Richard Kunes - Chief Financial Officer, Principal Accounting Officer and Executive Vice President Olivier Bottrie - President of Travel Retailing Worldwide Fabrizio Freda - Chief Executive Officer, President and Director Dennis D'Andrea - Vice President of Investor Relations

Ali Dibadj - Sanford Constance Maneaty - BMO Capital Markets U.S. Lauren Lieberman - Barclays Capital Mark Astrachan - Stifel, Nicolaus & Co., Inc. Alice Longley - Buckingham Research Group, Inc. Joseph Altobello - Oppenheimer & Co. Inc. Jason Gere - RBC Capital Markets, LLC William Schmitz - Deutsche Bank AG Wendy Nicholson - Citigroup Inc Caroline Levy - Credit Agricole Securities (USA) Inc. Linda Weiser - Caris & Company

Good day, everyone, and welcome to the Estée Lauder Companies Fiscal 2011 Third Quarter Conference Call. Today's call is being recorded and webcast. For opening remarks and introduction, 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: Thank you. Good morning, everyone. On today's call are Fabrizio Freda, President and Chief Executive Officer; and Rick Kunes, Executive Vice President and Chief Financial Officer. Also with us is Olivier Bottrie, President of Travel Retailing Worldwide. Olivier will give an overview of Travel Retail and discuss our strategies for growth in the channel. 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'll find factors that could cause actual results to differ materially from these forward-looking statements. We will also discuss certain of our results in non-GAAP financial terms, and you can find a reconciliation between GAAP and non-GAAP figures in our press release and in the Investors section of our website. I'll turn the call over to Fabrizio.

