Richard Kunes - Chief Financial Officer, Principal Accounting Officer and Executive Vice President Jane Hudis - President of Global Brand Fabrizio Freda - Chief Executive Officer, President and Director Dennis D'Andrea - Vice President of Investor Relations

Constance Maneaty - BMO Capital Markets U.S. Lauren Lieberman - Barclays Capital Alice Longley - Buckingham Research Group, Inc. Mark Astrachan - Stifel, Nicolaus & Co., Inc. Ali Dibadj - Sanford C. Bernstein & Co., Inc. William Schmitz - Deutsche Bank AG David Wu - Telsey Advisory Group LLC Alex Fuhrman - Piper Jaffray Companies Linda Weiser - Caris & Company Caroline Levy - Credit Agricole Securities (USA) Inc. Nik Modi - UBS Investment Bank

Good day, everyone, and welcome to The Estée Lauder Companies Fiscal 2011 Year End 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: 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 Jane Hertzmark Hudis, Global President of the Estée Lauder brand. 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. You can also find a reconciliation between GAAP and non-GAAP results in our press release and in the Investors section of our website. I'll turn the call over to Fabrizio now.

Good morning. I'm delighted you joined us for our fiscal 2011 year end conference call. Once again, we finished the year on a positive note with a good momentum. We are now 2 years into our strategy, which is working well, and by virtually all measures, we made tremendous progress. As you know, our plan has many components, and we are fighting on all cylinders, leading to our excellent results. Our business grew double digits. We exceeded our cost-saving projection and have achieved our stated operating margin goals 2 years in advance. In addition, we are executing with excellence on our strategy, and the strengths of our organization has been unleashed. Specifically, we have created robust launches, effective advertising, improved High-Touch services, stronger digital presence and cost reductions. Our international growth has been terrific, and we sharply improved our North America business. Our brands and global workforce are more collaborative, which has led to a stronger organization. We have already achieved many of our original fiscal 2013 goals, and we are now extending the strategy for another year through fiscal year 2014 with a new operating margin target of 14.5% to 15%. Fiscal 2011 was a record year for many financial measurements. Let me highlight our recent milestones. Our sales grew 13% to a record $8.8 billion, 3x the growth of global prestige beauty. Our largest categories, Skin Care, Makeup and Everyday Region climbed by double digits. By growing faster than the industry, we gained share in many important markets and channels, including China, the U.K. and Travel Retail. The company continued to manage cost, enabling us to leverage our sales growth into greater profitability. Our net earnings were $743 million, and earnings per share of $3.69 were 34% above the prior year and the highest in the company's history. Also hitting all-time highs were gross margin of 78.1% and operating margin of 13%, which increased 140 and 180 basis points, respectively. Our operating income and operating cash flow each topped $1 billion for the first time, and we created substantial stockholder value. We raised our dividend 36%, and total shareholder return nearly doubled. I'm especially pleased with our 3 largest brands, which accounts for 70% of sales, had strong momentum globally and, combined, grew at double-digit pace. Estée Lauder resonated so well with Chinese consumers that it became the largest prestige beauty brand in our distribution in that rapidly growing market. Clinique Important [ph] Skin Care business rose 14% worldwide, driven by cutting-edge products that filled gaps in the marketplace. As the biggest beauty brand in the U.S., Clinique grew share significantly in Skin Care, and M-A-C had double-digit gains in every region and attracted a following of more than 2 million fans on Facebook, the most of any prestige beauty brand. An important element of our strategy is to win big with affluent customers, and our high-end brands enjoyed double-digit growth, as luxury consumer have been shopping enthusiastically again. In a ringing [ph] endorsement, we are thrilled that 2 of our luxury brands had a role in one of the most newsworthy events of the year, the Royal wedding. Members of the bridal party used the Bobbi Brown Makeup, and Westminster Abbey was scented with Jo Malone Orange Blossom candles. Another key goal is to improve our turnaround brands, and they made excellent progress with a significant gain in operating profit. The improvement was led by Aramis and Designer Fragrances, which grew sales and substantially reduced its cost of goods, creating solid profit progress. We also set out to grow through acquisition. In fiscal '11, we added Smashbox to our portfolio, and it contributed 1% our growth. We also finalized a licensing agreements with Ermenegildo Zegna, which is one of the fastest-growing men luxury brands in Greater China. Looking at our business geographically, our performance in North America was the strongest it has been in a decade. The surge was led by a terrific year at U.S. department stores, where our brands were key drivers of increasing store traffic and attracting new consumers, thanks to fantastic innovations backed by aggressive advertising. Overall, prestige grew faster than mass. Despite the tragic event in Japan, Asia-Pacific had another solid showing, driven by sales growth in China of 33%, even better than the 29% the previous year. The Estée Lauder brand continued its rapid pace in China and La Mer sales skyrocketed. We have done so well that our company became the leading prestige player in China in our distribution, and our presence is growing. We recently introduced Good Skin Labs and Lab Series in the Chinese market, now giving us 11 brands there. Aside from China, we saw strong growth in most markets, but some others were more challenging, due in part to natural disasters. However, a key pillar of our strategy is to expand our Skin Care business in Asia, and we delivered. The category grew 13% in constant currency. Europe and Middle East and Africa was our fastest-growing region, led by many emerging markets. The bigger established countries, including the U.K., France, Germany and Italy, were also strong. In a major initiative to improve our High-Touch services, we began installing informative messages in perfumery to aid consumers in product selection. Looking at our channels, we became the leader in Skin Care in Travel Retail, which is the fastest-growing category in the fastest-growing prestige beauty channel. Our exceptional growth was triple the rate of the passenger air traffic, thanks to better, more efficient advertising behind strong innovations in our biggest brands, personalized services and getting more people to shop and buy. Our freestanding stores also grew nicely and now accounts for about 10% of our business. E-commerce continued its outstanding pace, which paced [ph] at 28%, and we added 22 new brand sites globally. Our terrific performance stems from the innate creativity shared throughout our company and its strategic decisions developed fewer but more impactful products. Consumers learn about our high desirable innovation through robust TV, magazines and digital advertising. We advertise our newness and biggest products also in TV in many of our largest market, such as the U.K., China and the U.S. The campaigns work to pull consumers into stores, where we leverage our High-Touch service to the loyalty and sell additional products. The concept worked so well that our average sales per launch in the U.S. increased by 67%. With the digital world becoming more important to successful brand building, we include our capabilities and communications. Three of our brands: Clinique, M-A-C and Aveda, were among the top 5 beauty brands with the highest digital IQ according to a U.S. survey. We also successfully deployed our strategic modernization initiative into more markets and functions, and continued building capabilities in areas critical to our growth. This includes international R&D center, digital knowledge, consumer insights and talent development. Additionally, we capped $199 million in expenses for total savings to date of over $560 million and further aligned our organization and infrastructure to the strategic vision. As you see, our strategy is a resounding success, so much so that we have already achieved most of our original goals. When we first laid out our strategy in fiscal 2009, we targeted an operating margin of 12% to 13% by fiscal 2013. Since we have now hit the top of the range 2 years early, as I said before, we are extending our strategy for another year, with a more ambitious goal, an operating margin of 14.5% to 15% by the end of fiscal '14. This new goal reflect our ability to leverage our growth, thereby generating sustainable and increased profitability. Looking ahead, our strategic vision is unchanged. However, we continuously refine our strategy to chase the biggest opportunities globally. In deciding where to invest, we target the most promising areas and develop the capabilities we need to win. In fiscal '12 and beyond, we believe the greatest growth engines will be emerging market, Travel Retail and the digital world. Additionally, we will give increased focus and investment to the brand building aspects of freestanding stores. Emerging markets will drive much of the growth in prestige beauty, especially China. It is the fastest-growing beauty market and holds huge untapped potential. Our sales are climbing rapidly and is expected to be our largest Asian affiliate this fiscal year. Today, we sell our products in 38 cities, and by the end of the fiscal year, we intend to be in 5 more. However, our efforts goes well beyond China borders. We target Chinese consumers wherever they live and travel. We estimate that $1 billion of our sales in fiscal '11 came from Chinese consumers around the world. Our retail customers are reporting