United States

Estee Lauder Companies Delivers 30% Earnings Per Share Increase on 11% Sales Growth in First Quarter of Fiscal 2009

Press Release

International Sales and Earnings Drive Growth

NEW YORK--(BUSINESS WIRE)--Oct. 28, 2008--The Estee Lauder Companies Inc. (NYSE: EL) today reported $1.90 billion in net sales for its fiscal first quarter ended September 30, 2008, an 11% increase over the $1.71 billion reported in the prior-year quarter. Excluding the impact of foreign currency translation, net sales rose 10%.

The Company reported net earnings for the quarter ended September 30, 2008 of $51.1 million, a 31% increase compared with $39.1 million last year. Diluted net earnings per common share for the quarter rose 30% to $.26 compared with $.20 reported in the prior year.

William P. Lauder, Chief Executive Officer said, "In spite of a very challenging global macroeconomic environment, we met our sales growth target and exceeded our EPS estimate for the quarter. We achieved our goals on the strength of our brands and the efforts of our employees who demonstrated time and again the value of our products to consumers. Our performance in the period underscored, once more, the importance of our investments in emerging markets as well as our presence in more established international markets. We also continued to benefit from product innovation, multi-channel distribution and consistent brand building investments. Looking forward, we are convinced that these strategies, along with our commitment to strong execution and disciplined spending, will continue to be key drivers of both our top line and bottom line performance.

"In the near term, we see this as a time of extraordinary uncertainty. We believe the global economic challenges will be extensive and ongoing, and we are managing our business with these expectations in mind. We remain focused on our core strengths and in directing our resources to the greatest growth opportunities, while vigilantly taking necessary steps to protect our bottom line where we can. We believe that the slowdown in the global economy will impact our overall sales growth for the remainder of the fiscal year, and the unprecedented strengthening of the U.S. dollar against several major currencies will also have a negative impact on our results. With this in mind, we are revising our full 2009 fiscal year estimates for sales growth in constant currencies to 3% to 5% and earnings per share to $2.20 to $2.50."

----------------------------------------------------------------------
Results by
 Product
 Category
-----------
                         Three Months Ended September 30
            ----------------------------------------------------------
(Unaudited;
 Dollars in                                       Operating   Percent
 millions)      Net Sales      Percent Change   Income (Loss)  Change
----------- ----------------- ----------------- ------------- --------
                              Reported  Local                 Reported
              2008     2007    Basis   Currency 2008   2007    Basis
            -------- -------- -------- -------- -----  -----  --------

Skin Care   $  716.8 $  619.5    15.7%    13.9% $43.5  $35.8    21.5%
Makeup         742.9    663.1    12.0     10.6   54.4   41.1    32.4
Fragrance      327.8    313.0     4.7      3.3   (5.5)  (5.0)  (10.0)
Hair Care       98.8    102.6    (3.7)    (4.4)  (1.0)   7.4  (100.0)+
Other           17.2     11.9    44.5     42.9    1.2   (1.1)  100.0+
            -------- --------                   -----  -----
  Subtotal   1,903.5  1,710.1    11.3      9.8   92.6   78.2    18.4
Special
 charges
 related to
cost
 savings
 initiative        -        -                    (0.1)  (0.3)
            -------- --------                   -----  -----
  Total     $1,903.5 $1,710.1    11.3%     9.8% $92.5  $77.9     18.7%
            ======== ========                   =====  =====

----------------------------------------------------------------------

For the fiscal 2009 first quarter, on a reported basis, as well as in constant currency, sales increased in all product categories within each of the Company's geographic regions, except for hair care in the Americas.

    Skin Care

    --  The 16% net sales growth in skin care products in the current
        quarter was particularly strong in view of the 9% sales gain
        in the category in last year's first quarter. This growth was
        primarily fueled by double-digit increases in the Company's
        international businesses.

    --  The recent launches of Perfectionist (CP+) Wrinkle Lifting
        Serum and Cyber White EX by Estee Lauder, as well as Moisture
        Surge Extended Thirst Relief and Superdefense SPF 25 Age
        Defense Moisturizer from Clinique contributed incremental
        sales.

