Good day, everyone and welcome to the Estee Lauder Companies Fiscal 2022, First 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 Senior Vice President of Investor Relations, Ms. Rainey Mancini.

Hello. On today's call, our Fabrizio Freda, President and Chief Executive Officer, and Tracey Travis, Executive Vice President and Chief Financial Officer. Since many of our remarks today contain forward-looking statements, let me refer you to our press release and other reports filed with the SEC where you'll find factors that could cause actual results to differ materially from these forward-looking statements. To facilitate the discussion of our underlying business, the commentary on our financial results and expectations is before restructuring and other charges and adjustments disclosed in our press release. Unless otherwise stated, all net sales growth numbers are in constant currency, and all organic results exclude the non-comparable impacts of acquisitions, divestitures, brand closures, and the impact of currency translation. You can find reconciliations between GAAP and non-GAAP measures in our press release and on the Investors section of our website. As a reminder, references to online sales include sales we make directly to our consumers through our brand.com sites and through third-party platforms. It also includes estimated sales of our products through our retailers' websites. During the Q&A session, we ask that you please limit yourself to 1 question so that we can respond to all of you within the time scheduled for this call. And now I will turn the call over to Fabrizio.

Thank you, Rainey, and hello, everyone. We are grateful you have joined us today. We delivered excellent performance to begin fiscal year 2022, reinforcing our optimism in the opportunities of tomorrow as we discussed with you in August. Our multiple engines of growth strategy enabled us to excel amid continued volatility and variability from the pandemic. Organic sales rose 18% and adjusted diluted earnings per share grew an even stronger 31%. Encouragingly, relatively to the pre -pandemic first quarter of fiscal year 2020, our business is 13% larger on a reported basis and more profitable. We achieved these outstanding results with increasingly diverse growth engines as we expected, by virtue of our dynamics strategy we could act locally amid the complexity of the pandemic to both create and capture demand. The growth engines of makeup, developed markets in the West and Brick-and-mortar reunited and complemented momentum in skincare, fragrance, Mainland China, travel retail in Asia-Pacific and global online. 13 brands contributed double-digit organic sales growth, demonstrating the breadth of strengths across our portfolio. If the loader and MAC drove Makeup Allergic Renaissance, while La Mer, and Clinique delivered standout results in Skin Care. Impressively, Skin Care solidly outpaced its three-year organic sales growth performance despite having the far toughest comparison among the categories. Fragrance soared double-digits, driven by Tom Ford Beauty and Jo Malone London. Let me share a few highlights by brand Estee Lauder advanced planning for the Makeup Renaissance delivered significant sales growth. As social and professional use education resumed in certain markets, the brand was well-positioned with compelling innovation, superb merchandising, and on-point communication. Its double wear and futurist foundation franchises, grows strong double-digits while it's new pure color whipped matte lipstick was a hit. MAC strategically engaged consumers to drive performance in makeup. In the Americas and EMEA, excellent results from in-store activations and regional MAC The Moment campaigns, combined with desirable innovation like Lustreglass Sheer-Shine Lipstick and Magic Extension Mascara. The brand's new omni -channel capabilities, which leveraged its free-standing stores, also contributed to the strength. It demonstrates a new capability for MAC to benefit from going forward. La Mer performed magnificent and led the Company, with sales rising strong double-digits. Its new The Hydrating Infused Emulsion expanded our portfolio of East to West innovation, captivating consumers in every region. The product successes are many, as it welcome new and younger consumer, as well as men into the brand and created a powerful hollow benefit for La Mer Skin Care portfolio. It is a striking example of the innovation gains we can achieve when the power of our data analytics, combined with our creative talent and R&D. La Mer's iconic Creme De La Mer prospered as a new global campaign focused on its most store rising benefit realized terrific initial results. Clinique thrived in skin care from the strength of its heroes. Moreover, its new smart clinical repair wrinkle correcting serum with powerful clinically led claims and compelling before and after visualizations extend the Clinique winning streak with innovation and farther demonstrated the brand ability to be highly relevant for consumers of all ages. In makeup, Clinique skincare authority drove growth in complexion led subcategories. While in leap, the brand brilliant leveraged black, Tony viral sensation on TikTok to expand its consumer base, especially among Gen Z. Visium complemented our organic sales growth in skincare with its coveted vegan brand, the ordinary. Visium is known for its transparency, which has enamored it we consumers and in the first quarter it launched the insightful, Everything is Chemicals Campaign. And the new regimen builder by the ordinary on brand.com realized spectacular adaption, further enhancing the brand's powerful online ecosystem. Fragrance momentum continued with stellar double-digit performance in every region powered by hero products and innovation from Tom Ford Beauty, Jo Malone, London, and our seasonal offerings. We are excited for the Estee Lauder brand launch of its luxury collection in the second quarter as it expands our portfolio in the high-growth segment of fragrances. Our fragrance category benefits from diversification amongst our categories, as well as regions with outstanding performance from both historically strong markets for fragrance and emerging fragrance opportunities. The self-care rituals related to scent, which were embraced during the pandemic, continue even as social and professional use and education resume. Of note, Tom Ford Beauty performed strongly in both fragrance and makeup, such that the brand was among our top performance in the quarter. Is new Ombre Leather Parfum and Heroes wardrobes and Lost Cherry fueled the brand's success. Our growth engines also diversified geographically, led by developed markets in the West. Our business in North America, executed with excellence to deliver strong double-digit organic sales growth, powered by readiness for make - up's emerging renaissance, ongoing strength in skincare, fragrance, and recovery in hair care. Strategic go-to-market initiative supported by on-trend innovation, increased