Good morning. Thank you for joining us. Our company had another strong quarter in which we continue to show fantastic momentum. Our growth was broad-based, encompassing all regions and categories, and every category grew in every region. More than half of our brands grew double digits. The luxury consumer is clearly... [Audio Gap] The strength is driven by affluent shoppers in the U.S. and wealth creation markets especially in China. Demand for premium goods and services in the U.S. is expected to rise 8% this year according to a recent survey of affluent and wealth in America. In the U.S., premium brands are generating the strongest gains among consumer goods and luxury travel is outperforming economy travel. However, luxury consumers are very demanding. They're willing to spend, but they expect excellent product and services and an experience that provides added value. This trend rewards our focus on high-quality products and reinforces our commitment to invest at point-of-sales in beauty advisor online and all other aspects of our High-Touch experience. In fact, our luxury brands -- Bobbi Brown, La Mer, Jo Malone, Tom Ford -- grew strong double-digits for the quarter. The soundness of our strategy of launching fewer, bigger innovations and supporting them with stronger advertising and excellent High-Touch service is confirmed again this quarter. We continue to lead in the strategically important Skin Care category, which saw strong increases in all regions. Recent technologically advanced innovations include Clinique Repairwear Laser Focus, Estée Lauder Advanced Night Repair Eye Recovery Complex, La Mer Regenerating Serum and Origins Plantscription. We are pleased with the success of these new products, and we have a strong pipeline of innovations ahead of us to sustain our leadership. Importantly, we continue to nurture our other categories. Makeup, our second-largest category, also grew strongly in every region. Innovation drove sales at Clinique, which benefited from launches of bottom lash mascara and Chubby Stick lip gloss. Our makeup artist brands continue to lead the category. M-A-C and Bobbi Brown grew double digits, and Smashbox contributed incremental sales. M-A-C added 14 doors this quarter and is planning to open almost 30 more by our fiscal year-end. Our Hair Care category is improving. Following a successful test in 10 stores, Bumble and bumble had expanded to all stand-alone Sephora doors in the U.S. Bumble salon network should benefit from the referral program at Sephora. The brand has also launched its first ever print ad campaign for its new texture cream in North America in April, followed by the U.K. this month. Aveda is seeing increased sales of its styling products and professional hair color, and we are encouraged about the full quarter relaunch of our Ojon brand, with a reformulated product lineup. The brand is running a trading campaign in Sephora in May to encourage trial of new products. The brand narrative of the strength and is now focused on product performance, as well as strong sustainability platform. Our Fragrance category grew this quarter despite a tough comparison with the 3-year relaunch of pureDKNY. Several of our recent launches performed well, including Coach Poppy and Estée Lauder Pleasures Bloom, as well as the premium Jo Malone and Tom Ford fragrances. During the quarter, we announced that we are assuming a worldwide license for Zegna, which should strengthen our international Fragrance portfolio especially in China and Europe. We continue to improve the profitability in this category. It is now contributing nicely to our overall margin expansion. Our turnaround brands have contributed to improve profitability in all categories, most notably Fragrance. The relaunch of Ojon is expected to further improve our Hair Care category and several other brands have streamlined their distribution and focused their product assortment to grow their profitability. Our business is responding well to our pool strategies around the world. We have been reinvesting a portion of cost savings and reallocating marketing dollars to advertising behind the most powerful innovations, a market where we believe that has the greatest impact, both emerging and developed. Fast-growing emerging markets and our ability to satisfy multicultural consumers continues to fuel our growth. China continue to grow strongly, rising 35% this quarter. Origins is well perceived in China, and its doors in that country are already the brand's second-most productive in the world. It just opened its first freestanding store at the popular [indiscernible] mall in Shanghai. Also, to promote its innovative new product, Plantscription, Origins is running its first TV commercial in the brand's history beginning in Hong Kong this month. Through 9 of our brands, we now had a presence in department stores, freestanding stores and Sephora in 38 cities in China. Our online initiative in the country extends our reach to more than 346. Estée Lauder remains the top-ranked Prestige brand in its distribution in China. Our business in Latin America is benefiting from greater focus. All countries in the region rose double digits, and we are particularly pleased with our progress in Brazil. Our M-A-C and Clinique brands continue to resonate with consumers. M-A-C is expanding distribution... [Audio Gap] Even Better Clinical has been a greater success in Brazil. The brand is supporting Even Better Clinical with strong print advertising, which is contributing to fantastic double-digit sell-through. Despite the turmoil in the Middle East, our sales continue to grow nicely, as most of our sales in the region are derived in countries not directly affected by political changes. Turkey is a fast-growing emerging market in the European region. Our sales there gained 34% in the quarter, and we continue to gain share. We also gained share in South Africa, where improved consumer insights led to better product assortment and more effective marketing campaigns. In Russia, our sales every day remains strong, rising more than 20% which is about double the overall Prestige beauty growth. We see lots of potential and opportunity in Russia and are committed to further growth in the region. We are developing infrastructure in the markets around Russia, investing in our full strategy, advertising and serving at points of sales. Our excitement about our emerging market is not just about sales. It's also about profits. And in most countries, we are generating profitability that is not diluted. This is due in part to the way we have designed the business model. So results would be accretive to the company. Performance in one more developed markets -- in more developed market is mixed. In Japan, the devastating disaster that took place in March have been disruptive. But the resilience of the Japanese people and our employees have been truly remarkable. I'm happy to say that all of our employees in Japan are safe. I want to take a moment to commend our management team in Japan and in the region for their outstanding leadership, steady guidance and unwavering courage during this difficult time. In fact, it has been a remarkable outreach by our employees around the world to aid our colleagues in Japan. In addition, the company's contribution to the Japan Red Cross, our local team is being quietly doing all it can to aid friends, coworkers and families in deserted areas. That said, the impact of the disaster was not significant to our overall financial performance through March. We expect the condition in Japan to reduce sales growth by about half a percentage point for the full fiscal year and affect us for the next 6 to 9 months. We will continue to monitor the situation. While the affected areas represents a very small portion of Japan, the trauma and continued aftershocks has dampened consumer sentiment across the country. Retailers in Japan are operating, but there are limits on electricity. So some have shortened hours or dimmed lights. This is expected to continue through the summer. This quarter, we are particularly pleased with the continued retained momentum in the United States. Prestige Beauty grew more than 5% this quarter, and continues to take share for mass as new consumers are drawn to the Prestige channel. In fact, beauty sales in U.S. department stores and Sephora, as measured by NPD Beauty Trends, outpaced those in food, drug and mass outlets in each product category, and most significantly in Skin Care and Fragrance. Our North America team has been working hard with our department store customers to improve the consumer experience at point of sale. Clinique's service-as-you-like-it concept continue to rollout to top stores around the world. Estée Lauder is expanding its Beautiful Skin studios, and is also seeing success with merchandising powers showcasing its top 10 bestsellers. In other distribution, our own stores have been performing well, particularly Jo Malone, Origins and M-A-C. We carefully monitor productivity in these stores, pruning the less productive doors and adding new locations. This discipline helps to ensure that our retail stores are not margin-diluted to the corporation. Among the last markets in Europe, we have seen the benefits from the successful SKU reassortment program implemented in last year's third quarter. Our retail sell-through in Germany and France was very strong during the quarter. Retail sales in Italy have improved, although Spain declined modestly. Estée Lauder and Clinique continued to strengthen their position in many retailers, particularly in Skin Care. Greece remains difficult, as unemployment and poor consumer sentiment hamper sales. Looking at another aspect of our business, a key strategy is to further leverage our digital opportunities. E-commerce continues to appeal consumers around the world, and our online business grew almost 30% this quarter. During the quarter, we expanded our e-commerce capability in several brands. M-A-C began selling online in China, and Bobbi Brown launched its site in Germany. Estée Lauder and Clinique started testing automatic replenishment program on their sites, allowing consumer to choose what products they want to replenish and at what intervals. Bumble and bumble is now official on Sephora.com in conjunction with the rollout of the brand in Sephora's brick-and-mortar stores. The site links to the Bumble and bumble network salon locator, effectively connecting 50 million Sephora door to our customers to Bumble and bumble salons. The brand is also launching a digital campaign in conjunction, with its first-ever print ads. Additionally, Ojon just launched its new interactive website incorporating the brand's updated positioning and new creative direction. Beyond e-commerce, we are very excited about our many initiative in social networking. Origin ran a sampling campaign around the launch of its Plantscription Skin Care product. It garnered 130,000 new fans on Facebook in just 1 week. Both Aveda and Origins ran first month campaigns as well, following overwhelming consumer interest in last year Origins' Rockford month concert. The brands made this year concert accessible to more than 170,000 global viewers by live streaming the concert online. This type of activity expands consumer interest and helps to foster a connection to the brand. Moving to our cost-savings initiative. We continue to improve productivity and eliminate non-added value cost through our DMT savings and the strategic shift in our product mix. Reductions in promotional spending are being reinvested in activities with better returns. We also passed another milestone in our Strategic Modernization Initiative, with the first wave of our international affiliates successfully implementing SAP on April 1. The U.K., Germany, Singapore, Malaysia, Vietnam, Indonesia and Philippines went live with few issues. We are pleased with our progress on SMI and will transfer the learnings from these affiliate to the next wave. Our ability to profitably leverage our current growth give us the flexibility to invest more in new growth areas, building capabilities and modernizing the company to further sustain and improve our long term profitability. We are investing significantly more than we originally budgeted in pool activities in our fourth quarter, increasing investment in our best opportunities to sustain our share growth in key markets and ensuring our success for the long term. We will continue to focus our advertising in the most promising new products and the best performing markets and brands. Our ability to push harder in strong areas of our business helps mitigate the risk from Japan, Australia, the Middle East and continued softness impact in Southern Europe. We have had strong 9 months performance. With the month of April behind us and only 2 months remaining in the year, we are comfortable raising our EPS expectation for fiscal year 2011 to between $3.55 and $3.65 despite the impact of Japan and the higher investment we are making. We are committed to providing a solid and sustainable return to stakeholders and to shareholders. We believe that the path we developed to increase sales and leverage down for profits will continue to provide good returns in the future. This dynamic reflect the power of Estée Lauder Companies' strong organization and the amazing quality of our people. Now I will turn the call over to Olivier to discuss our Travel Retail business.

