in the Americas, as I think we said during the call. What we are seeing is that the acquired doors through some of the mergers and acquisition activity in our retail partners are under-performing the legacy doors, and that is certainly something that continues to affect us. It is roughly in its total around 7% differential in growth rates, one versus the other, so it is a pretty big impact this year but we are beginning to see that start to slow down. We did talk last quarter about the fact that we had some customer-driven sell in last quarter which was going to effect our replenishment in quarter three, and we did see that this quarter. We had the fragrance comp issue that we just discussed, with the 11% growth last year. And generally, through many of the businesses that have either gone through some sort of merger or acquisition, we are seeing some pressure on inventories. I think that is one way that they are looking to help fund some of that acquisition costs that is putting a little pressure. So that is affecting our replenishment a little bit. Amy Low Chasen - Goldman Sachs: I guess what I am a little bit confused about is that the legacy doors, has their underperformance gotten worse? Why wasn’t this an -- and I understand some of the timing stuff, so let’s kind of strip that out in terms of the replenishment last quarter, but why wasn’t the underperformance of these legacy doors an issue last quarter or the quarter before? Has it gotten worse? Richard W. Kunes: I think that it is something that we talked about almost on every call, quite honestly. The legacy doors are the ones that are actually doing pretty well. It is those doors that have been acquired and changed their names in some fashion, those are the ones that are showing weakness. Amy Low Chasen - Goldman Sachs: Okay, so I guess if we strip out the timing issues in terms of the second quarter replenishment and the fragrance issue, could you give us a sense what the normalized number would have been in the quarter? Would it have been up? Richard W. Kunes: It would have been up, certainly. As I say, we are expecting growth in the Americas region in its totality for the year. Amy Low Chasen - Goldman Sachs: So is it fair to say that in the quarter, maybe the U.S. would have been up closer to like 5% if it weren’t for those timing issues? William P. Lauder: It is kind of hard to say if, if, if, if -- if the Nor’easter didn’t come along and wipe out the entire Northeast up to the Midwest for three to four days during the Clinique gift, perhaps their number would have been better. There are some other sarcastic comments I can make about if, but suffice it to say, we see a material difference in sales performance -- and I am not singling out any one retailer -- between acquired doors and legacy doors where names have changed. What we are seeing is that when a retail store name, brand name has changed on the door, the local markets where there have been changes seem to be materially impacted in a different way in sales trend versus doors that have consistently had the same name on the door with the consumer. We see a seven point spread in that difference across multiple different retail platforms. That is a very significant statistical number on a single door, and you add up the hundreds of doors that this has been affected across a number of different retailers, that is a meaningful difference. It is very hard to be able to pull out hundreds of doors and say if you take those away and you take this away and you take that away, we would have been fine. Amy Low Chasen - Goldman Sachs: But William, last follow-up; forget about department stores. If you look at your U.S. non-department store business, can you give us a sense for how much that was up? Richard W. Kunes: That was up double digits. If you want to look at, if you will, Amy, non-NPD monitored doors, our business was up 11%. Daniel J. Brestle: Amy, if you look at what we would describe the specialty stores -- Neimen’s, Sachs, Nordstrom’s, Bloomingdale’s, most of which are not affected at all by any type of mergers, our business was fine, absolutely fine.