a significant rise in Chinese shopper purchasing cosmetic in major cities from Paris to Los Angeles to Seoul. Over the next 3 years, we plan to introduce more luxury brands in China and open doors in additional cities, including department stores, freestanding stores and Sephora. This year, we plan to launch e-commerce for Origins and Bobbi Brown in China. We are also excited about the potential of Brazil. We will sell 6 brands and are accelerating our efforts. It's the third largest global beauty market after the U.S. and Japan, although heavily skewed towards mass. With prestige department stores under developed in Brazil, we plan to open more freestanding stores, launch e-commerce sites and sell in new prestige retailer as they enter the market. M-A-C currently has 18 freestanding stores in Brazil, and we'll open 7 more this year, with further expansion planned reaching 10 more cities. Clinique launched e-commerce in Brazil in May, and M-A-C will start in a few months. We are expecting great interest since Brazilians are active online. M-A-C is a leading prestige beauty brand and the pillar of our business in Brazil. Although it will make time -- it will take time to be a formidable competitor in the market, we are building awareness and reaping the benefits from Brazilian travelers. Brazilian visiting M-A-C Time Square store in New York City accounts for the largest group of foreign shoppers. Looking at our distribution, Travel Retail represents a big opportunity for beauty long term. In fact, its size could rival North America prestige in 2020. In Travel Retail, Skin Care in Asia are the fastest growing areas, which play to our strengths, and often consumer who buy in Travel Retail are new to our brands. To maintain our great momentum, the company plans to increase Travel retail advertising this year. We also will offer new kinds of High-Touch services to travelers and create excitement to our special events. In fiscal '12, we plan to emphasize High-Touch, as we work to strengthen our target connection with consumer and elevate our service across channels and brands. One way to do this is by expanding our network of more than 750 freestanding stores, which we plan to accelerate in fiscal 2012. Many of our brands are using retail stores to build brand equity, expand into new markets, develop deeper consumer engagement and test new merchandising areas. We are also experimenting a new store concept. In Buenos Aires, we took over a space in a mall and split the store, one side is for Bobbi Brown, the other for La Mer. M-A-C plans to open more global flagship, and Jo Malone is broadening its reach in key U.S. locations, including a store in Grand Central terminal next month. The world of digital in all its form is a top priority for us, because e-commerce and social media allow us to talk to consumers directly, providing another High-Touch venue. Consumer are leading the line, growing the lines between e-commerce, digital marketing and social media. To reach them, we expect to launch 50 e-commerce and mobile sites worldwide this year, with even more in the following 2 years, but we can't just create the same content over the map. In social media in particular, we must be locally relevant and understand our consumers' cultures and desires. Equally important is developing unique and innovative content, including how to videos, exclusive online offerings, video chats, consumer ratings and reviews and diagnostic tools. We want to be the best company in our space in all digital things, so we are hiring community managers to receive brand content, and we will create similar roles in international markets. Our brands have 67 Facebook pages across 27 countries, with a total of 4 million fans. 11 brands are talking to consumer on Twitter, and consumer have viewed our brand's content to -- on YouTube 6 million times. Some brands are developing mobile and tablet apps to strengthen their brand equity and feed consumer interest. Clinique app provides weather forecast and the most appropriate products for a particular climate. Smashbox has taken another approach using QR codes so consumer can scan the code with their mobile phone for product information. We intend to invest substantial resources to build the necessary capabilities in digital, attracting best talent to educate [ph] our employees. Now to focus on different aspects of our business, let me update you on our categories. Skin Care remains a key priority. It accounts for the largest portion of sales and profits. We have focused our resources on fewer and bigger launches in Skin Care and supported them with TV, print and digital advertising to pull consumer to our counters and websites. This year, we will expand that approach to Makeup. Clinique is bridging the Skin Care and Makeup categories by expanding some of its popular Skin Care products into foundation such as Even Better Makeup. In other Makeup news, Tom Ford is launching a color cosmetic collection, and Smashbox will expand to additional countries. This year, M-A-C is expected to become the company-leading brand in Latin America, making it the first place, where M-A-C will hold the top spot. In Hair Care, we believe we have the right portfolio to become a driving force in salon and prestige retailers who wish to push the category globally. We will expand in prestige salon to drive growth and, at the same time, pursue international retail opportunity and e-commerce. Bumble and bumble did so well in Sephora in the U.S. that we plan to expand internationally. Aveda gained share in prestige Hair Care, thanks to successful pull-push promotions. We plan to continue our pull-push strategy to support our strong innovation pipeline, as well as further international expansion. Ojon's repositioning on high-performance treatment should generate renewed excitement with consumers. In Fragrance, EDF will strive for continued profitable growth. The division plans to continue improving its margin, while pushing global growth in DKNY, Coach and other brands in our portfolio, while incorporating the new Zegna franchise. Elsewhere in the portfolio, we see terrific opportunity in high-end fragrances and plan to accelerate Jo Malone and Tom Ford. We will prioritize by selling scents from Clinique and pursue a new regional strategy at Estée Lauder that Jane will discuss. What's drive our growth across categories is our creativity innovation, which is at the heart of everything we do. This spring, we'll open a larger innovation center in Shanghai to develop beauty products for Asian consumers. We will take successful once developed there and distribute them worldwide. Our top line of innovation is exciting and robust. Once we introduce a major new product, we will continue to leverage it using extensive advertising and High-Touch to build consumer engagement and sell additional products. Since High-Touch works in concert with our innovation, we will make a big investment to improve the store experience and create ways to get closer to consumers. Clinique Customized Service concept has been a huge success in flagship department store, so we are rolling out elements of it around the world, which will vary depending on the size of the store and the channel. For instance, in European perfumeries, Clinique is installing new merchandising and navigation for Skin Care and Makeup. In North America doors, it is providing iPad so consumer can identify skin concern and find appropriate products. Our Strategic Modernization Initiative continues. We are gearing gap [ph] for our biggest year yet, actively preparing over 25 business units to implement SAP in several groups during the next 2 years. While SMI is helping to transform our global processes, the full benefits won't be realized until fiscal '14, giving us even more leverage after the current saving program ends. A critical factor underpinning our success is our people. The company has always prided itself for its amazing talent. And now we are further developing our leadership, working collaboratively and leveraging our organizational strengths. We have accomplished these throughout an improved and redesign organizational structure, combined with a compensation system aligned with our strategy, performance and shareholder value creation. The strengths in the organization is a key to our future success. Prestige beauty has rebounded strongly, and was returning to long-term growth of at least 4% annually. But recent volatility may make it harder to predict the trend in the next couple of years. We continue to believe we can grow well ahead of prestige beauty. And as things stands today, we expect sales growth in the range of 6% to 8% in fiscal '12. Of course, the recent negative economy and political trends here in Europe create uncertainty for global economies in our company. It may postpone the moment when prestige beauty growth fully recovers to historical 4% to 5% levels. The recent volatility and uncertainty in global financial markets may impact consumer confidence, demand and spending. We cannot predict with certainly the extent or duration of these conditions, but we are better positioned now to manage our business more effectively and efficiently, and allocate the resources to the most promising opportunity. Our business strategy of design to strengthen the company over the long term and our fundamentals are solid. That said, our first quarter is off to a strong start. We have always been a growth company. But now we are more a disciplined growth company that is able to leverage our gains into higher, sustainable profitability. I am so proud that the company core values, culture and long-held principle have stayed intact, while we have gone through a rapid transformation. This is a testament to the dedication of our global workforce and its creative talents. Our terrific success wouldn't have been possible without the tremendous support and dedication of all of our employees and our important retail partners. I thank all of them for making the Estée Lauder Companies the best it can be, the leader in global prestige beauty. Now I will turn the call over to Jane.