Thank you, Fabrizio. Good morning. Let me first introduce myself. I've been with the Estée Lauder Companies for 15 years, running Travel Retail division for the past 7 years. I also worked with the different brand in North America and won the international division of Aramis and Designer Fragrances. To begin, I would like to give you some background on the Travel Retail channel. We estimate retail sales in excess of $30 billion in 2010. The Travel Retail channel provides shopping opportunities to travelers around the world, tourists and business people alike. The Travel Retail channel grew an average of 7% annually over the past 10 years. Travel Retail was born as a beauty advisory channel. It has evolved into one of the most vibrant, rapidly growing brand equity building, global market business. The channel provides a great platform to build brand new [indiscernible], introduce new consumers to brands and improve their travel experience. While historically, sales growth in the channel for passenger [indiscernible] quite closely. The recent and rapid development of new airports and improved facilities in existing airports and had both retailers and brands to focus in attracting an ever-growing number of travelers into shopping and buying. Our retailers have done a great job securing the right mix of brands and improving store layouts and merchandising. This is reducing the coalition between traffic growth and sales growth. The emergence of the Chinese travelers eager to consume nursery [ph] products in our channel is also changing. The Beauty category enjoys the growing leadership in addition to the channel, over 30% of all sales. In the past 10 years, sale are growing at the rate of 10% annually. Within every category, Fragrances have a dominant position with a global share of 58%. However, their share have been declining as Makeup and especially Skin Care have enjoyed both average growth in recent years, driven in large parts by the rise in Asian travelers who are very attracted to strong beauty brands. The Estée Lauder Companies is the fastest growing company in the channel, with a growing share estimated at 14.5% for 2010 compared with 13.6% in 2009. This is the result of the remarkable growth of our brands in local markets and our specific Travel Retail reports in product offering, point of representation, communication, services and consumer relevance. Working closely, we are global brands team and our [indiscernible] around the world. We coordinate and support global product launches to leverage global market investment. Our key dedicated brand teams develop specific products set, combination of existing products for some prepackaged skin care regiments cater to local needs are unique collaborative positions that cooperate Fragrance or even exclusive Skin Care items. These offerings answer the specific needs and demands of a growing population. They're also a response to the need for strong consumer relevance of our brands in the channel. Business conditions have been excellent since the start of fiscal 2010 and is poised to end the fiscal year with sales growth above 20% versus traffic growth of only 8% over the same period. New products have been the key development for all brands, and the disciplined implementation of pull push strategies are yielding remarkable results. Slowdown in Japan travel since the terrible tragedy that hit the region and the current turmoil in the Middle East are showing a limited impact on our performance to date. We are, however, monitoring the situation very closely going forward. We believe that the overall channel and all business in it are together poised to continues long-term growth as a result of increasing passenger traffic combined with improved in-store penetration, sales conversion and sales transaction. As an example of its potential, we believe that only 12% to 15% of all problems correctly visit airport duty-free stores and actually purchase something in the stores. We are committed to building the category and partnering with the better [indiscernible] around the world to enhance the consumer experience and improve performance of the category. International passenger traffic is forecasted to grow on 5% annually over the next 4 years compared with 3.5% annual growth for the past 4 years. Looking at total travelers including outbound, inbound and transit, over 400 million new travelers expected in the next 5 years from the base of around 2 billion passengers in calendar 2010. We should note that higher than average growth is expected within Asia and to and from Asia, an area of trend for bigger companies. We also believe that airport shopping facilities will continue to expand and improve, providing a very strong platform to present our brands the best possible way to the consumers as we enhance their traveling experience between improve services and product offering in particular. We're confident that the Italy companies could continue to grow faster in the Beauty category in the channel. As a result of our strategies to full-year range, the investments of our brands on new or existing products and our ability to capture larger share of growing traffic for specific and targeted initiatives, combined with overarching implementation of our High-Touch service model. We engage, for instance, in traditional airport and internet advertising, inter-consumer communication and enhanced service propositions across all our brands. Our Travel Retail division is also extremely well-positioned with the ever-growing contingent of emerging consumers from China, India, Southeast Asia, Eastern Europe, Latin America, the Middle East and eventually, Africa. In particular, our brand visited various [indiscernible] with the 18 million Chinese international air travelers who impact our business, not only in Asia, but also in the Americas, Europe and the Middle East. Turning to air travelers are growing at a rapid pace of 11% annually and the stronger feel of our brand in Mainland China makes us uniquely positioned to take advantage of their appetite for high-quality Skin Care brands. As you know, the channel is subject to a number of risks that could impact air travel and close periods slowdown [indiscernible] in our business. Political events. Natural Disasters, health crisis, currency situations and global economic recessions are examples of such risks to the business. Market volatility is managed through regional and brand portfolio diversification efforts and our integration in the Estee Lauder company's global business. We're excited about our business and its potential, and we believe we're on the right course to continue strong growth and continue the improvement of the travel experience of our consumers, our continuous growth and the company's overall financial growth. In closing, I would like to thank specially our retailers worldwide for their continued support. I also want to thank our colleagues and all brand regional affiliate teams in New York and around the world for passion, support and collaboration. I will now pass the call over to Rick.