Your next question comes from Bill Schmitz with Deutsche Bank. William G. Schmitz - Deutsche Bank: Good morning. Can you just talk about -- you kind of look a lot at your global competitors and it looks like there has been a pretty good acceleration in category growth this quarter, and so they are doing high single digit organic or local currency sales growth. Are you losing market share? Richard W. Kunes: Sometimes when we compare against our competitors, you have to remember that we are very strong here in North America, which is the market that is most affected by a lot of these merger and acquisition activities. Our business internationally was very strong this quarter, 13% growth in Europe and 12% growth in Asia, so we had some great results. When you look outside of where we have a very strong presence, which is North American department stores, but even outside of those in North America our business was very strong, so in the department stores themselves are really what is affecting our business here in North America. William P. Lauder: Bill, I think it is a pretty safe number, even though it is harder to get your hands on it, we have been seeing very consistent share expansion in the Lauder and Clinique brands in particular, in continental Europe in the perfume markets now for five -- better than five years. We have seen a consistent trend in acquisition of share, both in color and treatment in particular. We have been seeing this over a meaningful amount of time. In fact, we can comfortably say we have acquire a fair amount of share in Europe in a stealthily manner because the reporting isn’t the same, but we know our business is expanding at a greater rate than our competition there, because we are in the position in Europe that they are in North America, which is we are not the market leader and dominating. Instead, we have more share to acquire coming from a smaller base. William G. Schmitz - Deutsche Bank: Okay, great, and then can we spend a few minutes on fragrance? The strategy of focusing on the classics and getting rid of some of the tertiary, fly-by-night brands that have a disproportionate amount of spending, is that going to continue going forward? Do you think that operating profit margins in fragrance will grow pretty significantly year over year? William P. Lauder: I don’t know if I would use the words significant growth and operating profit margin in the same sentence with fragrance as much as I’d say you’ll see improvement, meaningful improvement. But coming from the substantially lower operating profit base that we have in the fragrance, I think I would caution to putting any orders of magnitude to it. We believe that fragrance is both a strategic imperative for us on a global basis and we believe that there are opportunities for us. Specifically, we are finding a greater return on investment and focusing in on certain positions brand by brand which offer us an opportunity versus others. I would hate to generalize because fragrance in particular is a highly opportunistic business and we would not want to rule out opportunities that may give us an opportunity to both accelerate the top line while improving the bottom line too. Richard W. Kunes: But I think if you look at our year-to-date results, you have seen some pretty nice improvement in the profitability of fragrance.

Your next question comes from Linda Bolton Weiser with Oppenheimer. Linda Bolton Weiser - Oppenheimer & Co.: Thanks. Can you comment on whether the expected impact on FY07 EPS is still negative $0.08 related to the Federated-May combination? Also, can you talk a little bit about the announcement that you are expanding the Estée Lauder brand into the Shoppers Drug Marts in Canada and how that relates, if at all, to your decision to keep Clinique brand out of the JC Penny Sephoras in the U.S.? William P. Lauder: I would hesitate to compare Shoppers Drug Mart and its presence in Canada to the JC Penny Sephora partnership in North America and relate them to each other, because those are very different retail strategies on the retailers part. Our distribution decisions market by market are very different. Shoppers Drug Mart has established itself as an alternative prestige, with a significant section of its retail position, in prestige cosmetics across Canada. And there is no real equivalent in North America compared to Shoppers Drug Mart in Canada or Boots in the U.K. The Estée Lauder and Clinique brands are probably the last two and the leading two prestige cosmetics brands in Canada to go into Shoppers Drug Mart. We think that the Shoppers Drug Mart has established itself in Canada in a manner which can enhance the position of both those brands there and reach a consumer who previously wasn’t able -- a Shoppers Drug Mart consumer who previously wasn’t able to shop for these two brands. Richard W. Kunes: Regarding the impact of Federated-May, yes, we still estimate it is about $0.075 to $0.08, but if it comes under a little bit more, difficult and a little bit more of an estimation, because when we see the weakness in the names that have changed, stores that have changed names as William was describing, how much do you attribute that weakness to the actual consolidation and how much is something else, but it is still we estimate around $0.07 to $0.08. Linda Bolton Weiser - Oppenheimer & Co.: Thank you.

Your next question comes from Nik Modi with UBS. Nik Modi - UBS: Good morning. Just two quick questions; can you talk about the challenges you are facing in Spain and France, just what’s going on there? The second question, William, your update on what you are seeing from the niche brands in the U.S. from a competitive standpoint? Thank you. Richard W. Kunes: In Spain and France, each of those markets has different dynamics in particular. I’ll isolate them. In Spain, we have two factors going on. Number one, we made a strategic decision to cut back a certain group of retailers in the shipments we were making, particularly in the fragrance markets, and to a very significant degree because we found that there was a great deal of grey market activity going on from these retailers and significant quantities of our merchandise was showing up in markets well outside of Spain, well outside of our established distribution and to far greater quantities than we were comfortable with. Secondly, we had the launch of Aveda in Spain, which had an impact on them. As well, we are making significant investments in France in the pharmacies. In addition to that, there is a general malaise right now in French retail, perhaps associated with their elections. I’m not certain. I’m not French, I can’t tell you but it’s been alleged that that’s one of the impacts. In addition, Spain is our single largest business on continental Europe as a total country. Significantly, 30% of our business is actually in a department store business with one department store partner who is an effective operator. They have not seen the same growth in their business as they have over the previous 10 years. So we are being somewhat affected by the traffic impact that they have had. Nik Modi - UBS: Thank you, and on the niche brands? William P. Lauder: The niche brands, you sort of put your finger on the notion of what the niche brands are. There are certain brands -- every brand is a niche brand. Some niches are bigger than others. I want to give you a flavor of what magnitudes are. This is a wonderful statistic which I like to give you an idea of. In calendar year 2006, Clinique sold 19,902,930 units in treatment. If you add up the unit sales of the next six brands combined in the department store arena, they didn’t even sell 19,786,000. So one brand, Clinique, sold more combined units of treatment than the next six brands combined. So that is a major, major statement of presence of a brand in the channel of distribution. We see some of the nice, newer brands making an impact but we do not see this as being a major impact. I would never dismiss a competitor of any size and not pay attention to them. We are paying attention to anybody and everybody. At the same time, we are focusing our efforts on those brands of ours which we think are very strong and very powerful in connecting with the consumers and focusing on those efforts to continue to bring those consumers back to our brands, which we know they love.