advertise spending and expert in-store visual services delighted consumers. Our expanded consumer reach enhanced these initiatives as Bobby Brown launch in Ulta Beauty exceeded expectation. And we are encouraged by the early results of the new Ulta Beauty at Target and Sephora at Kohl's relationships. In Asia-Pacific, many markets faced COVID-induced lockdowns and temporary store closures, which pressured performance. Despite this, the regional still grew 10% organically driven by strength in Greater China and Korea. Mainland China achieved double-digit organic sales growth, owing to skincare and fragrance. With online both higher. We launched locally relevant innovation, which proved highly decidable, while we also increased advertising spending, strategically standard our consumer reach to match success on JD, and designed successful activation for Chinese Valentine's Day. We continue to invest in the vibrant and compelling long-term growth opportunity on Mainland China, led by our talented local team. We are enthusiastic for our new innovation center in Shanghai to open in the second half of this fiscal year. This new world-class innovation center will be the first of its kind for our Company. We did. We will have a unique ability to grow and build on our market and consumer insights, to develop exceptional products to meet and surpass the needs and desires of Chinese consumers. What is more, we are seeing the benefits of recent investment in online fulfillment, which have led to higher service levels in better inventory management, while setting the stage for expanded omnichannel capabilities in the market. From a channel perspective, globally, brick-and-mortar grew strongly in markets which are gradually emerging from the latest waves of COVID-19. We realized excellent results across the board in brick-and-mortar, most especially in the Americas and EMEA. Our brands created excitement in-store with enticing high-touch services and unique activations. We are encouraged by improving trends in the productivity of brick-and-mortar owing to both increased traffic and our strategic actions, including those under the post-COVID business acceleration program. As brick-and-mortar reignites, our global online business continue to showcase its tremendous promise, with impressive organic results despite significant organic sales growth in the year-ago period. Online grew to be nearly doubled the size on a reported basis of the pre-pandemic first quarter of fiscal year 2020. Many markets capitalized on the remarkable new consumer acquisition trend of the pandemic to deliver sustained gain in repeat purchases. As we seek to engage with consumers in innovative ways, we advanced our work with Instagram, Snapchat, TikTok, WeChat and others to capitalize on exciting trends in social commerce. We also deploy the technology solution, which enables brands to better customized consumer outreach by leveraging data to merchandise and personalized communication. This is leading to higher conversion rates for new consumers and a deeper level of relationship building after the initial purchase to force retention. Initiatives such as this, position us well to realize even greater success with trial and repeat. We continued to invest in online to strategically extend our consumer reach and realized promising results. For example, in the first quarter, La Mer launched on Lazada in Southeast Asia to tremendous success. We differentiate in merchandising, unique services, and prestige packaging; making it one of the platforms biggest brand launches ever. Our relationship with Lazada expanded in the current quarter with Jo Malone London debut. Before I close, I wanted to share that today, we will release our fiscal year 2021 social impact and sustainability report. We are incredibly inspired by the achievements of our employees globally. The report highlights initiative across key areas including inclusion, diversity and equity. Climate, packaging, social investments, responsible sources in Green Chemistry. I'm particularly proud of our support to employees globally who face financial hardships due to COVID-19. The ELC Cares Employee Relief Fund awarded nearly 14,000 grants and distributed nearly $8 million through June 30, 2021. Here, a few among the many other highlights of the report. We have continued to contribute to a low carbon future. For the second year in a row, we sourced 100% renewable electricity globally for our direct operations and achieved net-zero Scope 1 and Scope 2 emissions. The Company also made strong progress in its science-based targets for Scope 1 and 2 and made efforts toward meeting its Scope 3 science-based targets. We achieved our existing post-consumer recycled content goal ahead of schedule and announced a more ambitious goal to increase the amount of such material in our packages to 25% or more by the end of calendar year 2025. We're also committed to reduce the amount of building petroleum plastic in our packaging to 50% or less by the end of calendar year 2030. On the last few earnings calls, I discussed actions we're taking to make more progress on our commitments for ratio equity, as well as women advancement and gender equality, which are reflected in the report. We also deepened our work by further aligning the strategy of the Estee Lauder companies charitable foundation to identify support programs at the intersection of climate, justice, human rights, and well-being with a focus on equity. Building upon our legacy of funding girls education and leadership programs. In the beginning of fiscal year 2022 and aligned with our social impact commitments, we were pleased to announce a 3-year partnership with Amanda Gorman, activists, award-winning writers in the youngest in our world poet U.S. history. The Estee Lauder companies will contribute $3 million over three years to support writing change, especially initiative to advance literally as a pathway to a quality access and social change. In addition Mrs. Gorman will bring her voice of change to the Estee Lauder brand. The good thing our first campaign in the second half of this fiscal year. In closing, we delivered outstanding performance to begin the new fiscal year amid the volatility, and variability of the pandemic. While continuing to invest in sustainable long-term growth drivers, we are focusing on fundamental capabilities for product quality and the consumer - centric elements of acquisition, engagement, and high-touch experiences and services. We are doing this while improving our cost structure, diversifying our portfolio and its distribution, investing behind the best growth opportunities, and leaving our values. Our confidence in the long-term growth opportunities for global prestige beauty and our Company is reflected in the announcement today to raise the quarterly dividend. I'm forever grateful to the grace, wisdom, and ingenuity of our employees globally, while making us a stronger Company each and every day. I will now turn the call over to Tracey.