Thank you, Fabrizio. Good morning, everyone. I have been with the Estée Lauder Companies for 25 years, and was honored 2 years ago to become the Global Brand President of Estée Lauder. The Estée Lauder brand, as many of you know, was founded by Mrs. Estée Lauder in 1946 with just 4 Skin Care products. Her first counter was in Saks Fifth Avenue in New York City. Today, 65 years later, the Estée Lauder brand is one of the largest in our company, with well over $2 billion in annual sales. We sell prestige, skin care, makeup and fragrance products in more than 150 countries and territories. In fact, the Estée Lauder brand does almost 75% of its business outside of North America. In fiscal '11, the Estée Lauder brand had an outstanding year. Sales rose double digits globally, and our profits increased significantly, reaching record levels. Due to the brand size and its importance to the company, coupled with its terrific performance, I'm proud to say that it was one of the major contributors to the company's overall success. Key to this success is a brilliant global team, with a keen understanding of our global strategy, as well as local consumer dynamics. By working together, sharing knowledge and executing with excellence, we've been able to leverage our understanding of our consumer and accelerate our growth. Estée Lauder has a strong brand heritage. I would like to begin by outlining how we have built on that heritage to implement and update its strategy that evolves and modernizes our brand. As the world evolves, there was opportunity almost everywhere we looked. The key tenets of our updated strategy are: Focusing on high-performance Skin Care and establishing Advanced Night Repair as our icon product; better understanding our consumers around the world, especially in Asia and China, where the brand is ripe with opportunity; broadening the appeal of our brand to a younger, more ethnically diverse consumer; maximizing opportunities to create regionally and locally relevant products and programs, tailored to local consumers; and identifying our biggest and best innovations and leveraging our resources behind them. We believe that with this carefully designed strategy, the brand will continue its momentum and be a significant contributor to the company's future success. In fiscal '11, I'm pleased to report that the brand grew in every region and in the Travel Retail channel. The brand have been particularly successful in Asia-Pacific, where we grew 2x as fast as prestige beauty, we became the #1 prestige brand in our distribution and Asia-Pacific became the brand's largest region, growing in the mid-teens and surpassing North America in sales. Of particular note is China, where we are the #1 brand in our distribution. Our success with the Chinese consumer positively impacts our success in Greater China, Travel Retail and other markets around the world. We are very focused on capturing the Chinese beauty consumer wherever she lives and travel. To this end, we are introducing products that specifically meet the needs of Chinese women. One example is Nutritious, which was created in China, but is now sold in many markets around the globe that attract Chinese beauty consumers. We will continue to study Asian skin and identify the needs of Asian women through our new Asia Innovation Center in Shanghai. The brand also has strong momentum in the European region. Our greatest growth is coming from emerging markets like Russia and the Middle East, as well as key countries including the U.K., France and Italy. This momentum was driven by our strategy of fewer, bigger launches, supported by strong TV, digital and productivity. Overall, the Estée Lauder brand rose in the high-single digits in the EMEA region for the year, excluding Travel Retail. In North America, we've been successfully reengineering our business model by reducing promotions such as Gift-With-Purchase sets and reallocating funds into full strategies behind major innovations and our biggest opportunity. I am very happy to report that the Estée Lauder brand grew mid-single digits in our home market, and that rate has accelerated in recent months. The Estée Lauder brand is also doing exceptionally well in the Travel Retail channel, where our Skin Care business was up 35% and our total sales rose 28%. Now let's turn to product categories. With the rapid growth of Estée Lauder in Asia, Skin Care, our most profitable category, is now more than half of our global sales. Makeup is about 1/4 and fragrances was less than 20%. In line with the company's strategy, the Estée Lauder brand has focused on Skin Care as our #1 priority. For example, we launched and leveraged our icon product, Advanced Night Repair, in fiscal 2010 with a new technologically advanced face serum, and again in 2011 with a new eye product, Advanced Night Repair Eye. As a result, this 29-year-old franchise grew over 20% this year globally. In Makeup, we have elevated our style leadership with the amazing talent of Tom Pecheux, a creative makeup director. Tom has created trendsetting color collections to the Pure Color franchise, generating tremendous energy and buzz. In addition, he has helped us create dynamic digital assets, including backstage fashion show and how to makeup application videos. As a global prestige player, Fragrance is also an important part of our business. Our fragrances are sold at our counters, not at Fragrance bars, which increases beauty adviser productivity. In terms of strategy, we are focusing on our key fragrances: Beautiful, Pleasures and Sensuous; and also creating regionally and locally relevant fragrances for Russia and the Middle East which will launch later this year. This new strategy allows us to further maximize our sustainable and profitable Fragrance business. In order to broaden our appeal, we are positioning our brand around Mrs. Lauder's original belief that every woman can be beautiful. Today, these words are more relevant than ever as they speak to a more multicultural and multigenerational consumer. We have recently added models from France, Puerto Rico and China to represent our brand globally, not only in advertising, but also in innovative digital and in-store initiatives. In fact, we are the first Western brand to have an Asian face representing us on a global basis. These models are featured in our new multimedia campaigns created by Erin Lauder, for Idealist Even Skintone Illuminator that began appearing in June in North America. Across our top distribution in the first 8 weeks of the launch, we saw that almost half of the consumers were new to the brand. These new consumer is younger and more ethnically diverse, with early results showing that this launch is drawing more women age 26 to 35 and more Hispanic and African-American consumers. This launch will roll out globally this fall. We are focused on capturing consumers when they get to the store by increasing our High-Touch elements. We are currently rolling out a new concept called the Beautiful Skin Studio, featuring special lighting to help customers get the right Skin Care and foundation fit. We are also developing a new store design concept that invites consumers into our brand and provides better navigation and ease of shopping. We are testing prototypes, and over the next few years we will roll out various concepts across department stores, perfumeries and Travel Retail. To welcome a new generation of consumers to Estée Lauder, we are also focused on expanding our scope of engagement in the digital space. Over the past year, we have quadrupled our global Facebook fan base. We recently launched our mobile e-commerce site, and next month we'll go live with our interactive YouTube channel. All of these brand initiatives reflect key elements of the company's strategy, with its focus on creativity and innovation, High-Touch service, mobile relevance, leadership in Asian Skin Care and digital. We are excited about the changes we have implemented in the Estée Lauder brand strategy and believe our flagship will continue to be a major contributor to the overall success of our company. I would like to thank the Lauder family, my team and my global colleagues for their commitments to iconic Estée Lauder brand, as well as all of our retail and media partners across the globe for their continuous support. And now I will turn the call over to Rick Kunes.