    --  The category's growth also benefited from increases in our La
        Mer brand and products such as the 3-Step Skin Care System
        from Clinique and Tri-Aktiline Instant Deep Wrinkle Filler and
        Eyliplex-2 by good skin(TM).

    --  Operating income increased, primarily reflecting improved
        results from certain of the Company's core brands due to the
        strong sales gains.

    Makeup

    --  Makeup sales increased sharply, with solid double-digit gains
        reported in international markets along with a mid-single
        digit sales increase in the Americas.

    --  The Company's makeup artist brands continued to generate
        strong sales growth during the quarter, principally in
        international markets.

    --  Higher makeup sales were also generated from the launch of
        High Impact Lip Colour SPF 15 and reformulated Superfit Makeup
        from Clinique, as well as Estee Lauder Signature Blush and
        Sumptuous Bold Volume Lifting Mascara by Estee Lauder.

    --  Operating income increased, primarily reflecting improved
        results from certain of the Company's core brands and makeup
        artist brands stemming from the higher sales.

    Fragrance

    --  Fragrance sales increased, primarily driven by newer fragrance
        offerings. While current year sales compared favorably to the
        prior year, the Company continues to face challenges in this
        product category, primarily in the United States.

    --  The launch of Sensuous by Estee Lauder and the international
        introduction of DKNY Delicious Night contributed to the sales
        growth.

    --  The increased sales also benefited from the performance of
        various Tom Ford and Jo Malone fragrances.

    --  Operating loss in the fragrance product category widened in
        the current quarter primarily reflecting lower net sales of
        designer fragrance products, partially offset by favorable
        results related to launches of new Estee Lauder fragrances.

    Hair Care

    --  Sales of hair care products decreased, primarily due to the
        conclusion of Bumble and bumble's hotel amenities program.

    --  Aveda net sales benefited from the launch of Dry Remedy
        Shampoo and Conditioner and the recent acquisition of an
        independent distributor.

    --  Higher sales were posted at Ojon, which was acquired in July
        2007.

    --  Hair care reported an operating loss in the current quarter
        compared to an operating profit in the prior-year period,
        primarily due to the conclusion of the Bumble and bumble
        amenities program and an increase in selling and marketing
        expenses related to the positioning of the Ojon brand for
        future growth.
----------------------------------------------------------------------
Results
 by
 Geographic
 Region
-----------
                    Three Months Ended September 30
            ----------------------------------------------------------

(Unaudited;                                      Operating    Percent
 Dollars in                                       Income       Change
 millions)      Net Sales      Percent Change      (Loss)
----------- ----------------- ----------------- ------------  --------
                              Reported  Local                 Reported
              2008     2007    Basis   Currency  2008  2007    Basis
            -------- -------- -------- --------  ----- -----  --------

The
 Americas   $  939.0 $  898.9  4.5%     4.2%    $56.5  $52.4      7.8%
Europe, the
 Middle
 East &
 Africa        641.5    551.2 16.4     13.5       7.6    9.0    (15.6)
Asia/
 Pacific       323.0    260.0 24.2     21.1      28.5   16.8     69.6
            -------- --------                   -----  -----
  Subtotal   1,903.5  1,710.1 11.3      9.8      92.6   78.2     18.4
Special
 charges
 related to
cost
 savings
 initiative        -        -                    (0.1)  (0.3)
            -------- --------                   -----  -----
  Total     $1,903.5 $1,710.1 11.3%     9.8%    $92.5  $77.9     18.7%
            ======== ========                   =====  =====

----------------------------------------------------------------------
    The Americas

    --  Sales growth reflected gains in the United States from certain
        of the Company's core brands and makeup artist brands. Gains
        were also achieved in Latin America and Canada, as well as
        growth from the Ojon brand.

    --  The Company believes the current economic conditions in this
        region during the quarter, particularly in the department
        store channel, as well as competitive pressures, negatively
        impacted certain of the Company's businesses.

    --  Operating income in the Americas increased, driven by higher
        sales from certain of the Company's core and makeup artist
        brands, coupled with cost containment and contingency plan
        efforts. These favorable results were partially offset by
        challenges experienced by the Company's hair care brands in
        the United States and incremental investment in information
        technology systems and infrastructure.