Thank you, Fabrizio and hello everyone. We're off to an outstanding start with first quarter net sales growing 18% organically driven by the Nascent recovery in the Americas and EMEA during the quarter compared to a more difficult environment in the prior year. Global logistic constraints caused some retailers, primarily in North America, to order earlier to ensure popular sets and products would be on counter for Holidays. We estimate that this contributed approximately 1.5 points to our first-quarter sales growth that otherwise would have occurred in the second quarter. The inclusion of sales from the May 2021 DECIEM investments added approximately 3 points to reported net sales, growth and currency added just over 2 points. From a geographic standpoint, organic net sales in the Americas climbed 27% as COVID restrictions eased throughout the region. Brick-and-mortar retail grew sharply across all formats compared to the prior year period when many stores were temporarily shutdown. Distribution and Kohl's with Sephora and in target with Ulta Beauty, began its phased roll-out to initial stores and online in mid August with minimal impact on net sales growth for the quarter. With the strong resurgence of Brick-and-mortar traffic online, organic sales growth in the Americas declined single-digit against the sharp increase last year, while organic online penetration remains solid at 31% of sales. The inclusion of sales from DECIEM added about 9 points to the overall reported growth in the region. In our Europe, the Middle East, and Africa region, organic net sales rose 19% with virtually every market contributing to growth led by the emerging markets in the Middle East, Turkey, and Russia, as well as the U.K. Most markets throughout the regions saw COVID restrictions lifted and some tourism resume during the peak summer months. By channel, the region saw more balance between brick-and-mortar and online growth. All major categories grew this quarter and the region saw the strongest growth in fragrance and makeup as social occasions increased. Our global travel retail business grew double-digit as China and Korea continued to be strong. Internal travel restrictions during the quarter in China slowed Hainan sales temporarily, but restrictions lifted in early September and traffic rebounded. Retailers also responded to the August dip by driving post-travel consumption online. Summer holiday travel in Europe and the Americas ticked up but international travels still reached only 40% of pre-COVID levels. In our Asia-Pacific region, organic net sales rose 10% and driven by Greater China and Korea. The region overall experienced higher levels of COVID lockdowns this quarter, compared to last year's quarter due to the rise of the Delta variant, although online remains strong. Sales growth in Mainland, China was somewhat slower due to COVID restrictions during July and August and the pace of online sales growth slowed following the successful 6-18 programs last quarter, and in anticipation of the 11.11 Shopping Festival. As we've mentioned before, these key shopping moments have created some additional seasonality in our business in this region. More than half of our brands, and virtually all channels rose double-digit in Mainland China. Hong Kong and Macau were bright spots this quarter. They benefited from strong new product launches from La Mer and Jo Malone and successful marketing campaigns from several other brands. From a category perspective, net sales growth in fragrance jumped nearly 50%. Virtually every brand that participates in the category contributed to growth with exceptional double-digit increases from Tom Ford Beauty, Jo Malone London, and La LeBeau. Perfumes and colognes led the category growth and bath, body and home fragrances continued to perform well. Net sales in makeup rose 18% as markets in the Americas and Europe began to recover from COVID shutdowns. We are encouraged by the sequential improvement in makeup versus pre - COVID level. However, makeup sales in the quarter was still 19% below 2 years ago. Nonetheless, Estee Lauder foundations continued to resonate strongly with consumers, and MAC leaned into the makeup recovery with a number of fun and compelling campaign. Skin care sales remained strong during the quarter. Organic net sales grew 12% and the inclusion of sales from DECIEM added 6 percentage points to reported growth. Nearly all of our skincare brands contributed to growth, although Estee Lauder had a tough comparison with the prior year launch of its improved Advanced Night Repair serum. Our hair care net sales rose 8% as traffic in salons and stores in the U.S. and Europe began to return. Both Aveda and Bumble and bumble saw growth in hair products as well as continued strength from innovation. Our gross margin declined 100 basis points compared to the first quarter last year. The positive impacts from strategic pricing and currency were more than offset