Your next question comes from Filippe Goossens with Credit Suisse. Filippe Goossens - Credit Suisse: Good morning. William, if I have my numbers correct, the current family ownership is about 81 million shares of Estée Lauder. If I then look at the number of shares outstanding in 2001 versus what I expect to be outstanding at the end of 2007, the effective family ownership has actually gone up from 34% to 41%. Can you just share with us what your long-term strategy is, given this kind of upwards slope in terms of family ownership? Also, what your short-term view is, particularly now with the stock being down about 6%. Would you be a buyer of the stock today? My second question basically is also related to the debt capacity here. You have talked about a pipeline of acquisitions that you are looking at during the analyst meeting a little bit earlier this year, yet we have not seen any activity from you yet. This one competitor based in Paris seems to continue to be very aggressive. Is it because you don’t see the right opportunities or your parameters are somewhat different from that one competitors? Thanks very much, William. William P. Lauder: Let me address the second question first. We are constantly looking and evaluating numbers of different acquisition opportunities and we feel privileged that most opportunities that are available in our space do come our way at some point, and I am certain that those who are shopping them are also offering them to a number of our competitors. Each of us has a different view about what we are willing to spend. We believe that if we spend the right amount of money for the right strategic fit within our parameters, we will be effective in leveraging our acquisitions. To date, in the last 13 years, which is really the broad history of our acquisition program, we have had a tremendous number of successes and only one or two acquisitions which we are perhaps not as proud as we would like to be. I would like to say that you should be proud of the fact that we are very disciplined with our shareholders’ money and spending it correctly for the right strategic acquisitions. Oftentimes, we have been at the table but pulled back because we just decided this was too rich a price for us to give us a good return on our investment over a short to medium term or the long-term, and we will continue to focus on those disciplines and that does not mean we are not in the game, but I am certainly not driven to make an acquisition for the sake of making an acquisition. They have to be the right strategic fit for our company and we will spend our assets wisely in the right strategic positions. As far as the second position, I am not exactly familiar with the numbers as you cite. When you look at, and perhaps you can call Dennis later and he can give you a better flavor of it, but I can tell you that our family is totally committed to this business. This represents the vast majority of our personal wealth and will continue to do so, and we are highly motivated to making sure that it increases. I have been a net buyer as much as I can possibly be. Most of my options exercises have been buys and holds, and in addition, there have been a handful of family members of mine who for their own personal reasons have decided to sell. Whenever I can and to the extent that my bankers allow me to, I have been buying their shares and I am glad to say that has been probably one of my best, if not my best, personal investments to date over the last four years. I will continue to do so.

Your next question comes from Alice Longley with Buckingham Research. Alice Longley - Buckingham Research: If I look at the first nine months of the year, is it fair to say that maybe the operating profits in the Americas is below plan and operating profits offshore is above your original plan? Richard W. Kunes: I think that is fair to say, Alice, yes, but we do the best we can to make sure that we deliver what we intended at the beginning of the year. As you know, we have taken our guidance up for the year on our last call and we have taken up the floor, if you will, of our existing higher guidance on this call. We are happy with the results so far and what we are anticipating for the year. Alice Longley - Buckingham Research: Just focusing on the Americas, if the profits here-to-date are a little or somewhat below your original expectations, is that because of share loss being worse than you thought or is it because of the new Macy’s stores being disappointing? Richard W. Kunes: I don’t think it is just the Macy’s stores, but it is any store that had a name change. But I think of anything that is affecting us, it is that weakness for those acquired doors. There is no question about it. We are also making some investments in new brands in North America and we are spending some money on things that we have talked about, and a lot of that is focused here, relating to some IT initiatives and some strategies around that.