Thank you, Olivier, and good morning, everyone. As you know, my discussions on the quarter and the outlook exclude restructuring and special charges. We had another strong quarter, driven by broad-based growth across our regions and categories. Sales rose 16% to $2.17 billion. Excluding the impact of currency translation, sales were up 15% and earnings for the quarter more than doubled to $142.6 million compared with $68.9 million in the prior year quarter, and diluted EPS was $0.71 compared to $0.34 last year. Sales growth was about 6 points higher than the top end of our guidance. Approximately 2 points was due to a weaker U.S. dollar than we had forecast. Some of our retail customers ordered extra inventory ahead of the April 1 launch of SAP in 7 of our International sales affiliates, increasing our third quarter sales by about another 2 points. These sales would have likely been made in our fourth fiscal quarter. The remainder came from stronger-than-expected sales, mainly in Travel Retail, North America and China. The incremental sales, combined with well-managed operating expenses, were only partially offset by an impairment charge for Ojon, allowing the majority of the benefit to drop to the bottom line. Compared to last year, all product categories grew. Skin Care, Makeup and Hair Care saw double-digit gains with the fastest growth in the Makeup category. Sales rose 22% in local currency, with improvements in every region. The Makeup category benefited from an easy comparison to the prior year when we recorded approximately $27 million in returns for product reassortment at certain European perfumeries. This compares an added about 4.5 points of growth to the Makeup category. The strong underlying category growth was driven primarily by our M-A-C and Bobbi Brown brands and the addition of Smashbox. In Skin Care, local currency sales rose 12%, driven by strong innovation at Estée Lauder and Clinique, as well as solid growth at La Mer. The category grew in all regions with particular strength in international markets. Our Fragrance business grew 2%, excluding currency. The category was helped by recent launches such as Coach Poppy and excellent growth at Jo Malone. In Hair Care, sales rose 14% from new products at Aveda and expanded distribution at Bumble and bumble. Ojon sales declined in anticipation of the fourth quarter relaunch of its newly formulated product line. On a geographic basis, all regions rose double digits. Sales in Europe, the Middle East and Africa rose 19% in local currency. The prior year included a $31 million charge for returns related to the reassortment of perfumery SKUs. The current year includes approximately $36 million in additional sales orders ahead of the rollout of SAP in the U.K. and Germany. Excluding both of these items, local currency sales growth would be approximately 9%. Travel Retail rose 19%, thanks to the drivers Olivier discussed earlier. Many major Western European countries grew double digits, including France, Benelux and Nordic, as did most emerging markets in the region. Encouragingly, Italy rose high single digits. Spain, Portugal and Greece remain soft. We continue to see healthy sales growth in the Asia-Pacific region, which gained 13% in local currency. The region benefited from approximately $6 billion in incremental sales in anticipation of the SAP rollout, adding 2 points of growth. China, which continues to lead growth in Asia-Pacific, rose 35%, and Hong Kong grew more than 20%. Taiwan and Korea were up mid-single digits. Japan contracted by about 4%, partially reflecting the impact of the earthquake near the end of the quarter. The Americas region has great momentum with sales rising 12% in constant currency. Latin America rose 30%, while Canada was softer this quarter, partly due to the impending relaunch of Ojon products. Our superpremium brands had the highest growth in the U.S., reflecting the strength of luxury consumers. Tom Ford, La Mer, Jo Malone and Bobbi Brown also had very strong double-digit increases. Our 3 largest brands also contributed to growth, led by M-A-C, which reported double-digit gains, following with a strong reception for its Wonder Woman collection. Additionally, Smashbox added 2 points to growth in the region. Our gross margin improved by 150 basis points this quarter to 77.7%. The increase was primarily driven by lower obsolescence charges of about 60 basis points, improved product mix of 50 basis points and favorable currency of 30 basis points. These figures include the benefit of our cost-savings initiative of $30 million. Operating expenses as a percentage of sales improved 150 basis points to 67.0%. The improvement was primarily due to lower selling and shipping costs of 180 basis points, and improved administrative cost of 180 basis points. These improvements were partially offset by the impairment charges of approximately 170 basis points, higher advertising merchandising and sampling of 30 basis points in line with our strategy, as well as stock-based compensation cost of 10 basis points. These figures reflect savings of $18 million from our cost reduction programs. Operating income increased 63% to $232.6 million, and operating margin rose 300 basis points to 10.7% of sales. Our savings programs, including a more efficient organization, indirect procurement initiatives and the ability and processes to leverage growth, continue to support our profitability improvements. Total savings from our cost initiatives were $48 million in the quarter, and we expect to save approximately $190 million for the full year. Net interest expense was $15.8 million this quarter compared with $18.2 million last year due to lower debt. The effective tax rate was 34%. In the third quarter, we recorded $23.5 million in restructuring and other special charges equal to $0.09 per share. For the full year, we expect to record charges of between $60 million and $70 million. During the quarter, we repurchased approximately $1.9 million shares of our stock under our share repurchase program. Net cash flows provided by operating activities for the 9 months was $728 million compared with $798 million in the prior year. The biggest driver of the variance was an increase in the value of accounts receivable due to timing of collections and the extra orders received at the end of the quarter related to the SAP rollout. Our day sales outstanding were 52 days at the end of March compared with 47 last year. Inventory days were 169 days compared with 157 days at the end of March last year. We have been intentionally building inventory to support our solid growth and improve our service levels. We do not anticipate unusual obsolescence issues in the future associated with the higher inventory. During the 9 months, we spent $224 million for capital expenditures, which includes our company-wide systems initiative. We also used $250 million for the purchase of Smashbox and $148 million for our increased dividend. We expect to generate approximately $900 million of cash flow from operations and use about $350 million for capital expenditures for the fiscal year. We are very pleased with the tenure of our business. For the year, we now expect local currency sales growth of 10% to 11%. Our guidance builds in assumptions for the balance of the fiscal year of approximately 144 for the euro, 83 for the yen and 164 for the pound. This scenario would increase reported sales growth by about 1 percentage point. We are committed to reinvesting behind our strategic priorities. The timing, amount and place of our investments is thoughtful, driving our overall strategy of leveraging growth. The first 9 months of the year have gone very well, and we want to keep up the momentum into fiscal 2012. We are significantly increasing investment spending in our fourth quarter in the areas of TV, digital and print advertising, merchandising and sampling. We will also continue to pursue our cost savings programs. Additionally, we are beginning to lay the foundation for future efficiencies by investing in several systems initiatives beyond SMI. By the end of the fiscal year, we expect at least a 170-basis-point improvement in operating margin. At this time, we now estimate our effective tax rate for the year will be between 31% and 33%. Taking all of this into account, we are raising our full year non-GAAP EPS forecast to between $3.55 and $3.65. We are now only 2 months from the end of our fiscal year, and we believe we have good visibility to support our revised EPS range. There are a few items to keep in mind when reviewing your models for the fourth quarter. First, the $42 million in retail orders we shipped ahead of the SAP rollout were recorded in our third quarter, but originally expected in our fourth quarter. This was just a move from quarter-to-quarter, not incremental business. Second, we recorded a $31 million tax credit in last year's fourth quarter, which added about $0.15 to EPS. Third, we are ramping up on investment spending, especially advertising, as I just mentioned. Lastly, Japan is expected to weaken sequentially as this will be the first full quarter following the difficulties there and could impact EPS by about $0.05. Looking forward, as we build our plans, we will continue to consider the risk we see in parts of the world. Unrest in the Middle East and other factors have precipitated higher fuel prices, which increases the cost of travel and could dampen consumption. We believe the negative impact on our business in Japan will continue for at least the next 6 to 9 months. And finally, austerity measures and weak economic growth in some European countries and elsewhere could hamper consumer sentiment. That concludes my comments, and we'd be happy to take your questions now.