by higher obsolescence costs for both basic and holiday product sets and the inclusion of Visium. Operating expenses decreased 240 basis points as a percent of sales. Our strong sales growth was partly due to earlier orders from some North America retailers concerned about logistics constraints and costs related to these sales are expected to be incurred in our second quarter. We do continue to manage costs with agility, realizing savings from our cost initiatives while also investing to support a continued brick-and-mortar recovery, as well as our strategic initiatives. Our operating income rose 32% to $941 million, and our operating margin rose 140 basis points to 21.4% in the quarter. Diluted EPS of a $1.89 increased 31% compared to the prior year. During the quarter, we used 81 million in net cash flows from operating activities, which was below the prior year. This reflects a more normalized first quarter where we typically have seasonally higher working capital needs. We invested $205 million in capital expenditures as we ramped up our investment to build the new manufacturing facility in Japan, and we returned $749 million in cash to stockholders through both share repurchases and dividends. We also announced this morning, an increase in our quarterly dividend. Now let's turn to our outlook. We are encouraged by the green shoots we are seeing around the world even in the context of an environment of increased volatility. Our strong performance reflects our ability to navigate through the volatility while leveraging our multiple engines of growth. At the same time, we are mindful that recovery is tenuous and likely to be uneven. Nevertheless, we are cautiously optimistic in our assumption for fiscal 2022 remain consistent. We continue to expect an emerging Renaissance in the makeup category as restrictions are safely lifted and social occasions increase. We welcome the resumption of some travel in the Americas and EMEA in the first quarter. And as intercontinental restrictions are lifted, we expect international passenger traffic to build toward the end of the fiscal year. We began taking strategic pricing actions in July and overall, pricing is expected to add at least 3 points of growth, helping to offset inflationary pressures. On the cost side, we plan to continue to increase advertising to support our brands and drive traffic in all channels. Selling costs are expected to rise to support the reopening of brick-and-mortar retail. We also continue to invest behind key strategic capabilities like data analytics, innovation, technology, and sustainability initiatives. As you are all aware, global supply chains are being strained by COVID and it's related effects in some markets, resulting in port congestion, higher fuel costs, and labor shortages at a time when demand for goods is rising. This is causing us to experience inflation in freight and procurement, which we expect to impact our cost of goods and operating expenses beginning next quarter. Based on what we see through October, the expected benefit of pricing combined with good cost discipline elsewhere, are enabling us to maintain our expectations for the year. For the full fiscal year, organic net sales are forecasted to grow 9% to 12%. Based on rates of 1.163 for the euro, 1.351 for the pound, and 6.471 for the Chinese yuan, we expect currency translation to be negligible for the full fiscal year. This range excludes approximately 3 points from acquisitions, divestitures, and brand closures, primarily the inclusion of DECIEM. Diluted EPS is expected to range between 723 and 738 before restructuring another charges. This includes approximately $0.04 of accretion from currency translation and $0.03 accretion from DECIEM. In constant currency, we expect EPS to rise 11% to 14%. At this time we expect organic sales for our second quarter to rise 8% to 10%. The net incremental sales from acquisitions, divestitures, and brand closures are expected to add about 3 points to reported growth, and currency is forecasted to be neutral. Operating expenses are expected to rise in the second quarter as we support holiday activations and the continued recovery of brick-and-mortar retail around the world. Additionally, the prior-year quarter included some benefit of government subsidies which are not anticipated in the current year quarter. We expect second quarter EPS of $2.51 to $2.61. Both currency and the inclusion of DECIEM are expected to be immaterial to EPS. Notably, our EPS forecast also reflects a 23% tax rate compared to 15.9% in the prior year when we benefited from certain one-time line up In closing, we are pleased with the terrific start to the year and are proud of the continued efforts of our global team. We remain confident in our corporate strategy with its multiple growth engines to drive sustainable, profitable growth. That concludes our prepared remarks. We'll be happy to take your questions at this time.