    Europe, the Middle East & Africa

    --  In constant currency, net sales increased sharply, with every
        country, except Spain, posting gains, and most reporting
        double-digit sales growth. The higher sales were led by the
        United Kingdom, the Company's travel retail business and
        Italy.

    --  Strong double-digit sales increases were achieved in certain
        emerging markets, including Russia and Eastern Europe.

    --  Operating income decreased, reflecting lower results in
        Russia, Spain and France, inclusive of additional provisions
        for certain accounts receivable and inventory. Partially
        offsetting these decreases were improved results from our
        travel retail business, the United Kingdom and Germany.

    Asia/Pacific

    --  This region generated significant constant currency sales
        growth with every country posting increases. Strong
        double-digit growth was generated in Korea, China, Hong Kong,
        Australia and Thailand. Sales in Japan, the Company's largest
        Asian market, also improved, rising mid-single digits.

    --  Operating income in the region increased substantially, led by
        improved results in Japan, Korea, Hong Kong and China.

    Cash Flows

    --  For the three months ended September 30, 2008, net cash flows
        used for operating activities were $196.2 million, compared
        with $132.8 million in the prior-year period.

    --  The change primarily reflects increased cash used for certain
        seasonal working capital components and noncurrent
        liabilities.

    --  Operating cash flow was utilized primarily for capital
        investments, the acquisitions of businesses and the repurchase
        of shares of the Company's Class A Common Stock.

    --  The Company believes that cash on hand, cash generated from
        operations, available credit lines and access to credit
        markets will be adequate to support its currently planned
        business operations on both a near-term and long-term basis.

    Estimate of Fiscal 2009 Second Quarter and Full Year

The high degree of global economic uncertainty may have a negative effect on consumer confidence, demand and spending. The Company cannot predict with certainty the extent or duration of these conditions and is cautious that the current economic climate may affect the Company's results for the remainder of fiscal 2009. A continuation of these conditions, which are almost without precedent, makes definitive forecasting difficult.

The Company expects the current retail trends in North America to continue for the remainder of the fiscal year. In Europe, the Middle East & Africa, sales growth rates are anticipated to slow in certain key countries. The Company's outlook in Asia/Pacific is cautiously positive, reflecting the softening of certain retail environments in this region.

    Second Quarter

    --  Net sales are expected to grow between 2% and 3% in constant
        currency.

    --  Foreign currency translation at current spot rates is expected
        to negatively impact net sales by approximately 8.5% versus
        the prior-year period.

    --  Diluted net earnings per share are projected to be between
        $.97 and $1.05. This projection includes the expected negative
        impact of foreign currency translation of approximately $.11
        per share.

    Full Year

    --  Net sales are now forecasted to grow between 3% and 5% in
        constant currency, below the previous expectations of sales
        growth of 6% to 8%.

    --  Foreign currency translation at current spot rates is expected
        to negatively impact net sales by approximately 6.5% versus
        the prior-year period.

    --  Given the revised sales expectations, the Company projects
        diluted net earnings per share to be between $2.20 and $2.50.
        This projection includes the expected negative impact of
        foreign currency translation of approximately $.33 per share.

    --  On a product category basis, in constant currency, sales in
        hair care are expected to be the leading sales growth
        category, followed by skin care, makeup and fragrance.

    --  Geographic region net sales growth in constant currency is
        expected to be led by Asia/Pacific, where the Company expects
        sales gains of approximately 13% to 15%. In Europe, the Middle
        East & Africa constant currency sales are forecasted in the
        range of 4% to 6% and in the Americas, flat to up 2%.