Thank you, Jane, and good morning, everyone. This morning, I'll briefly cover our fiscal '1l full year, and then focus my discussion on fiscal '12. My commentary reflects our results before restructuring and special charges, which I'll cover separately. The second full year of our strategic plan clearly demonstrated that we are on the right path, and our organization is capable of executing with excellence. We raised guidance 3x during the year as our growth consistently exceeded our expectations. Our fourth quarter sales, excluding currency growth was 7% below recent trends, due in part to the $42 million sales shift into our third quarter in anticipation of the April SMI rollout that we discussed on our last call. Our business in Japan declined slightly less than we had anticipated, affecting sales growth by 1% to 2% and EPS by about $0.03. Advertising, merchandising and sampling investment rose dramatically in the fourth quarter as planned. We increased advertising behind key products in countries with good momentum. Our marketing spending jumped 130 basis points during the quarter on top of the strong investment in the prior-year quarter. This helped us maintain good sales momentum to start the new fiscal year. Partly offsetting these investments were cost savings of $45 million [Audio Gap] prior quarter. This helped us maintain good sales momentum to start the new fiscal year. Partly offsetting these investments were cost savings of $45 million in the quarter. Earnings per share was $0.25 compared to $0.29 last year. In the prior year, a tax credit added $0.15 to EPS. Our fiscal 2011 full year sales rose 12% versus last year in local currency. Favorable currency movements added more than 1 percentage point of growth, resulting in a sales gain of 13% to $8.8 billion. Net earnings for the year were $742.5 million compared to $551.7 million last year. Diluted EPS was $3.69, 34% higher than the $2.75 reported last year. As Fabrizio mentioned, we achieved all-time highs in a number of key measures, including sales, margins, operating income, EPS and operating cash flow. Every region and product category contributed to the outstanding sales improvement this year. Europe, the Middle East and Africa led the growth as local currency sales rose 14%. Every product category in every virtually every country in the region contributed. In addition, our Travel Retail business recorded another year of unusually strong sales, rising 24% on top of the 27% growth the channel saw last year. International airline passenger traffic rose nearly 8% for the year. The growth in Asian travelers in particular strengthened our position in Skin Care, and we continued to drive conversion and improve the in-store experience. Sales in the U.K. remained robust, rising 7%. The growth was due to good response to advertising for key product launches, strong double-digit growth in our luxury and Makeup artist brands and solid London tourism. Asia-Pacific net sales rose 10% in local currency, reflecting growth in all product categories in nearly every country. China again led the region, with growth of 33% from increased consumption and distribution. Neighboring markets of Hong Kong and Taiwan rose 22% and 15%, respectively. Korea rose 6%, while Malaysia, Singapore and Vietnam grew double digits on strong consumer demand. Japan, New Zealand and Australia's businesses were lower, as each suffered from the effects of natural disasters that contributed to weak consumer demand. The Americas gained 10% in fiscal '11. High-end department stores were among the top performers in the U.S. for the year, as luxury shoppers returned. Our sales in department stores grew over 5%, reflecting a continued strong execution of our strategy to reinvigorate our business in this key channel. Growth was also solid in most of our alternative channels. Sales in our freestanding stores rose 5%, salons were up 3% and online grew 23%. Sales Latin America rose 24%, the fastest growth rate of any geographic area. And our acquisition of Smashbox last July added 2 percentage points of growth. Gross margin expanded 140 basis points to a record 78.1%. Favorable product mix added 70 basis points, lower obsolescence 20 points, and favorable manufacturing variances and positive currency garnered 30 points each. For the year, our PMT initiatives improved cost of goods by $118 million. Operating expenses as a percentage of sales decreased 40 basis points to 65.1%. Lower selling, shipping and administrative costs, reflecting cost savings and improved leverage, contributed about 160 basis points. Lower impairment charges saved 20 basis points and currency contributed 10 points. Savings were partially offset by our strategic investment in advertising, merchandising and sampling of 120 basis points, where we spent approximately $340 million more than last year and higher stock-based compensation cost of about 30 basis points. Our cost-savings initiatives reduced expenses by $81 million. Operating income rose 31% to $1.15 billion, the first time we exceeded the $1 billion mark, and operating margin rose 180 basis points to 13.0% compared to last year. Net interest expense declined to $63.9 million compared to $74.3 million in fiscal '10, reflecting the full year benefit of the retirement of $200 million of debt in May of 2010. The effective tax rate for the year was approximately 31.3%. We recorded $59 million in returns and restructuring charges in fiscal '11. We have now recorded a total of $239 million of the $350 million to $450 million we expect through fiscal '13. The charges primarily reflect employee-related costs, asset and inventory write-offs, contract terminations and other special charges. These costs were equal to $0.21 per share for the year. Days sales outstanding increased to 41 days compared to 36 days at this time last year when we benefited from tightened receivables in emerging markets, as well as the timing of collections in the fourth quarter. Inventory days rose to 188 compared with 166 days last year. We have had to reassess the pace of our inventory improvement. We built inventory to support the rollout of SMI. Also, early in the fiscal year, we tightened inventory too quickly without the new systems and processes in place to do so properly, causing our service-level to suffer. Inventories are likely to stay slightly higher than we had previously expected to maintain good service levels while we finish implementing SMI. We now expect inventory days to improve to 150 to 155 days by fiscal 2014. We generated a record $1 billion of operating cash flow compared with $957 million the previous year. The increase primarily reflects the substantial improvement in earnings. We spent $351 million for capital projects this year, as we continue to invest in systems, and spending for counters and stores picked up. We also purchased Smashbox for $250 million in July of last year. We returned substantial cash to shareholders. During the year, we repurchased approximately 5 million shares of our Class A common stock for $397 million, and we have purchased approximately 2.8 million more shares since July 1. Last November, our board increased the common stock dividend to $0.75 per share, which used $148 million of cash. Now I'd like to discuss a few assumptions for fiscal '12. We have accomplished a great deal in the first 2 years of our strategy. In this time, with the tremendous support of the global finance team, we have engrained in the organization a virtuous cycle of financial discipline. We are planning more effectively by budgeting our cost based on realistic sales targets and strict productivity guidelines. As we execute our plans during the year, we are able to adjust by releasing more investment dollars if sales targets are overachieved or restraining spending if they are not. We maintain our discipline by insisting that only a portion of every dollar in overachievement is reinvested. Finally, the incremental investments are carefully targeted to the most successful products in the fastest growing markets and channels to drive even higher returns. The incredible results we saw in fiscal '11 allowed us to invest substantially in the fourth quarter to build momentum into fiscal '12. Our stated goal is to grow our top line at least 1% faster than the growth of global prestige beauty. In fiscal 12, our sales are forecasted to grow 6% to 8% excluding currency. We have begun to take a more strategic view on pricing, looking across our brands, countries and the competitive landscape. It's our goal to be more thoughtful with our pricing decisions in the future. As we build our capabilities, our objective for this year is to increase prices at least with inflation, and our sales estimates include about 2 percentage points of growth from pricing. Based on current exchange rates and the forecasted slight strengthening of the dollar over the course of our fiscal year, we estimate a negative FX impact of less than 1% on our full year. We expect gross margins to improve by about 150 to 170 basis points for the fiscal year, driven by the pricing I just mentioned, a planned strategic shift of promotional spending into advertising, as well as other cost of goods improvements and favorable mix. Operating expenses in fiscal '12 are expected to rise about 90 to 110 basis points. We expect to benefit from improved leverage and from savings initiatives. These positives will be more than offset by a ramp up in certain strategic investments: First, there is the shift of spending from promo to advertising to support our full strategies; second, a significant investment in SMI, as we roll out the program to a peak number of affiliates this year; third, we are transforming the consumers' in-store experience around the world, and some costs associated with store expansion and modernization will impact our operating expenses; fourth, we are updating several significant systems, including those used at point-of-sale, human resources and consumer relations management; and lastly, equity-based compensation costs are increasing. We expect incremental savings from our PMT initiatives this year of $100 million to $125 million. 3 quarters are expected to come from cost of goods, the rest mainly from indirect procurement and other operating expenses. At this time, we believe we can generate total savings from the program of between $675 million and $725 million through fiscal '13. We expect operating margins to rise by about 50 to 70 basis points this year, bringing us closer to our long-range targets. The tax rate is expected to be 31% to 33% and can vary by quarter. As you know, the rate can be affected by changes in tax rates, the geographic mix of our earnings and fluctuations in the amounts of tax reserves. Diluted EPS for fiscal 2012 is expected to be between $4 and $4.20. We expect to generate slightly more than $1.1 billion in cash flow from operations. We plan to increase capital spending to between $400 million to $450 million. Aside from SAP, we are investing in the systems and initiative I mentioned a moment ago. Our priorities for uses of cash remain the same. First and foremost, we invest in the business. We continue to search for strategic acquisitions with favorable return profiles. We plan to repurchase shares against our remaining 10 million share authorization to broadly offset stock-based compensation, and our board routinely reviews our dividend policy. We expect to take restructuring and other special charges in fiscal '12 of $25 million to $50 million, with about $10 million in the first quarter. Our first quarter should reflect the momentum from our fourth quarter advertising spending and new product launches, with sales expected to grow 11% to 13% in local currency. Foreign exchange could benefit growth by 3 to 4 percentage points. EPS for the quarter is estimated to come in between $1.10 and $1.20. In closing, we are clearly pleased with the progress on our strategy and with the trajectory of our business. These sentiments are embodies in our new operating margin target of 14.5% to 15% by the end of fiscal '14. We are confident that our strategy will enable us to achieve operating margin improvement annually over the next few years. This level of improvement should allow us to maintain our ROIC goal of at least 21% to 22%. And now we'd be happy to take your questions.