Your next question comes from Lauren Lieberman with Lehman Brothers. Lauren R. Lieberman - Lehman Brothers: Thanks. Just a couple of questions. First, Rick, you just mentioned new brands in North America and there was a portion in the script where that was mentioned as well, as being a growth avenue. Are these new brands that we don’t know about yet or brands that are within the portfolio that just have not been fully developed? Richard W. Kunes: They are brands that are in our portfolio now that are being developed, yes. Lauren R. Lieberman - Lehman Brothers: Okay, so can you talk a little bit about M-A-C’s performance in the U.S. this quarter? And then also, was there a deterioration at all in core brand performance? I understand what you are saying about department stores and the gap in performance, but the reality is it seems like there was less Estée and Clinique sold in the U.S. than there was either last quarter or this quarter last year, despite some refocusing on these brands and rethinking of how to communicate better with consumers over the last 12 months. Are there strategies that you have put into place that are not really working yet, or are there signs that things are getting better and we just can’t see it yet? Richard W. Kunes: I’ll answer the M-A-C question I think was one of your questions in there, how was our growth. Year-to-date in North America, our business is up double digits. On a global basis, it is up very strong double digits. Obviously a brand can’t grow at the pace that M-A-C has been growing in North America forever, so that’s -- but that’s part of our plan. We were fully aware of that. Lauren R. Lieberman - Lehman Brothers: I’m sorry, what was M-A-C this quarter, you said double digits year-to-date. What about this quarter in the U.S.? Richard W. Kunes: This quarter in the U.S., it was in the mid single digit range. So M-A-C, we are quite happy with its performance, quite honestly. It is a very successful brand for us. Daniel J. Brestle: I’ll just comment on a couple of things. We keep hitting the difference between the legacy doors and the acquired doors and the impact that has on Lauder and Clinique because they are the brands that were in every one of the stores affected. This manifests itself in three ways. First of all, the consumer acceptance, and you guys have read as much as we have about the Marshall Fields customer and the acceptance of Macy’s, et cetera. But it really has hit us in two other areas. One has been capital. The other has been analyst turnover that William talked about at the conference we had, and inventories. Everyone has a lot on their plate. We are confident that both Lauder and Clinique are positioned quite nicely for now and going forward. We think that the Clinique gift with purchase was very positive and the Clinique brand is going to show some nice gains. Lauder was disappointing with their gift with purchase but their basis business is good. I think once we clear this out, and you have to understand the turbulence of the market, all these brands are selling their product on different dates. Mother’s Day shifts, the shifts of all the gift dates. Next year we will have a level playing field. We will be anniversarying all the dates of all the gifts and I think we will be in a much better place to talk about the business, whether it is a weakness of the brand or the weakness of the distribution channel.

Your next question comes from Connie Maneaty with Prudential Equity Group. Constance Maneaty - Prudential: Good morning. At the analyst meeting, you talked about the 60,000 women who are the interface between your products and the consumer and how the turnover is I think you said 75%. But that still this was an area of strategic investment. At that meeting, you weren’t quite sure what the strategies for investing in this really transient group were going to be, so I was wondering if you had an update on that and how you would be measuring the productivity of those invested dollars? Daniel J. Brestle: Let me just comment -- it purely is not necessarily an investment. It is not about the dollars. The turnover at the point of sales, our lifeblood, which is our beauty advisors, there’s a lot of things going on, a lot of tactical things that both our field force and our retail partners are doing, and it is just not a matter of looking at salaries or throwing more money at the problem. It is how do we make this a career for people and keep them more engaged? Given time, we could list a dozen different initiatives that both Lauder and Clinique and our smaller brands are doing to keep people in their jobs and keep them more engaged in selling cosmetics. All of our stores have recognized the issue. They all recognize it as a result of the turbulence in the marketplace and they are fully behind solving this problem, so we are getting great support from everyone from Dillard’s to Macy’s -- it has been a nationwide effort and it is just beginning. Initially, we see some numbers coming down but not enough to report on. The financial impact of that we won’t be able to measure until all of the programs are in and we see which ones are the most successful and which ones we are going to continue to invest in. Constance Maneaty - Prudential: What is the timeframe on getting those programs in and would you guess that the turnover at the acquired stores might be higher than the legacy stores, and that might also be a reason for their underperformance? Daniel J. Brestle: To answer your first question, most of the programs will be installed by the middle of the summer and which ones take effect, which ones satisfy the problems, we’ll evaluate. And I’m not guessing, I know that the turnover in the acquired doors is significantly higher than the turnover in the legacy doors. You have hundreds of stores where people are changing benefit programs, changing salary programs and it is taking its toll.