    Forward-Looking Statements

The forward-looking statements in this press release, including those containing words like "expect," "planned," "may," "could," "anticipate," "estimate," "projected," "forecasted," those in Mr. Lauder's remarks and those in the "Estimate of Fiscal 2009 Second Quarter and Full Year" section involve risks and uncertainties. Factors that could cause actual results to differ materially from those forward-looking statements include the following:

(1) increased competitive activity from companies in the skin care, makeup, fragrance and hair care businesses, some of which have greater resources than the Company does;

(2) the Company's ability to develop, produce and market new products on which future operating results may depend and to successfully address challenges in the Company's core brands, including gift with purchase, and in the Company's fragrance business;

(3) consolidations, restructurings, bankruptcies and reorganizations in the retail industry causing a decrease in the number of stores that sell the Company's products, an increase in the ownership concentration within the retail industry, ownership of retailers by the Company's competitors and ownership of competitors by the Company's customers that are retailers;

(4) destocking by retailers;

(5) the success, or changes in timing or scope, of new product launches and the success, or changes in the timing or scope, of advertising, sampling and merchandising programs;

(6) shifts in the preferences of consumers as to where and how they shop for the types of products and services the Company sells;

(7) social, political and economic risks to the Company's foreign or domestic manufacturing, distribution and retail operations, including changes in foreign investment and trade policies and regulations of the host countries and of the United States;

(8) changes in the laws, regulations and policies (including the interpretation and enforcement thereof) that affect, or will affect, the Company's business, including those relating to its products, changes in accounting standards, tax laws and regulations, trade rules and customs regulations, and the outcome and expense of legal or regulatory proceedings, and any action the Company may take as a result;

(9) foreign currency fluctuations affecting the Company's results of operations and the value of its foreign assets, the relative prices at which the Company and its foreign competitors sell products in the same markets and the Company's operating and manufacturing costs outside of the United States;

(10) changes in global or local conditions, including those due to the volatility in the global credit and equity markets, natural or man-made disasters, real or perceived epidemics, or energy costs, that could affect consumer purchasing, the willingness or ability of consumers to travel and/or purchase the Company's products while traveling, the financial strength of the Company's customers, suppliers or other contract counterparties, the Company's operations, the cost and availability of capital which the Company may need for new equipment, facilities or acquisitions, the returns that the Company is able to generate on its pension assets and the resulting impact on its funding obligations, the cost and availability of raw materials and the assumptions underlying the Company's critical accounting estimates;

(11) shipment delays, depletion of inventory and increased production costs resulting from disruptions of operations at any of the facilities that manufacture nearly all of the Company's supply of a particular type of product (i.e., focus factories) or at the Company's distribution or inventory centers, including disruptions that may be caused by the implementation of SAP as part of the Company's Strategic Modernization Initiative;

(12) real estate rates and availability, which may affect the Company's ability to increase or maintain the number of retail locations at which the Company sells its products and the costs associated with the Company's other facilities;

(13) changes in product mix to products which are less profitable;

(14) the Company's ability to acquire, develop or implement new information and distribution technologies on a timely basis and within the Company's cost estimates;

(15) the Company's ability to capitalize on opportunities for improved efficiency, such as publicly announced cost-savings initiatives, and to integrate acquired businesses and realize value therefrom;

(16) consequences attributable to the events that are currently taking place in the Middle East, including terrorist attacks, retaliation and the threat of further attacks or retaliation;

(17) the timing and impact of acquisitions and divestitures, which depend on willing sellers and buyers, respectively, and;

(18) additional factors as described in the Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended June 30, 2008.

The Company assumes no responsibility to update forward-looking statements made herein or otherwise.

The Estee Lauder Companies Inc. is one of the world's leading manufacturers and marketers of quality skin care, makeup, fragrance and hair care products. The Company's products are sold in over 140 countries and territories under the following brand names: Estee Lauder, Aramis, Clinique, Prescriptives, Lab Series, Origins, M-A-C, Bobbi Brown, Tommy Hilfiger, Kiton, La Mer, Donna Karan, Aveda, Jo Malone, Bumble and bumble, Darphin, Michael Kors, American Beauty, Flirt!, Good Skin(TM), Grassroots, Sean John, Missoni, Daisy Fuentes, Tom Ford, Mustang, Coach, Ojon and Eyes by Design.

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

                   THE ESTEE LAUDER COMPANIES INC.