Thank you. The floor is now open for your questions. I to ensure that everyone can ask their question. We will limit each person to one question, time permitting, we will return you for additional. And our first question today comes from Erinn Murphy, Piper Sandler.

Great. Thank you. Good morning. I guess my question is around the supply chain, Tracey for you, if you could talk a little bit more about your ability to get product to the end markets in a timely manner into holiday. And are you seeing any major shifts in product launches? And then maybe if you can share, if you think about the higher OpEx, how you're balancing air freight versus ocean freight currently? Thank you so much.

Yeah. Hi, Erinn. We are seeing some supply chain impact as I said in our prepared remarks. We have experienced some airfreight and we have experienced some delays, but by and large, we're in very good shape for holiday. Our holiday sets, we had anticipated some of the supply chain challenges earlier in the year when clearly our supply chain -- and more publicly, there were discussions about supply chain challenges. And so we did order some products early, we produce some products early, and we landed many of our gift sets early. And that's set us up pretty well for Q2. We are experiencing some inflation in transport, we're managing it as best we can. One of the things that certainly we have the benefit of is we are a luxury Company, so we do have pricing power, and we have pricing power not only in our inline products, but also in our innovation as well. So we do have the opportunity and have taken the opportunity to offset some of the cost inflation with some of the pricing that we've taken this year.

And our next question is going to come from the line of Lauren Lieberman with Barclays.

Great. Thank you so much. Good morning. I'm really curious to hear a little bit more about MAC. I would certainly have expected it to be key in the beginning of this makeup resurgence. But I was curious what you could tell us in terms of progress on brick-and-mortar footprint in North America and EMEA, how that interacts with the online presence, and how you think about the profit model for that brand or maybe from the makeup category going forward? We're 1 quarter into the beginning of a recovery, but I recognize that looking at operating margins the division isn't really fair game yet. But interested to hear how you think that can evolve over the next, whatever the appropriate time frame, in the 12 plus months or so.

Yeah. Hi, Lauren. So you stated out, and at the very beginning, what -- your question is about what specifically?

About MAC,

Oh, MAC, yeah.

Mac, and how the brick-and-mortar footprint, where you've gotten to so far, how that fits with online presence and how you're thinking about the business model going forward and what that means for profitability.

Yeah, no. As we announced last year in our post COVID acceleration program, we did take the opportunity last year to close some stores and some additional stores will close this year. And not only freestanding stores, but there are some counters as well that MAC has pulled that up. We were encouraged at the end of last year and encouraged through the first quarter with MAC performance in both the Americas. So both North America, as well as Latin America, and also EMEA. So we really -- with return to brick-and-mortar, as we had indicated before, we saw a higher productivity of the remaining brick-and-mortar doors that we had open, and we saw a bit of softness more in North America than in EMEA, but a bit of softness in online as traffic return to brick-and-mortar. We think that will normalize out a bit in Q2 and we will see a bit more balanced, but as I think all of us can imagine, I think consumers were very excited about going back to brick-and-mortar stores in markets where restrictions were lifted, and people felt more comfortable going out and socializing.

Just -- can I add that there's also MAC has been a good start in the Ulta target experience. It's a great start in the preparation of the holiday season. And the brand is doing very well online and is one of the brands that is benefiting from the service acceleration online both in U.S. and EMEA. So overall, very good progress from MAC obviously, as you would expect in the contest of the makeup acceleration for consumers in general.

Thank you. Our next question comes from the line of Nik Modi with RBC Capital Markets.

Yeah. Hi, good morning, everyone. I got a question on consumer behavior. Just on online, what you're seeing there in terms of stickiness retention? Obviously, that's an important channel from a profitability standpoint and consumer engagement. So I just wanted to understand that. And then also, Fabrizio, you think about what happened during the pandemic as consumers are migrating to well-known brands, exploration came down a bit, but I suspect that that's starting to happen now as consumers are getting back out and exploring different brands. I just wanted to get your perspective on that dynamic, if that's what you're seeing, and how does Estee better prepare in the future to deal with all of these upstart brands that are starting up on social media? Thank you.

So, I think there are 2 question. So what we see online? Obviously, online is doing pretty well on a two-year stack, we've doubled it. And so it's a very strong acceleration versus two years. And we see the progress to continue and the growth to continues. Obviously, in the moment where there was the opening of brick-and-mortar, the amount of growth online slow down, but the continuous growth is what is really encouraging. So the most important part of your question, what happened to the consumer's behavior. So what we saw during COVID, that the consumers that were already online before, like younger consumer, continue to be online even more intensively. But many new consumers, they just appeared online during the COVID. They were more the ageless consumer, the more adults consumers. Now, this consumer really enjoyed so they are staying online and so that's what showed that the online continues to grow even when brick-and-mortar open side. But obviously, the 2 channels growth get re-balanced in this situation. So very optimistic for online. The other thing that the online continues to grow is that there are very different channels with different level of growth and we are growing in every single channel. We are growing in 3PP. We are growing in brand.com. We are growing in retail account. We're growing in the pure place and these are very different by region because in every region, one of this channel is stronger than the others. The combination of the global online growth is continuing to be pretty exciting. And we count to this to continue, even when brick-and-mortar will be fully, fully recovered. And as a result, we have reached already 28% of our business in online and this will gradually continue to grow over time. So very strong. In terms of -- sorry, your second question, because it was a separate question on consumer behaviors in Asia. Could you repeat it?

Yes, it was around exploration, it died down during the pandemic. Are you seeing consumers explore new brands again, and what is doing to try to make sure that doesn't become too much of a risk going forward?