[Operator Instructions] Our first question today comes from Chris Ferrara with Bank of America Merrill Lynch. [Technical Difficulty]

Your next question comes from the line of Alice Longley with Buckingham Research. Alice Longley - Buckingham Research Group, Inc.: Could you quantify the EPS impact of the $42 million in incremental sales you got in the third quarter, because we have no way of calculating the costs associated with those sales.

Sure. That sales shift was about $0.10 EPS. Alice Longley - Buckingham Research Group, Inc.: Okay. And then that takes $0.10 off the next quarter obviously. And then, could you elaborate on the 180 basis points improvement in margins you got in selling and shipments? I think that line includes compensation for people who help out customers in stores, and tell us where you're getting the bulk of that savings.

Sure. As you know, our business model is built on generating high volumes through as few doors as possible, if you will. So that productivity at point of sale, and what we're seeing is tremendous results from a sales perspective, which is helping us to drive our productivity at point of sale. And just generally across the company, we're doing I think a pretty effective job of leveraging growth. So our growth has been ahead of what we actually thought we would achieve this fiscal year, and what we are doing is very effectively controlling our costs associated with that, and at the same time, taking some of that additional profitability and investing it in advertising, in particular, magazine and television advertising, which is helping drive our business especially in markets like China. So the business model that we built is working pretty well for us so far.

Your next question comes from the line of Lauren Lieberman with Barclays Capital. Lauren Lieberman - Barclays Capital: It is a question actually on Travel Retail. So if you were talking about sort of improvements in the selling environment and so on, I know historically, it's in your P&L today, most of the -- the emergence of Travel Retail are so accretive because a lot of the advertising and marketing costs is actually allocated to the regions themselves, not to travel. So as we go forward, there's more investment sort of in-advertising within the channel and merchandising within the channel itself. Does that sort of cost allocation and implied probability change at all?

This is Fabrizio. Actually, first of all, Travel Retail will continue to exploit the power of our brands in the key markets because consumers we try in this market when to travel the Lauder brands. And the advertising in those markets will continue to influence positively Travel Retail. But what is the new trend and new possibility this channel offers is actually also using the channel for equity building. And I like Olivier to explain exactly how we is doing that with his team in that channel.

Well, again, what we want to do is to exploit the possibility given to us with very low penetration and conversion rates that we observed in airports in particular. So what we do is put a series of activities to give advantage to advertising of course as we mentioned, towards also improving our contest in airports includes theaters and events all this again to drive consumers into strong and improve conversion therefore, more sales. So the question on how this could affect profitability, in effect, we investigate more sales, and as a result, actually the profitability goes up.

Your next question comes from the line of Chris Ferrara with Bank of America Merrill Lynch. [Technical Difficulty]

Your next question comes from the line of Connie Maneaty with BMO Capital Markets. Constance Maneaty - BMO Capital Markets U.S.: Could you talk about the next wave of roll out of SAP, which countries it's going into, and would you expect the same sort of sales shift that you saw this quarter? And specifically, which quarter does the next wave start in?