                 CONSOLIDATED STATEMENTS OF EARNINGS
   (Unaudited; In millions, except per share data and percentages)


                                           Three Months Ended
                                              September 30     Percent
                                           -------------------
                                             2008      2007    Change
                                           --------  --------- -------

Net Sales                                  $1,903.5  $1,710.1    11.3%

Cost of sales                                 500.1     455.8
                                           --------  --------
Gross Profit                                1,403.4   1,254.3    11.9%
                                           --------  --------

     Gross Margin                              73.7%     73.3%

Operating expenses:
Selling, general and administrative         1,310.8   1,176.1
Special charges related to cost savings
 initiative                                     0.1       0.3
                                           --------  --------
                                            1,310.9   1,176.4    11.4%
                                           --------  --------

     Operating Expense Margin                  68.9%     68.8%

Operating Income                               92.5      77.9    18.7%

     Operating Income Margin                    4.8%      4.5%

Interest expense, net                          15.3      18.4

Earnings before Income Taxes and Minority
 Interest                                      77.2      59.5    29.7%

Provision for income taxes                     27.6      21.1
Minority interest, net of tax                   1.5       0.7
                                           --------  --------
Net Earnings                               $   51.1  $   39.1    30.7%
                                           ========  ========

Net earnings per common share:
   Basic                                   $    .26  $    .20    29.7%
   Diluted                                      .26       .20    29.8%

Weighted average common shares
 outstanding:
   Basic                                      195.3     194.0
   Diluted                                    198.8     197.2
                   THE ESTEE LAUDER COMPANIES INC.

                CONDENSED CONSOLIDATED BALANCE SHEETS
                       (Unaudited; In millions)

                                    September 30 June 30  September 30
                                        2008       2008       2007
                                    ------------ -------- ------------
                                ASSETS
Current Assets
Cash and cash equivalents          $       328.8 $  401.7     $  211.4
Accounts receivable, net                 1,164.9  1,038.8      1,062.4
Inventory and promotional
 merchandise, net                        1,048.4    987.2        968.5
Prepaid expenses and other current
 assets                                    364.1    359.5        285.5
                                   ------------- -------- ------------
     Total Current Assets                2,906.2  2,787.2      2,527.8
                                   ------------- -------- ------------

Property, Plant and Equipment, net       1,042.6  1,043.1        917.4
Other Assets                             1,232.9  1,180.9      1,167.7
                                   ------------- -------- ------------
    Total Assets                   $     5,181.7 $5,011.2     $4,612.9
                                   ============= ======== ============

                 LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt                    $       349.9 $  118.7     $  396.3
Accounts payable                           331.5    361.7        314.5
Other current liabilities                1,142.7  1,218.8      1,060.7
                                   ------------- -------- ------------
Total Current Liabilities                1,824.1  1,699.2      1,771.5
                                   ------------- -------- ------------

Noncurrent Liabilities
Long-term debt                           1,082.0  1,078.2      1,062.4
Other noncurrent liabilities and
 minority interest                         559.2    580.6        555.6
Total Stockholders' Equity               1,716.4  1,653.2      1,223.4
                                   ------------- -------- ------------
     Total Liabilities and
      Stockholders' Equity         $     5,181.7 $5,011.2     $4,612.9
                                   ============= ======== ============

----------------------------------------------------------------------
                        SELECT CASH FLOW DATA
                       (Unaudited; In millions)

                                                    Three Months Ended
                                                       September 30
                                                    ------------------
                                                      2008      2007
                                                    --------- --------
Cash Flows from Operating Activities
   Net earnings                                      $  51.1  $  39.1
   Depreciation and amortization                        62.6     59.0
   Deferred income taxes                                (7.1)    (6.4)
   Other items                                          24.5     20.8
   Changes in operating assets and liabilities:
      Increase in accounts receivable, net            (177.6)  (174.6)
      Increase in inventory and promotional
       merchandise, net                                (96.8)   (84.9)
      Increase in other assets, net                    (23.0)   (12.1)
      Increase (decrease) in accounts payable and
       other liabilities                               (29.9)    26.3
                                                    --------  -------
        Net cash flows used for operating
         activities                                  $(196.2) $(132.8)
                                                    ========  =======

  Capital expenditures                               $  75.9  $  78.5
  Payments to acquire treasury stock                    57.0     54.4
    CONTACT: The Estee Lauder Companies Inc.
             Investor Relations:
             Dennis D'Andrea, 212-572-4384
             or
             Media Relations:
             Alexandra Trower, 212-572-4430

    SOURCE: The Estee Lauder Companies Inc.

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