We have time for one more question and that comes from Javier Escalante with Morgan Stanley. Javier Escalante - Morgan Stanley: Could you talk about the programs to which you are allocating an increase of spending? In particular, could you tell us how much did advertising grow in the quarter for the overall company and in the U.S.? And whether because of the weak U.S. sales, do you think that you need to dial it up even further, or change the mix in the spending or accelerate expansion in new channels? If you can comment on that, first on where you are increasing the spending, how much did advertising grow, both overall company and the U.S., and whether you think that this is the right level or you need to increase it further, or whether it is an issue of the success of the programs themselves? Thank you. William P. Lauder: Javier, let me just give you a flavor, if you will, on what our focus and strategy is going to be. Each of our brands has a different mix of how they allocate their monies towards their consumer. If you realize that overall, each brand only has four different places where it spends its money towards its consumer. First is cost of goods and the quality of the product which they have. Second would be selling expense, advertising and promotion. Those are really the four places where each brand chooses to allocate its money to its brand. Each brand spends a good deal of money on the quality of its product. As you know, our total cost of goods number, what it is, and they don’t have much choice. We really say you must deliver the highest quality product possible. So the real discretionary spending by brand is allocated between and amongst selling, advertising and promotion, and each brand has a different ratio of how it allocates it. It is not a fixed number and it is generally a general number. The global A&P number is 7% -- that is all brands, all markets, and our goal is to increase that number. But quite honestly, if you look at a brand like M-A-C, they devote the vast majority of their selling, advertising and promotion monies into selling expense. As a brand like a M-A-C, and Bobbi Brown is very similar. They both do not have a meaningful advertising program but they allocate those monies that might otherwise be spent in national advertising or other forms of advertising into selling expense. So as they become a higher portion of the total business, the ratio if you will between advertising and promotion and selling expense shifts. So while the absolute dollars in one line or another may change, what you really have to look at is how each brand allocates its monies. One of the things we are looking at, in particular for those brands that share what ways are we communicating with the consumer. Print, in the different forms, radio, television, online, and allocating our media spends accordingly to where we see consumers responding. There is no fixed number by brand. There is no fixed number around the world, nor is there a fixed number by marketplace because each brand, each market is very different. For example, commuting media as generally defined in North America is radio, because most Americans are driving to work and they have their radios on. In Japan, commuting media is not radio because nobody drives to work in Japan, they ride the subways. So commuting media in Japan would be print advertising in subways and other places that that consumer may see. That’s just an example and a flavor of it. Certain markets are highly penetrated with online consumers who respond very strongly. Other markets are very low penetration in online so we would not allocate those monies in the same way. The influence of national advertising, fashion and beauty books versus other more local media, whether it is newspaper or local weekly magazines are different market by market. So we allocate those monies very locally by brand as well as some strategic broad initiatives across the world, but there is no one general rule. Javier Escalante - Morgan Stanley: Just to understand if I got your response, is that advertising spending on a global basis, either print or subways or radio or TV, was up 7% is what you said in your response? Richard W. Kunes: Yes, our global spending grew by 7%. Javier Escalante - Morgan Stanley: And that means that basically the selling and spending part, meaning what, it goes into the counters and because of the increase in freestanding stores is what is driving the bulk of the spending. Is that a correct assumption? Richard W. Kunes: What you are speaking of is on a different line called selling expense. That one is growing faster and that is growing faster for the reasons that William mentioned, which is our M-A-C brands, Bobbi Brown brands, those that rely on that selling vehicle as really a driver of the business, and those businesses are growing quite fast that they are investing more money in there. William P. Lauder: Let me just finish this. This is an important point. The core essence of our success in the prestige arena is having that expert for the brand in the store when the consumer responds to the advertising. If we have the most brilliant advertising in the world but that consumer comes into the store and there isn’t an expert for the brand to help her find the right product, it is a variation on the analogy of if a tree falls in the forest and there is nobody there to hear it, did it make a noise? So any monies we spend in advertising must be complemented by the level of service that we are able to offer that consumer in store for us to complete that sale. Ultimately, that is the key in the circle in driving our success.

That concludes today’s question-and-answer session. If you were unable to join the entire call, a playback will be available at 12:00 noon Eastern Time today through May 10th. To hear a recording of the call, please dial 800-642-1687, passcode number 5015583. That concludes today’s Estée Lauder conference call. I would like to thank you all for participating and wish you all a good day.