[Operator Instructions] Our first question today comes from Caroline Levy of CLSA. Caroline Levy - Credit Agricole Securities (USA) Inc.: As always, given the first quarter's strength, your guidance looks very, very conservative, particularly if you expect 50 basis points of margin improvement this fiscal year and yet only expect to get to 14.5% EBIT margin further out. Can you explain why you are cautious on the margin? And also, if your sales come in as strong as they have been, as strongly as they have been, do you just keep ramping up that advertising no matter what to keep accelerating the top line? Or are you going to let some flow-through as happened this year because you didn't meet you initial guidance substantially?

Yes. Now, first of all, our range include, at the bottom of it, the assumption that the current turmoil will create a certain impact on the global markets. We have -- today, we see the market. We were seeing the market growing about 4% globally. At the bottom of our range, we assume there will be 1 or 2 points of impact on the market globally. And we assume that even in that case, we will continue making our long-term strategic investments that we have decided to do to create not a short-term rally, but rather a 10 years continued development of top line and bottom line for this company and exploit our momentum. At the top of our range, on the contrary, we assume that the market will continue to be as we originally estimated, and the current turmoil will not have a significant impact on consumption in the following months. Now part of your question is why this happens after the first quarter. Because, in fact, in the first quarter, to date, we do not see any impact on consumption. Actually, we see things pretty in line what we estimated, and that's why we have a pretty bullish conviction that we will have a very strong first quarter, as you see from our estimate. On the other side, we assume that if there will be an impact, this impact will be after the first quarter. Caroline Levy - Credit Agricole Securities (USA) Inc.: And would you spend up, if you do see rather than an impact from a global slowdown, if you see continued strength like the first quarter, is your plan just to accelerate the rollout of your initiative and advertising such that you just don't see the margin expanding much more than you've guided to?

Yes. First of all, let me clarify that where we are spending the money next year, some expenditure is temporary. What I mean, we are going to spend a lot in SMI, in creating the systems that will make us win for the next several years, in creating the HR system and the retail system to continue winning emerging markets. So some of it is not about advertising, and we don't plan to stop this investment in our assumptions even if the market will become softer. Some of it is advertising. And, again, we don't plan to stop advertising behind our major initiatives in case it would be just a moderate softness of the market because we see great opportunity to build market share and exploit our strong momentum. So that's the logic between -- behind if you want our guidelines and particularly our plan. Rick, do you want to add something?

Yes. There are 2 other things to consider, Caroline. One is there is at least in the FX rates that we're using for the rest of the year, there is an implied negative impact from foreign exchange for the balance of the year of about 2%. We see the dollar strengthening against some of our major currencies. So that's one of the things that also makes that back portion of the sales growth look a little bit slower than you would think. And, also, I did in my prepared remarks talk about a business model that we have built, which is based on realistic sales and which has a level of flexibility within it that allows us to invest in opportunities if we start to do better and also pullbacks in some areas where if things will go against us, to be able to protect our profitability. But, also, if things are in a very positive way, to be able to invest in opportunities, but also let some of that money drop to the bottom line.

Our next question comes from Nik Modi from UBS. Nik Modi - UBS Investment Bank: Just very quick question on your emerging market business. If you can just give us some perspective on the margin profile there in those markets relative to the developed world, especially -- as well as the corporate average. Just get a sense and any thoughts on kind of how the progression of margins in those markets will develop over the next couple of years?

Yes, this is -- Nik, this is very different by market. So we have some emerging market like China, where margin is already very pretty strong and non-dilutive to the company. There are others where we plan to enter more aggressive like Brazil where we are in the beginning of the journey, and, obviously, the margin is in dilutive -- is an investment period for the next few years.

Nik, the way we enter these emerging markets is we anticipate over the medium term that a lot of our growth will come from these markets. So we start with a plan that says that we will reach a level of profitability which is accretive to the company. And then we reverse engineer, and that's what Fabrizio were saying. In some markets we're earlier on in that process, and like in Brazil, we're investing because we see a big opportunity, but it also is probably somewhat lower in overall profitability over the shorter term. And then a market like China, which is certainly not dilutive at all to the regional profitability and is growing very nicely and we have great prospects for in the longer term. Nik Modi - UBS Investment Bank: And just as a follow-up, if you take China because that's obviously been a great success for you, if you could just take China and help us understand how quickly it took to kind of the investment period, because I know you ramped pretty quickly in that market to it being non-margin dilutive to the overall franchise.

Yes. In the case of -- now I'm going to stretch my memory a little bit, but we started to invest in China over probably a longer period than in some other markets because of the huge potential that's there. So we've been investing 5 to 7 years and probably reached the level of profitability after about last 3 or 2 or 3 years we've been at a level which is equal to, and now we're starting to exceed the regional average. So it depends on the opportunity, and for instance, Brazil is a big opportunity for us. So that one might be -- have a little bit longer glidepath. When you enter into a smaller market like in Vietnam, we want to improve the profitability there fairly quickly.

Our next question comes from Lauren Lieberman of Barclays Capital. Lauren Lieberman - Barclays Capital: I wanted to ask you a bit about Hair Care. I thought it was interesting in the press release. You guys specifically commented on Hair Care as being the growth leader in 2012, which is just I think that's the first time I can ever recall that kind of statement being made. So was it about new product launch activity, distribution, or something to think about in terms of difficult comparisons of the pipeline in Skin Care?

I think we have mentioned Hair Care. Hair Care is off a smaller base. So the growth rate certainly is fast. But I think the key message that we're saying is that we believe now that we have a business model in Hair Care, which is going to work for us. And it's been very successful in Sephora, and we look with Bumble, and we look to expand that around the world, and we also have what we believe is a model that's going to work for Ojon and Aveda. So Hair Care is an area of optimism for us as a company, but it is, obviously, off a very small piece of business relative to the other parts.