I think the exploration of newness in the world of beauty will continuous, will never stop. And personally, I don't have any data points that suggest was dependent on COVID. The disploration is not only by our new brands, but this disploration is about the newness of the existing brands. In fact, our percentage on newness continues to be very, very high and our innovation program continues to be super exciting. We are continued to be in the 30% of new products per year, which is extraordinary and has been a huge progress in the last years. So we continue to see consumers to be interested in innovation, and we continue to make our innovation program one of the best drivers of growth globally.

Thank you. Our next question is going to come from the line of Dara Mohsenian with Morgan Stanley.

Hey, guys, good morning.

Good morning.

Good morning.

So just a question of guidance. Clearly, you came in better than expected in terms of fiscal Q1, you mentioned some green shoots, obviously, a makeup recovery, America's recovery, Asia's from Southwest from some of the government lockdowns, inter-quarter, but it sounded like that's getting better. And so I'm just trying to understand the unchanged local currency top-line guidance for the year. Is there something specific that's giving you more caution as you look at the balance for the year? Is it more just some conservatism, given it's early in the year? How do you think about that relative to the Q1 top-line delivery and some green shoots? And maybe specifically also, you can touch on the 11.11 Shopping Festival in China and what you're seeing there in terms of initial signs heading into that festival. Thanks.

Yeah. Yeah. Thanks, Dara. In terms of -- we are encouraged obviously, as we should be by our Q1 performance. We're still only at quarter end, as you mentioned, as you mentioned it. We did have some early shipments in the quarter that obviously came out of the second quarter. So some of the growth, as we mentioned, about 1.5 was related to that. But as we look at the balance of the year, we are -- also while we're seeing encouragement, there's still a lot of volatility in the market. We did have some markets unexpectedly that were shut down in the first quarter. We are still managing through this pandemic. And so we are -- we believe that certainly as you look at Q2 on a 2-year stock basis, it is -- and really versus pre-pandemic, it's really quite strong. And again, you're seeing some of the seasonality related to 11-11, continue to impact Q1, and that's reflected in the -- Q2, and that's reflected in the guidance that we've provided. But we feel that the guidance that we've given for the year is incredibly strong. The only difference between the guidance that we gave last time and this time, is currency. Our outlook on currency is a bit less. So that's the 1 point change in the guidance that you see. And then from a reported EPS standpoint, our guidance actually on a constant currency basis has improved quite a bit. We -- I would say we are seeing green shoots, we are expressing confidence in the guidance that we are providing quite a bit when you actually look at it from an EPS standpoint, even with all of the things that we're navigating through as it relates to transport, etc. And that goes to the choices that we're making as an organization in terms of where to invest and where not to invest, along with the pricing actions that we're taking as well.

Thank you. Our next question is going to come from the line of Steve Powers with Deutsche Bank.

Hey, thanks. First is just a cleanup. Apologies if I missed it, but were the early holiday sales in North America that you've mentioned in the first quarter to any particular brand or product category? That'd be helpful. And what I really want to ask you about was picking up on something there I mentioned, but I'm not sure you addressed Tracey, was just the relative softness in China and Asia that you experienced in the quarter against the curtailed mobility backdrop versus the improvement that you saw in September. and what I hear is enthusiasm entering December at around the 11.11 Holiday. Maybe you could just expand on a little bit on how trends evolve through the September quarter and then what you're expecting in the Asia-Pacific region, as we go through fiscal 2Q? Thank you.

Yeah. Now, so, Steve, in terms of the early shipments, obviously, our larger brands would have comprised most of the larger -- most of the sales dollar volume in terms of those shipments, but it was really across the board. And again, both we and our retailers wanted to make sure that we had our holiday programs, as well as some of our basic product in-store, recognizing the severe constraint that is being projected as it relates to transport during this holiday season. So we feel very good about that. In terms of Asia-Pacific inclusive of China, but other markets as well. We did see some intermittent shutdowns in Asia and that did include some traffic to Hainan being a bit curtailed in the July and August time frame and a bit into the early part of September. We saw, as we mentioned in our prepared remarks, Hainan picked up quite a bit when those travel restrictions were lifted almost immediately. That is a positive sign and we are still quite encouraged with respect to China and the performance that we expect to see certainly for the balance of the year, both in China and Mainland, China and with Chinese consumers, wherever they shop.

Thank you. Our next question will come from the line of Stephanie Wisinc(ph ) with Jefferies.

Hi, good morning. Thank you for taking my question. This is Grace . I'm wondering if you could talk a little bit about the strength that you're seeing in fragrance and just touch on the sustainability there. Is anything assumed in your guidance for fragrance and then also on a similar vein, if there's anything assumed for the makeup recovery in the second half in guidance. Thank you.