So our next wave starts about 12 months from now, I believe. And, I mean, we're working on it now as we speak. I don't know, Connie, off the top of my head the countries involved. It depends of the retailers. So what we saw this time was because of their past experience with other suppliers, they were somewhat concerned, I guess, about whether we would have any problems going live with SAP. And what happened was actually that our implementation and go live went very well for us. So I don't know whether in the future now, other customers will look at that experience and assume the same or whether they'll be cautious as well and also order in advance of us going live in their markets. Constance Maneaty - BMO Capital Markets U.S.: Okay. My follow-up question is this, what is the nature of the investment spending in the fourth quarter? And should we assume that level of spending going into the first half of fiscal '12?

Yes, the nature of the spending is basically advertising and sampling a key merchandising activity on the biggest new initiatives and launches on the biggest brands in the main markets like China or the U.S. And we are increasing overall advertising by one full point. So 100 basis point in the year on average. And in the quarter, we are increasing about 140 points. So we are really taking a big stance in building our business aggressively, building on our best brands, countries and initiatives. And we have built a business model where this is supposed to continue. So yes, it will continue for the future. Because in our business model, our pool activities have a bigger role. Constance Maneaty - BMO Capital Markets U.S.: Does that suggest then that in fiscal '12, this investment spending would be up about 100 basis points over fiscal '11?

No, I didn't say that every year we'll go up a point. I just said that we have increased the point, and this level is supposed to continue, and we will find -- we will look for opportunities to continue to gradually take this amount up depending on business needs and opportunities. Constance Maneaty - BMO Capital Markets U.S.: Great. That's helpful.

Your next question comes from the line of Linda Bolton Weiser with Caris. Linda Weiser - Caris & Company: Just a follow-up question on the Travel Retail impact. That impact that you gave, the 0.5% for the fiscal year, does that include just your sales in stores and other channels in Japan or does it include the anticipated effect on the Travel Retail? And can you also comment on whether -- we found some data points that about 15% of the Travel Retail sales globally are to Japanese travelers traveling abroad, and can you comment if it's accurate? And maybe you can just give us some commentary about what -- I mean, are you seeing any impacts in terms of specifically the Travel Retail piece of the Japanese situation? That would be the first question. And then my second question has to do with the Americas strength. I'm wondering if you could give us some more detail on that, maybe department store sales compared with alternative channels, because the number that you're showing there seems extremely strong, and I just want to better understand the growth that's happening there on the Americas.

Okay, let me put the number first ahead. Japan is about 5% of our business. We are seeing about a 10% reduction because of the dramatic event, and Travel Retail related to Japanese people, so Travel Retail in Japan and influenced by Japanese travelers is about 6% of the Travel Retail business. And on that front, we are seeing, for the time being, about a 20% to 30% impact. So the combination of those 2 elements, meaning the Japanese traveling, Travel Retail and Japan mainland is the $0.05 impact that we have quoted. The next question is on the U.S., is that we see the specialty stores in the U.S. continue to be the fastest-growing channel in Prestige. But department stores are also growing pretty fast in this field. As I said, the combination of department stores and specialty store Prestige channel is growing at this point faster than drug and mass.

Your next question comes from the line of Wendy Nicholson from Citi Investment. Wendy Nicholson - Citigroup Inc: My first question has to do on the Travel Retail business and one of the comments I think that Olivier made was that the market share for Estée is only about 14.5% and that surprises me that, that is so much lower than what we see in terms of your department store market share, and I was wondering if you could split that out maybe geographically or some other way because it just seems like an awfully low number.

Well, it's slow but it's growing. So that's the good news. And we actually said the fastest-growing company in the channel, I think, has been great for 2 years now. The reason why we have a global market share of 14.5% only is due to the fact that the Travel Retail market historically is a European plane and it's a Fragrance plane. As a company, we are specialized in cosmetics and beauty, more than in fragrances today, and our trend is really in Asia. Now as I mentioned as well I think in my prepared remarks the trends towards Makeup and Skin Care, and we have very good expectations, very good hope that we could, going forward, continue to gain market share in the channel and increase that share on the back of Makeup and Skin Care as a company of course deploys also more investments acquiring brands to show our presence in Fragrances worldwide. Wendy Nicholson - Citigroup Inc: Okay. And then given that, and given, I mean, it just seems like you've got a tremendous amount of headroom there, and that's great, and given the margin profile, Frabrizio, even if the fourth quarter margin is flat with year ago, which I think is kind of what you're implying with the guidance which seems really hard to believe with foreign exchange and everything else, you're still going to end this year kind of halfway towards your 2013 margin goal, north of 13% already. Is there any reason for us to think that margins aren't going to be up in 2012 and then again in 2013, because it just seems crazy that you're not raising that 2013 margin target at this point?

No, we are not raising at this point, because we are still analyzing details all the elements. And we have all the elements, we will continue to update our guidelines in this sense. But if your question is should you expect to continue to see our margin progress, yes, you should. As we said, we had a very strong margin progress at the beginning of our program. We are today at the middle. We are after 2 years of our full-year program, because the majority of cost savings and the majority of mix improvement and the majority of improvement on underperforming brands they were a big part of our historical issue, all these things happened in the first 2 years. Now we will continue to progress may be at a different base. We said already in a previous call that we will see that only as 60 points. So 0.5% margin per year minimum as our ongoing ability to continue grow. So we will work on these and then when -- in August, we will present. The next fiscal year, we will also update our thinking on the long term.

Your next question comes from the line of Caroline Levy with CUSA. Caroline Levy - Credit Agricole Securities (USA) Inc.: I just want to clarify quickly a couple of points. In Europe, Middle East, et cetera, a year ago, I think you had a charge of $21 million -- $31 million. And so if I would add that back to last year and take out the pulled forward sales this year, it looks like the growth in Travel Retail would have been about 7% for EBIT. So that would be adjusting up the charge from last year and taking out the pull forward sales. And I just want to know if I'm getting that wrong or is that the right calculation.