One thing I wanted to add is that in Hair Care, we have been working some time to find the right model for prestige Hair Care, that can obviously continue to develop salon prestige Hair Care, but also serve the purpose of growing the retail aspect of prestige Hair Care for the retailers that we want to play with it. As you know, we have Aveda that plays with freestanding store in that area, but now we have Bumble and Ojon that start playing a significant role with prestige retailers. And the second big leg is the internationalization of our business. Historically, our Hair Care business has been mainly in the U.S. We have now started deploying plans for going in several other countries around the globe with our portfolio.

Our next question comes from David Wu of Telsey Advisory Group. David Wu - Telsey Advisory Group LLC: First question, in terms of the first quarter sales guidance, that does appear pretty robust, especially just given the tougher comparison. Can you talk about what's driving the growth there, and if there's any benefit at all from the difference in timing of launches or deliveries?

Yes. What is driving the growth is, first of all, so far in the first quarter, we see the market staying pretty solid, first of all. Second, as you know, we have invested heavily in pulling on our key initiatives in the last quarter of 2011, and we see the benefit of these investments also in the first quarter of 2012. In fact, a lot of this growth is driven by basically these initiatives, and some of them are extremely successful. And then third is the overall momentum on the business, that we are having and seeing and the continued momentum, particularly in areas like Travel Retail. David Wu - Telsey Advisory Group LLC: Excellent. And as we look at the specialty retail channel specifically like the Sephoras of the world, what percentage of the business is in this channel? And can you talk about how you're looking to expand further? You've done, obviously, a great job most recently in Bumble and bumble, and I was wondering what other brands could you introduce?

Dave, first of all, we are actively working on specialty stores across the globe, and we have the large majority of our portfolio in many parts of the globe, but it's very different by country. Because the portfolio is in specialty stores around the globe depends, first of all, from the portfolio in the country and from the relative success of the brand in the country. As far as your question on the U.S., we can continue to expand specialty stores, but independently from adding more brands, we can continue to expand the brands we have and making our marketing plans much more tuned to this channel to grow in this channel.

Our next question comes from Ali Dibadj from Bernstein. Ali Dibadj - Sanford C. Bernstein & Co., Inc.: I just wanted to get your thoughts on something we noticed, which just when you look through this release, it felt a lot more subdued from a market share gain commentary. So, frequently [ph], when we listen to you on the quarter, on Skin Care you mentioned in certain countries; Makeup, you don't really mention it; Fragrance, you don't really mention it, you don't really mention it by geography except for Europe, Middle East where the same store and countries again. Can you talk a little bit about kind of that observation, is it true why we're seeing differences? And perhaps the broader question of linking it into the more investment you've seen and that you expect going forward in the context of what we're hearing from competitors or you're seeing from competitors, arguably, they're getting their act together as well, and the competitor environment getting tougher here. So share, as it relates to how much investment you see going forward to grow what you think growing.

Yes. Let me start, and then Rick can add a few points. First of all, I agree with what you just said. I believe competition start being acting together. And, in fact, we assume particularly as of the second quarter of 2012 that we will see a much tougher competitive environment, and we know about announcement of launches and activities that our competitor are doing, obviously, we will need to face and confront ourselves with. However, we have been building market share pretty aggressively in Skin Care. Skin Care has been our priority, and in Skin Care, we are being aggressively bringing market share across many, many countries. We have not yet been able to grow market share in Hair Care and Fragrances at equal pace, and in Makeup is the area where we want now to further accelerate and increase more market share next fiscal year, starting 2012. So that's our future. In other word, we had a terrific model behind Skin Care. In 2011, we want now to use more of the winning elements of this marketing model also in Makeup, and then later on, we will further expand also in the other categories. And we are well conscious and we are reflecting in our guidelines that we will have a tougher competitive environment.

And, Ali, regarding market share, as Fabrizio mentioned during his prepared remarks, we believe that we grew our share or grew our business about 3x the overall market -- prestige market growth in this past year, and when you look to next year, we're looking for the prestige global market to grow 3% to 4% and our guidance of 6% of 8% and comparable currency says that we're going to grow double the prestige great -- rate rather, so again growing market share. And our strategy is really about growing our business at least 1% ahead of market in a sustainable and profitable way. And in particular next year, we have a big opportunity to grow share in emerging markets in our Travel Retail business. And then when you get into our P&L, we see one more year of really significant movements in gross margin, and we're using some of that money to fund a portion of very strategic initiatives around modernization and building a foundation for the future, and it allows us to take an opportunity to invest while were strong, quite honestly, while our business is doing pretty well. And we think that, that investment and the business model that will built is really a formula for success, not only in fiscal '12, but also over the next several years. Ali Dibadj - Sanford C. Bernstein & Co., Inc.: And just to tie that, if you would, with some of the commentary from earlier question, whether it be about the deceleration that you're modeling in the back half of the year in the last 3 quarters of the year. And in particular around, I think one of the first questions which was again kind of an observation from the press release, if you listen to you guys a while ago, a year ago, all of the risks sounded like the list of every possible natural disaster that would be out there, whether it be a volcano, whether it be H1N1, whether it be whatever possibility was out there, you kind of embedded in your numbers. And although you said something differently on the call, and maybe some clarification here will be helpful. On the press release you do say United States and certain European countries will have -- we expect a slowdown of volatility will not have a major impact on consumer spending in the business. So we're not modeling that. But on the call, you said kind of does fit [ph] into the low end. So just tying all that together, is it competition that's really driving the slowdown you're expecting in the 3 last quarters of the fiscal year? Is it that you actually are including some of this United States and European stuff for that? Or you're not -- I'm not sure what the press release I saw [ph] what you said. And just tying all that together would be helpful, because there seems to be a few disconnect at least in my head.

Let me try to reconnect this. First of all, what we say is that we have not assumed a major global recession. When we had a major global recession caused by the current issues of that in the U.S. and Europe, if we had a global recession, we will go back to markets where we are stable as we have seen in '08 and in '09. So we have not assumed that. But we have assumed a certain softening of the consumption in the bottom of our guideline, which is in the range of 1 or 2 points. So that's the first reconnect. The second, yes, we have assumed that after the first quarter we will see an intensified competitive environment. And third, the recent FX risk also that may happen after the second quarter in our opinion. And that's what we have taken into account. There are no volcanoes and there are no earthquakes in our guidelines for the time being.

Our next question comes from Mark Astrachan of Stifel, Nicolaus. Mark Astrachan - Stifel, Nicolaus & Co., Inc.: A couple of follow-ups to some previous questions. One on the last point. Could you parse out the difference between volume and pricing in terms of your views of global prestige beauty category growth on a volume basis, and you talked a bit about this 68 [ph] and 3% to 4%, I think that was a sales number. So if you could give us a bit of help there and including what the benefit of pricing on your numbers was in fiscal 2011. And then shifting to another question on emerging markets, could you talk a bit about what percent of sales emerging markets are now and then in terms of what percent of those markets are you importing products basically at a lower price essentially subsidizing what's being sold there, given that you're not producing in those markets, and is there an opportunity over time to start producing in those markets, both for those markets, as well as for other markets globally?

Certainly, Mark. I will try to catch all of those. First, in our numbers, in fiscal 2012, we have about 2% of our sales growth is related to price. In fiscal '11, it was about 1%. We see the global market growing about 3% to 4%, prestige beauty market, and we believe that the pricing impact on that is similar to ours, so roughly 1% to 2% in pricing is built into that number. So unit growth of prestige beauty on a global basis in the 2% to 3% range. Regarding emerging markets, they are about 10% of our overall business. And it is unlikely that we would be in a situation with some exceptions that we would look to produce locally in many of the emerging markets in which our business is growing just because the volumes and the marketing aspects are being produced in some of those markets would probably make us reach a decision not to do so. And the one exception might be with Brazil, where as we look to expand our business there might be some opportunities to do some local manufacturing there because the duty rates are so high. Mark Astrachan - Stifel, Nicolaus & Co., Inc.: Great. So that includes China as well, the 10%?