Yeah. No, we see obviously a very strong fragrance mascot and we see great growth in every single regions. So it's good. We see particularly strong fragrance traction in the high-end fragrances, in what we call the luxury artisan of our portfolio. This is really a stand, so brands like Jo Malone, Tom Ford, Le Labo, Kilian, Frederic Malle. And -- and we believe this will continue. This is a trend we have identified some years ago and we have focused the growth of our portfolio and our innovation on this kind of highly sophisticated fragrance experiences. And while we have seen that the -- during COVID that this trend is accelerated, the consumers are even more interested. The other interesting thing is during COVID, the element of our fragrance brands that were, for example, home, like candles or personal cleansing, or pampering parts of the lineup beyond the fragrance also was accelerating, and this acceleration continues. So the positives that consumer have learned, also the possibility of the pampering in-house element of products that these brands provide, they continue to buy them also after the COVID period or this COVID thing. So the entire fragrance brands are strong. The fragrance category is strong. And we expect to have a good holiday season. In this area, we expect continuous growth over time.

Thank you. Our next question comes from the line of Andrea Teixeira with JPMorgan.

Thank you. Good morning and congrats on your results. Can you comment on the cadence of the quarter in Asia-Pacific and how you exited? It seems that you had a hiccup in China consumption towards the end of the quarter. And Tracey, you mentioned that in your prepared remarks, and I think question, but is the deceleration in the fiscal second quarter a function of normalizing the pull forward or more how conservative you're seeing things happening? And then obviously, you have this seasonality they have been calling for 11.11. So if you can just elaborate more on that, I would appreciate. Thank you.

I mean, we achieved double-digit growth in China this quarter and some very strong double-digits also on a 2 or 3 years stacked basis. So despite the restrictions they were also in July and August. So the Chinese consumer are really strong and we are serving them. We also with a variety of locations, meaning in every channel we see the growth online, we see the growth in brick-and-mortar. We see the growth in high-end and, and our key idea is to serve the Chinese consumers wherever they are, and to serve them in the best possible way. So we manage this with agility. And depending what is the commercial model that is emerging in China, we focused more on 1 channel , also depending by the season and by the moment. Also screen -- skin care, which I think is a great sign of strength, skin care grew strong double-digit despite the very tough comparison with the previous year. While in our case, we launched the Advanced Night Repair relaunch. So it was a very big innovation in the base period. So brick-and-mortar in China also saw very strong growth, and our business online grew double digits. Despite the fact that in quarter 1, online is a bit normally sandwiched between the 6.18 big event and the 11.11 big event. But despite that, we grew double-digits. And the long term for demand on the market in closing, name ly the large and growing in the class with increasing spending per person, all these remain intact. And so the key idea is to be able to focus on the Chinese consumer, in whatever channel they choose to shop in depending on the moment to the year. And that's where we are doing, and that's why we remain very confident for the remaining of the fiscal year.

And Andrea as it relates to the rest of APAC, we are expecting a pickup in the second quarter, so we are not anticipating as many of the restrictions to be in place in the rest of APAC that we saw in Q1.

Thank you. Our next question is going to come from the line of Olivia Tong with Raymond James.

Great. Thank you. Actually, I want to talk a little bit about some of the new brands, like the ordinary. And if you could just give a little bit of commentary around things that you've learned since the majority stake that you've taken and how that could potentially be influencing other brands in your portfolio with respect to where you could potentially invest going forward with retailers might your other brands work in that you may have not have thought about earlier. Thank you.

Yeah. First of all, DECIEM is an extraordinary Company and The Ordinary is a brand with enormous success in traction. And so first of all, we are collaborating with the management team of DECIEM to continue building both The Ordinary and to continue building the overall DECIEM Company with their extraordinary incubation capability to have a new brand that they are creating for the future. So both of these activities -- so the big learning is obviously the ability to create vast interest, and the relationship between The Ordinary brand and the consumer is really extraordinary. Obviously, we can learn a lot from this. But apart from learning, we can support them in the implementation of the global commercial strategies in increasing the reach for the brand and obviously, in leveraging the powerful connection with the consumer in the best possible way, in supply chain, in R&D, in many, many areas. So we can learn and we can support, and this exchange is proving to be very successful. Then on top of The Ordinary, there are other brands that building other ideas and creating for the future. So what we're learning is also the power of the creative incubation and the creation on new brands, and these will have an influence on our future ability to continue developing brands. And definitely, we will leverage the strengths of these in most in this area.

Thank you. Our next question will come from the line of Mark Astrachan with Stifel.

Thanks, and good morning, everyone. I wanted to ask about Hainan growth. I think you had mentioned this one from previous calls in terms of where the growth was coming from, meaning that you weren't necessarily sourcing it from sales in the Mainland. I guess I'm curious if that's still the case and how you think about what has driven the growth, especially as it seems like some of the duty-free operators are paying the duties to deliver product to Mainland customers. So if that's true, how do you think this all plays out in time in terms of having Mainland and Hainan or local duty-free work together?