You're doing the right calculation for the region, but not for Travel Retail. None of that was associated with Travel Retail. So the $31 million charge last year was associated with the SKU assortment in perfumeries in Europe. So that was a charge, you're absolutely correct on that. And the shift in sales was all at the sales affiliate level, U.K. and Germany this year where sales from the fourth quarter were moved into the third quarter. So those would be the 2 adjustments that you would make. Caroline Levy - Credit Agricole Securities (USA) Inc.: The Travel Retail is obviously very strong but it sounds like in the other businesses, the EBIT was down, and I'm just wondering how much was discretionary because you felt like you had the money to spend with margins under pressure ex-Travel Retail.

No, you're right. It was based on spending patterns, but has nothing to do with our profitability improvement within the region. I think if you look on a year-to-date basis in Europe, you'll see that our numbers are up substantially, and I think you'll still see for the full year a substantial improvement in the profitability of the European region and quite honestly throughout all our regions.

Your next question comes from the line of Bill Schmitz with Deutsche Bank. William Schmitz - Deutsche Bank AG: Can you talk more about what's going on with Fragrances? So I just kind of read some the guidance here, are you going to exit more brands? Is that why it feels heavy flow. It's kind of written cryptically. I don't have a follow-up.

No, we are not going to exit more brands. Actually, we are building more our Fragrance portfolio. As we announced, we have Zegna, also included in our portfolio for the future. We are investing in improving our Fragrance business around the globe. As we said, we made excellent progress in fragrances in the last year, so now they are contributing to our profit improvement year-to-year in a substantial way. And our high-end Fragrance is like Jo Malone and Tom Ford, among the fastest-growing brands in our portfolio. So actually [indiscernible] shape that. William Schmitz - Deutsche Bank AG: Okay, great. And then just my follow up question is you kindly provided us with sales and operating impact of the pull forward of those SAP related prebuy. It looks like the margin on Asia was 83% and incremental sales and something like 72% in Europe. Why are those margins so high?

Well because there's -- for us, Bill, you see our gross margin, and there's really very little expenses associated with it. So when they ordered additional - at the end of March, ordered additional stock, there was no expenses associated with it. So it's pure gross margins to us. And same happens next quarter when those sales don't happen. So we don't change our spending plans as a result of that. Those stay sort of constant. So that's what generates that huge margin.

Your next question comes from the line of Joe Altobello with Oppenheimer. Joseph Altobello - Oppenheimer & Co. Inc.: Just a couple of questions. First, over the past few years, it seems like you benefited nicely from the trade down within the Prestige channels to opening price point wins like Clinique, like Estée Lauder. Are you still seeing this in a big way or are you -- it just seems like those brands did well this quarter but also the superpremium brands did well like La Mer, for example. So are you just gaining share across different price points or are you seeing trade up?

Actually, what we are seeing is really the strength of our broad portfolio of businesses or brands. Because what we are seeing is that our Clinique and M-A-C brands, for example, which are at the entry price points of Prestige, they continue to benefit from the trade up, actually, from mass into Prestige. They are at the entry of Prestige, and they are the brands which are growing, thanks to our -- the ability of our model to attract people and consumers also from mass drive and other channels around the world. On the contrary, our high-end brands, meaning the most luxury brands in our portfolio, are currently benefiting from the fact that the luxury consumer is back, and they are looking now for quality and for high-quality brands. And in our portfolio, we have brands to offer in that area. And those brands are now growing faster again where those brands, as you know during the recession, had been weaker than they are today. Joseph Altobello - Oppenheimer & Co. Inc.: Okay. Just one second one. In terms of the de-emphasis on promotional activity or for the pull strategy is you call it. Our promotional levels now sustainable or are there additional production next year that should be redeployed into its advertising?

I think that we are on a journey. We will continue to rationalize our market spending, including our promotional spending and to reinvest part of this rationalization into activities with higher return, and again, advertising, particularly digital, and on a certain extent, also print and TV depending by country we'll continue to gradually increase.

Your next question comes from the line of Jason Gere with RBC Capital Markets. Jason Gere - RBC Capital Markets, LLC: I guess, the first question, just the language in the release just on the Americas, Europe, the outlook remains cautious and that may be just your normal language. But I was just wondering in the context if you could talk about inventory levels maybe at retail, first. Second, the competitive environment, may be in the department store right now. And then third, I think, Rick, you mentioned something about fuel prices. I'm just wondering any type of studies you've done. I mean, typically we think the fuel prices are affecting the low-end consumer not the high-end. Though, I was just wondering what type of studies you've done, to kind of analyze that.

We are cautious in Europe because some markets are under pressure. So we definitely continue to see soft markets in Greece, in Portugal, in Spain, specifically, we continue to see soft markets also in Australia and obviously in Japan and in some of the Middle East countries which are closely affected by the political turmoil. On North America, actually, we're not cautious. We see that the North America business, the market trend is pretty positive in this moment, as I said, driven by the fact that the luxury consumer is back.

Yes, regarding fuel prices. At a certain point in time, we realized that our customers for the most part are not -- probably have the disposable income to buy our products regardless of the fuel prices. But at a certain point in time, fuel prices start to work on the consumer confidence and start to affect people spending pattern in the way they look for their economic well-being, if you will, and starts to affect the overall economy. So there is a point in time, gas is at, whatever, $4.40 or $4.35, I think I saw in the way in to the office this morning. So gas is starting to push up and what we're saying is that if that continues, if that price dramatically changes, there could be an effect on the consumer sentiment, which will obviously affect our business.