Yes, it does.

Our next question comes from Alex Fuhrman from Piper Jaffray. Alex Fuhrman - Piper Jaffray Companies: Just a couple of quick ones for you here. It seems like M-A-C is kind of the brand that really sort of led us into the recession, and it was also sort of the indicator of when we are coming out of the recession. Curious to see what M-A-C is sort of telling you about the consumer right now. And then thinking about your opportunity in China and emerging markets in general, should we think about the growth this year as being more about more locations in more cities? Or is it really more a distribution, getting more brands into your existing distribution?

Okay. I mean, what we are seeing frankly on M-A-C like on all our top brands in this moment, and that consumption in this month so far is normal, meaning is on the recovery trend we have seen in 2011. And M-A-C, particularly, has lot of potential internationally because there are a lot markets where M-A-C is just launched or as for the time being, low level of awareness. And so we are working to continue building this awareness at this penetration. And when we reach good level of awareness, a good level of penetration, M-A-C is normally a very successful brand in every country we are. As far as the second part of your question, is what we see in China, yes, we see in China an increase of number of cities. But China is really particularly driven by our Estée Lauder brand and by the plants of our Estée Lauder brand, which the biggest of our brands in China and in Greater China in general. So I'll let Jane to give you the rest of this answer.

Well, for the Estée Lauder brands, we see China as a huge opportunity for growth, and that's growth within our existing distribution and also the opportunity to reach out to new cities and to new consumers. And what you need to understand about our leadership in China is really that it benefits us globally, because our mission is to appeal to Chinese beauty consumers around the world where they travel, where they live, and this is a very sophisticated Skin Care consumer. So as we garner learnings from China, from our Asia Innovation Center in Shanghai, this benefits really across the globe. So we see a huge opportunity not just in China itself, not just in Greater China, but also in the market, in other markets and, of course, in Travel Retail business as well.

Our next question comes from Alice Longley at Buckingham Research. Alice Longley - Buckingham Research Group, Inc.: I have 2 questions. First of all, the question is timing relative to quarters. Oftentimes, your quarters are weighted oddly because of the timing of shipments and marketing. Could you give us a first look at the second quarter and tell us whether the first quarter is in any way benefiting from timing of shipments or marketing at the expense of the second quarter?

So, Alice, we mentioned that first quarter is certainly benefiting from our investments in the fourth quarter in marketing activities, and that's a given. And, also, obviously, our first quarter is not affected at all by some of the turmoil that we've seen in the marketplace just most recently. So that's the benefit for the first quarter. Regarding the second quarter, I mean, really, we'll give you guidance on the first quarter and the full year. You are right, our quarters do move based on our marketing programs. And so we prefer to just go one quarter out and then give you our full year guidance, which is obviously our focus. Alice Longley - Buckingham Research Group, Inc.: Okay. But there's nothing that you know about the first quarter is benefiting from something that could hurt the second quarter?

No. The second quarter will be impacted by the things that Fabrizio mentioned earlier, more so than anything we're doing in the first quarter.

Right. Okay. And then the second question is about the breakout of sales. Your projection for the year is 6% to 8% for you. You've already told us that 2 percentage points of that is price. How much of that is mix and reduction in trade deals?

There's no reduction in trade deals, and I'm not sure what you mean... Alice Longley - Buckingham Research Group, Inc.: Well, I thought you said you have a -- you're shifting from promotional activity to advertising. So I guess, how much is the cut in promotional activity coming off of sales?

So our promotion, they're benefiting cost of goods, so the gift programs and promotional programs are going down about 40 basis points year-over-year. We're investing that money into advertising. We are hopeful that the impact of pulling less promotional activity and the decrease in sales is more than offset by obviously the business building activities of our marketing program and advertising. So we don't really see that as a negative on sales.

Yes, Second... Alice Longley - Buckingham Research Group, Inc.: Well, I thought that would help sales, is the reduction in the promotional activity, but you're saying no?

No. Let me clarify it though. When the promotional activity -- our promotional activity are not pricing, things like gifts. So the gifts are in cost of goods. So when we reduce promotional activities, which includes gifting, you will see a reduction in cost of goods and an increase in OpEx because we will move these reduced gift cost into more pool advertising. And that's what you will see in the P&L, you will not see an impact on growth. Alice Longley - Buckingham Research Group, Inc.: Okay. And then mix, is that going to have an impact on sales?

No, that's not our assumption. The only impact on sales is that 2% of pricing, the rest is us growing volume ahead of the market.

Our next question comes from Linda Bolton-Weiser of Caris. Linda Weiser - Caris & Company: Can you talk a little bit more about the initiatives to modify some of the selling method in the department stores, having some different like open stock opportunities for consumers in some stores? We were in London, I think at Southbridge, and we saw the different colored bracelets that consumers could wear in the Clinique area for different levels of service. Can you just talk about what percentage of stores -- give some numbers about how much penetration into your whole distribution you've made with these new methods, and where we are in that process kind of globally?

First of all, I would say that one of the big achievements of 2011 is the great results in North America, and particularly in North America department stores. Our department store business here in the U.S. and globally had a tremendous year. And we've been able to drive and to help our retail partners to drive traffic in store and to drive our business mainly where we define the pull-push model, meaning having very big initiatives on our big brands, driven by advertising and this advertising bringing more traffic in store and then improvement of our High-Touch models including the examples of services that you are bringing will then make our consumer more loyal and buy even more and create the prestige cosmetic positive circle that were now exploiting with department stores. So that's the big idea. And frankly, this is working very, very well in the U.S. and around the globe. I like Jane to then to answer more specific to your question and your example.

Well, I just think that what we need to do is modernize with our consumer, and the way she shops today is evolving. And there are customers who want a tremendous amount of service, there are customers who want to just browse, there are customers that want something in the middle. So when you reference the bracelets in Clinique, that's a concept they've developed called service as you like it. And that, I guess, is what you're referencing probably in Southbridge. In terms of the Lauder brand, we are doing much of the same thing. We recognize the different ways that consumers like to shop. We are modifying our counter design and our counter experience, allowing for this. We've established a couple of prototypes in North America, and we will be rolling this out across our distribution across perfumeries, Travel Retail and department stores so that we really can modernize the brand experience and provide both for better navigation. So the customers understand how to shop our brand and understands what products are bestsellers and what products are right for them. Linda Weiser - Caris & Company: So it sounds like there's a lot of opportunity to come actually on that front.

There is, and it's opportunity, not only in the big brands, but really all of our plans are working on new selling opportunities, new ways to reach new consumers. And when you look at the transformation of the in-store per experience and you combine that with the enormous opportunity we have in the digital space, I think those are 2 huge modernization efforts going on across the company. Linda Weiser - Caris & Company: Can I also follow up and ask about in terms of your SKU reduction initiative, I think you said maybe 7% or so less fiscal year SKU reductions; is that correct? And how did it turn out this year in terms of SKU reductions? And how is that playing into the inventory outlook?

This year we were flat also because we had the addition of Smashbox. And next year, we plan to make another step in further reduction.

Our next question comes from Bill Schmitz of Deutsche Bank. William Schmitz - Deutsche Bank AG: Is there any way to bridge the $200 million of year-over-year increase in SG&A costs? Just in terms of like what the additional spending come from. Obviously, FX is probably about 5% of that, but is there a more detailed way to make that bridge work?