Keep in mind that in China, our most distributed brand, which is Estee Lauder in 140 cities where today with a strong social media and with the strong aspiration of values of our brand. As we speak, we can -- we are demand in more than 700 cities. So there are many, many consumers in China they can only buy either online or traveling and traveling domestically today. And historically Kelly also traveling internationally. And so the -- it is just the market, commercially, the market is designed to have a very limited between the Mainland, China, and the Hainan service. An enormous amount of consumer that comes also from Tier 3, Tier 4 cities, areas where there is not a lot of brick-and-mortar distribution. And so Hainan cannot track this consumer in this moment, also is a place where people go for holidays, as part of these holiday's this -- there is a lot of the pleasure of shopping, the pleasure of discovery. The business in China is proving to be a great trial builder, more than an cannibalizing business and is building trial of people that otherwise would not be able to try our problem, then we'll repurchase them. We'll repurchase them maybe again in the future travel, but most of the times in their everyday lives in Mainland China. So obviously, there is commercial competition. The market is becoming very competitive. There is a lot of players. And commercially, there is that will continue to be intense competition. But there is -- every channel serves, frankly, a very different role. And so our strategy is to be able to leverage each one of these channel in the best possible way. We are maximizing the coverage and the service to the total consumers in China that are interested in Beauty, and over time to be able to better differentiate the scope of the channels and how the consumer will be served by the different channels. Last thing I want to say, Hainan had at least the last number I've seen over the 80 million visitors in the last year. So if you think that Hainan serves the entire middle class because it's domestic travel. You don't need to have a passport. So today, in our knowledge, about 12% of Chinese consumer at the task force, even when international travel will restart. There will be even limited cannibalization versus international travel, because China would serve many consumers that do not plan to travel internationally. So we are very positive on the long term and very positive on the ability to serve the consumers using different channels, which is our strategy.

Thank you. Our next question comes from the line of Wendy Nicholson with Citi.

Hi. Two things, if I can. When you were running through the brands and what's growing for you and what's doing. Especially, well, I think you called out La Mer first. And I just wanted to clarify, how much of La Mer's growth is coming from China and Travel Retail or is the brand also growing strongly on -- in the U.S. and Western Europe non - Travel Retail? So that's my first question. And then second thing, I know you said, Tracey, that there was only minimal sales in the first quarter from the pipeline sale into Target and Kohl's, but now that we're already into November, can you comment a little bit about what you're seeing there? And especially, I'm curious what percentage of the sales that you're getting from Target and Kohl's are in makeup as opposed to skin? I'm just wondering that if those 2 channels really take off for you, what kind of mix effect that might have on your North American business? Thanks.

Thanks, Wendy. In terms of La Mer, La Mer is growing in pretty much every market. It's incredibly strong, the brand does a fantastic job of innovating and so we're seeing growth from both new innovation as well as a continued expansion of new consumers with some of the strategies that the brand is deploying. And we see very high loyalty and repeat with La Mer, it is all around even during this pandemic, it has been one of the constants in terms of the performance in our portfolio and the La Mer team is just an absolute fantastic team. So the brand is doing incredibly well. As it relates to Kohl's and Target and also within target and Sephora within Kohl. We have seeded the initial doors. We certainly expect during the upcoming holiday season that we will see increased growth, obviously, in contribution from the distribution that we have, and we're pleased thus far with the partnership. We're seeing more skin care growth and than makeup at the moment. But again, I expect that we will certainly with some of the strong gift programs that our makeup brands have, we expect that we'll see more makeup growth in the second quarter.

I just wanted to add that our North America growth discourse, which has been extraordinary, is the result of manufacturers. It's definitely not yet the impact of Ulta, Target, or Sephora, or Kohl's. That was just at the beginning and only in the last months of the quarter. So it's the result of many other very positive signs. Also, we have been getting shares with categories during the quarter in Clinique, in MAC, in La Mer, in Bobbi, in Tom Ford, in Jo Malone, so it's a very broad growth across. We are really ready with our innovation with the strong marketing programs. We had anticipated they come back for makeup. We have strengthened our program in what we call the Makeup Renaissance in anticipation on the return to back-to-school or back to work. And we had amazing programs so that we have had the obviously the ordinary, which is the number four brand in a skincare in prestige U.S. to our portfolio. So is a combination of factors of improvement of the strategy and improvement of the execution in our North America organization. So it's a refilled quarter, and we do expect the Ulta Target and Sephora to contribute more in the next quarters, or was not the key contributing factor in quarter one.

I think this quarter really represents the diversification that we have within the business that we've talked about. And certainly the North America performance to Fabrizio's point represents that as well.

Thank you. And with that, that will conclude today's question-and-answer session. If you were unable to join through the entire call, a playback will be available at 1 PM Eastern today through November 16th. To hear a recording of the call, please dial 855-859-2056. Enter pass code 6086-324. Again, the pass code 6086-324. That concludes Estee Lauder conference call. I'd like to thank you all for your participation and wish you all a good day.