Your next question comes from the line of Ali Dibadj with Bernstein. Ali Dibadj - Sanford: Couple of questions. First off, just around your guidance. I guess, I still struggle with it. First off, for next quarter, even if you pull out the kind of [indiscernible] you probably increase in advertising spend, et cetera. I just have trouble believing, I guess, in a down quarter. And I guess in that context more broadly, I guess, I'm certainly questioning guidance, I guess, in a broad sense in terms of what you've done over the past several quarters. How should we think about guidance? How much credence should we give guidance? Any guidance on that would be helpful, I guess. And as a piece of that, if you could address the impact of foreign exchange on the bottom line this quarter, it sounds likes it's a little too low for at least our numbers for next quarter. I mean, what kind the impact do you have on the bottom line versus the top line? Then I have a follow up for Olivier, please, on Travel Retail.

So let me first try to give you some specific numbers, and then you can judge our guidance in this case. But first of all, the high-end of our phase guidance would be in terms of sales growth for the last quarter. It will be about 12% if you have to adjust for the shift in orders that we had to have the rest, it might go live in April and for the input on Japan in the quarter, which is about 2 percentage points in the quarter. So if you adjust for this, the top line will be about 12%. Now 12% is in line with the first 9 months, more or less. And so in line were the 10%, 11% we see in the first. So we don't see the full quarter to be too different in terms of apple-to-apple comparison to our bottom line. In term of bottom line, you will need to, again, keep under account the fact that we are investing, 140 points more behind advertising opportunity for a specific choice that I've been frankly repeating that we are taking the flexibility to invest in our biggest opportunities for the long term. And we are taking the opportunity to build and consolidate our strong market share gains in places like China and Travel Retail now that we can, now that the market is strong. Because that's the right moment to do it for the long term. And we are taking advantage of the right windows when they open. And so, yes, you are going to see a certain important increase in advertising investment. They should benefit in turn also our top line in 2012. And you need to keep under account that last year, we had $31 million tax credit that we do not have in the last quarter of this year. That should include increase the quality list of the earning will be different. Now, I don't know, Rick, if want to add anything.

Yes. Ali, the exchange benefit that we had versus our estimate, we mentioned 2% of sales. That was worth -- it's worth about $0.04 from earnings in the quarter. Ali Dibadj - Sanford: Okay. And just a longer-term guidance on Travel Retail, then we have Olivier on the phone, might as well take advantage of it. Olivier Could you talk to us a little bit about what you saw the category in Travel Retail growing? You talked about traveler growth, but the category had been growing over the past x number of years and how you see that going forward, you did again mention the traveler growth going up a little bit, but could you give us some sense of that? And then if you would just aggregate that. So you talked about traveler growth, obviously, you talked about penetration which I guess, is distribution, you talked about conversion, how should we think of those buckets over the past couple of years for you, and how should we think about those as the pieces of your growth going forward?

First of all, let me qualify penetration. Penetration is a ratio of travelers in stores, number of percentage of travelers visiting stores. When we talk about our long-term outlook, a key factor of our growth in the future is of course traffic. It was explained we're able now to update traffic quite handsomely through techniques and activities that actually drive penetration and conversion. The category, which is a tough question, had been steadily growing in the industry over -- they're growing category to start, the beauty category is #1 in the channel and has been growing, as I said in the past 10 years, at 10% annually, while the overall channel, including all categories have been doing 7%. And again, that trend will be perceived continuing in the future if only due to the rise of Asian travelers and more specifically, Chinese travelers who happened to be avid consumers of Skin Care brands and spent much more on average than the typical American Consumer.

We have time for one more question which comes from the line of Marc Astrachan with Stifel, Nicolaus. Mark Astrachan - Stifel, Nicolaus & Co., Inc.: Wondering if you could talk a bit about what's driving the sales growth sustainably and meaningfully ahead of just global Prestige Beauty. And then somewhat relatedly, I'm curious if you see any gaps in the portfolio where you think there's an opportunity to expand into new categories, price points, et cetera?

First of all, we believe we can continue to drive our sales growth ahead of the market by about 1 point minimum every year. That's what we said for the long term. Now we are doing better than that in this moment, thanks to the many great success in activity we are running. But then the minimum stand that we have given ourselves for the long term. Now why we believe we can achieve that and why we are doing better than that today is because in reality, we are putting focus on the biggest opportunity. We have chosen to play in areas which are the fastest growing areas. We put our boat in the wind very well, and the wind is coming from China. The wind is coming from the other emerging markets. The wind is coming from multicultural, multiethnic consumers. The wind is coming from high-quality brands. And importantly, we gave a great contribution to create new wind in our core channel, which is U.S. department store, which is now growing again, and is growing also because of the many important efforts in new business model we are deploying in this channel. So we can grow faster because we are particularly well-positioned in the fastest-growing segments of the entire global market. And by the way, Travel Retail is part of this. The second question is what are the gap in opportunity portfolio? Definitely, we had put a huge priority on Skin Care, and I believe this just the beginning of a journey, particularly, there is more and more opportunity to continue to leverage the Skin Care category in Asia and, as Olivier just explained, in the fast-growing Travel Retail channel. And that will be an area where we'll continue to focus, continue to reinforce our position among others.

That concludes today's question-and-answer session. If you were unable to join for the entire call, a playback will be available at 12 noon, Eastern time today through May 12. To hear a recording of the call, please dial 1 (800) 642-1687, passcode 61746037. That concludes today's Estée Lauder conference call. I would like to thank you all for your participation, and wish you all a good day.