Bill, are you saying from '10 to '11, so our '11 actual results? William Schmitz - Deutsche Bank AG: Yes, exactly. I think for the year, but there wasn't a lot of granularity in the quarter.

Sure, and we didn't on the quarter, so I'm sorry for that. But our advertising, merchandising and sampling expense in the quarter went up about 130 basis points. I think for the most part, that was the biggest single increase. And as we said for the full fiscal year, that was really the only major category of expense that went up as a percentage of sales. All the major categories as a percentage of sales went down in spending. The total value of which I don't have off the top of my head, but maybe Dennis can give you a little more color on that. William Schmitz - Deutsche Bank AG: That's more than enough. It's perfect. And then -- I know it's kind of early, but what are you guys thinking on the Christmas season? I know you kind of set the plan to ramp typically in January or February. And the reason I asked the question is it sounds like maybe you got a little bit too lean on inventory. So the sort of cautious guidance for that holiday season, is any of that like allocation or maybe not enough inventory to kind of accommodate demand for the season?

I think that early in '11, Bill, was what I was referencing in my comments. Our service level was hurt because I think we're a little too tight on inventory before we actually had SAP up and running and all the processes and systems in place to help us manage that better. So we intentionally let our inventory build to make sure that we improved our service level. I don't know how you much you could say that affected our Christmas season of last year, but we wouldn't anticipate certainly any effect from the shortage of supply on this fiscal year's Christmas. William Schmitz - Deutsche Bank AG: Okay. Got you. And just one last one, if I could. You said 14.5% to 15% margin by fiscal '14. Is that leaving fiscal '14? Or is that for the full year?

Well, that would be the full year margin, right, so we would achieve -- if we're successful, we will have a margin at the end of fiscal '14 which will be 14.5% to 15% of sales. William Schmitz - Deutsche Bank AG: Okay. I just wanted to clarify, because you said the end of '14, but it's for the whole year like it will be...

Right.

Our next question comes from Connie Maneaty of BMO Capital Markets. Constance Maneaty - BMO Capital Markets U.S.: I have a couple of questions on the gross margin. Could you give us the big contributors to the changes in fiscal '11 as well as what you expect in fiscal 12? And then also, you said that fiscal '12 would probably be your last big year for gross margin improvement. But I was under the impression that once SAP is fully implemented, you would have an opportunity to take a look at distribution and other kind of cost of goods related costs. So if you could clarify that, that would be helpful. And then I have a follow-up.

Sure. So the biggest movements in fiscal 2011 were related to managing our product mix and lower obsolescence provisions because even though our inventory built a little bit, it's very fresh inventory, if you will, so it doesn't require a provision for obsolescence. There were some foreign exchange benefit in there and some pricing, but not too much. In fiscal '12, we have those same elements working in our favor, but with the added benefit of some of the price increases that we're talking about, so pricing is a little bit more of a factor in fiscal 2012 cost of goods and gross margin improvement. When you -- you are absolutely correct that SAP will offer us the opportunity to continue to improve, and what we were saying was during the period that we've outlined, which is through fiscal '14, that this is a big year of gross margin improvement. It will be somewhat less, but we do see the opportunity for gross margin to continue to improve in '14, '15 and '16 as a result of the implementation of SAP.

And I just like to add that also as a result of SAP and what we call SMI, which are the processes that SAP will enable, we see also the opportunity to improve at this point in the entire OpEx line more after 2014 to continue our overall margin progress. Constance Maneaty - BMO Capital Markets U.S.: The follow-up is this. What is the difference in these 2 products, Even Better Clinical and now the Idealist Even Skintone Illuminator, is what you put into Idealist the same concept as Even Better Clinical and so you're leveraging the investment in -- that you made in Clinique into the Estée Lauder product? Or are these 2 different technologies?

I will say -- this is Jane -- that they are 2 distinctly different products with different claims and a different point of view. The Clinique product is very focused on being a dark spot corrector. The Lauder product is focused on generally evening of skintone, discoloration, total aspect of evenness, as well as radiance and glow. The beauty of our company is that we are able to take technologies and use them across brands, adding different ingredients, different concepts and bringing them to consumers in different channels, in different price points, et cetera. But they are extremely different. And if you look closely at the advertising and the push behind each of them, I think you will see that. And that's the strength of our company.

Our next question comes from Leigh Ferst of Wellington Shields.

I was wondering if you could comment on your strategy in Japan with respect to promotion and advertising? It's such a large and fast-growing market. Is it laboratory for experimentation with respect to your cost and your profit margins? Or would you say it's -- you're managing it similar to the other countries which you operate?

You're right. Japan is a market where consumers are very sophisticated, very demanding. So it's a very important market for experimentation, learning, and we do that. We have research centers, we have the ability to innovate our brands, to really talk to the Japanese consumer and develop products close of them, and that's part of our strategy. So, yes, we use Japan a lot as an inspiration market for our innovation across brands, including Estée Lauder and Clinique and many others. In term of what we expect from the market today in advertising and promotion, Japan, we follow the same strategy of advertising and promotion that we are following in the other big developed markets. Meaning, we are in the process of reducing the amount of promotion and increasing the amount of pull via magazine, TV advertising and digital activities. Japan is particularly developing the digital area, and within digital and mobile. And so Japan is the market where we experimenting and learning more on the digital mobile front. However, we expect Japan to recover gradually from the earthquake, and for the moment, the market in Japan remained relatively soft, and I would say stable versus previously. And because of the earthquake, Japan is not yet developing at the level that we hope later on in the course of the year will happen.

Could you answer the same question with respect to China, please?

Yes. China, I could say the same thing on China in terms of using China to develop products, to get inspiration about products. We just open a research center in Shanghai with that purpose. And the Estée Lauder brand just brought the example to you of the Nutrition product that was developed in China, and is now has been expanded across the globe. However, it's a very different picture in terms of the situation in China internal market growth. Actually, China in this moment is the fastest growing market, and that's why it's a market where we're putting a lot of priority into more investments.

But because it's growing so quickly, do you do the same kind of Gift-With-Purchase? Do you also...

No, actually, in all the emerging markets, we are building new model that start avoiding the promotional gift we purchase. Development, in developed markets where Gift-With-Purchase has been a habit, we are trying to reduce the impact. On emerging markets where we are building the business from scratch, we are building it without Gift-With-Purchase or with a very minimal amount of promotions.

Our final question comes from Bill Schmitz. William Schmitz - Deutsche Bank AG: Just 2 quick follow-ups. Did you say what Travel Retail growth was in the quarter?

We didn't say in the quarter. Travel Retail for the quarter was about mid-teens. William Schmitz - Deutsche Bank AG: Mid-teens. Okay. Got you. If I put in the model, I think it's a 24% for the year. So if you average that out, it seems like it doesn't really work; is that right? It's 24% though for the year also?

Yes, that was 24% for the year, mid-teens for the quarter, yes. William Schmitz - Deutsche Bank AG: Okay. Awesome. And then when do you think you're going to be done rightsizing the Fragrance business? Like, when will that have, like the right base to grow from?

I think we have done it. Now we have the right base to grow from. We have rightsized, meaning we have taken out of the system the part of the Fragrance business that really had no profitability and no sustainability, and now we have a more solid base with more solid starting points in terms of profitability, and now we can start growing and leveraging the growth for even more profits.

That concludes today's question-and-answer session. If you were unable to join for the entire call, a playback will be available at 1:00 p.m. Eastern Time today through August 29. To hear a recording of the call, please dial (855) 859-2056, passcode: 87054410. 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.