Estee Lauder Companies Delivers Strong Second Quarter Earnings; Diluted EPS from Continuing Operations Increases 14% to $.70; Update on Cost Savings Initiatives

The Company reported net earnings from continuing operations forthe quarter ended December 31, 2005 of $150.4 million, up 8% from$139.7 million last year. Diluted earnings per common share fromcontinuing operations for the quarter rose 14% to $.70 from $.61reported in the comparable prior-year quarter. Net earnings anddiluted earnings per share for the quarter decreased 41% and 38%,respectively, compared with the prior-year quarter. The decreases weredue to a charge associated with the Company's Stila business, whichwas designated as discontinued operations as of September 30, 2005.

William P. Lauder, President and Chief Executive Officer, said,"Our results this quarter were led by a solid performance from ourinternational operations, while sales in the United States reflected amixed retail environment. Enhanced focus and execution on costcontainment in all areas of our business contributed sharply to ourstrong earnings. We continue to show progress on our strategicinitiatives to drive strong top-line growth, provide further costsavings and generate significant and sustainable profit growth."

Results by Product Category

Net sales of skin care products for the quarter increased 4% to$644.1 million on a reported basis and rose 7% in local currencies.Skin care benefited from higher sales of Perfectionist (CP+),Re-Nutriv Ultimate Lifting Serum and Resilience Lift Extreme UltraFirming Cremes by Estee Lauder, and Repairwear Deep WrinkleConcentrate, Turnaround Concentrate Visible Skin Renewer and the3-Step Skin Care System from Clinique. Net sales also reflected lowersales of certain existing products such as Perfectionist CorrectingSerum for Lines/Wrinkles/Age Spots and other Resilience Lift productsby Estee Lauder.

Makeup sales for the quarter rose a strong 11% to $642.3 millionon a reported basis and increased 13% in local currencies. Thisincrease primarily reflected solid growth from the Company's makeupartist brands, MAC and Bobbi Brown. Sales growth was also generatedfrom new or recently launched products like Repairwear Anti-AgingMakeup SPF 15 and Colour Surge Butter Shine Lipstick from Clinique,and Individualist Natural Finish Makeup and Tender Blush from EsteeLauder. Lower sales of certain existing products like SuperbalancedCompact Makeup SPF 20 from Clinique and So Ingenious by Estee Lauderpartially offset these positive results.

Fragrance sales decreased 11% to $407.9 million on a reportedbasis and declined 9% in local currencies compared to the prior-yearquarter, reflecting continued challenges in this category. Lower salesof certain Tommy Hilfiger fragrances, Estee Lauder Beyond Paradisefragrances, as well as various fragrances from Clinique, contributedto the decrease. Partially offsetting these decreases were highersales from the continued success of DKNY Be Delicious and recentlaunches of True Star Men from Tommy Hilfiger and DKNY Be DeliciousMen.

Sales of hair care products and services for the quarter rose 11%to $79.2 million on a reported basis and also increased 11% in localcurrencies, due primarily to higher sales at Aveda and Bumble andbumble. Aveda net sales growth was due to strong demand forprofessional color products and the recent launch of Damage Remedyhair care products. Higher sales at Bumble and bumble were primarilydue to new points of distribution as well as the success of existingand new products.

Operating income increased in skin care and makeup due to highersales. Fragrance operating income decreased reflecting the continuedsoft fragrance business and, to a lesser extent, expenses related todevelopment of new products and brands. Hair care operating resultsdeclined due to expenses related to the integration of an acquireddistributor business, customer retention programs, as well as initialcosts for expanded points of distribution. Overall, operating incomebenefited from a shift in certain advertising and promotionalactivities to the latter part of the fiscal year.

Results by Geographic Region

In the Americas, net sales for the quarter increased 1% to $878.8million. The increase was led by strong growth in the makeup and haircare product categories and overall growth in the Company's onlinebusiness, Canada and Mexico. Sales in the region were tempered bydecreases in certain core brands which are facing challenges,particularly in the fragrance category. Additionally, incrementalprovisions for anticipated sales returns resulting from the announcedstore closings by certain retailer groups, and the loss of sales toretail locations that remained closed during the quarter due to thehurricanes in the southern United States, negatively affected thisregion. Operating income in the Americas decreased primarily due toincremental expenses related to new accounting rules for stock-basedcompensation and the above mentioned provision for anticipated salesreturns.

In Europe, the Middle East & Africa, net sales increased 5% fromthe prior-year period to $658.9 million, and rose 11% in localcurrency. In constant currency, the higher sales were led by theUnited Kingdom, the Company's travel retail business, Spain, Russiaand Switzerland. Partially offsetting these results were lower salesin Germany and France. Operating profitability increased primarily dueto improved results in travel retail, France, Germany, South Africa,Switzerland and Spain, partially offset by declines in the UnitedKingdom and Greece.

Asia/Pacific net sales grew 3% over the prior-year quarter to$246.2 million. On a local currency basis, this region's net salesrose 5% led by double-digit increases in China and Hong Kong, andstrong growth in Korea. These increases were partially offset by lowersales in Australia and Japan. Operating profit in the regionincreased, reflecting higher results in Korea, China and Japan,partially offset by lower results in Australia and Taiwan.

Six-Month Results

For the six months ended December 31, 2005, the Company reportednet sales of $3.28 billion, a 2% increase from $3.23 billion in thecomparable prior-year period. Excluding the impact of foreign currencytranslation, net sales rose 3%. The Company reported net earnings fromcontinuing operations of $212.2 million for the six months comparedwith $235.4 million in the same period last year. Diluted earnings percommon share from continuing operations for the six months endedDecember 31, 2005 were $.97, compared with $1.02 reported in theprior-year period. Net earnings and diluted earnings per share for thesix months decreased 40% and 37%, respectively, compared with theprior-year period. The decreases include a charge associated with theCompany's Stila business, which was designated as discontinuedoperations as of September 30, 2005.

Cash Flows

For the six months ended December 31, 2005, the Company generated$388.7 million in cash flow provided by operating activities fromcontinuing operations, a 28% increase compared with $304.6 million inthe prior-year period. The change primarily reflects changes incertain working capital components, partially offset by lower netearnings from continuing operations. Operating cash flow was utilizedprimarily for capital investments, the repurchase of shares of theCompany's Class A Common Stock and dividend payments.

Estimate of Fiscal 2006 Second Half and Full Year

Net sales for the second half of fiscal 2006 are expected to growapproximately 4% in constant currency. Foreign currency translation isestimated to negatively impact second half sales by approximately 2.5percent, versus the second half of fiscal 2005. Geographic region netsales growth in constant currency is expected to be led byAsia/Pacific and the Americas, followed by Europe, the Middle East &Africa. On a product category basis, in constant currency, sales inhair care and fragrance are expected to be the leading growthcategories, followed by makeup and skin care. The Company expects toachieve diluted earnings per share from continuing operations ofbetween $.64 and $.71 for the second half, including approximately$.26 per share impact of one-time charges associated with theCompany's savings initiatives. Profitability in the Company's fiscalthird quarter ending March 31, 2006, in particular, is expected to beimpacted by the one-time charges, the shift in certain advertising andpromotional spending, store closings and/or business disruptionsrelated to retailer consolidation, as well as the timing of plannedmarketing programs. The combined impact of these factors is expectedto result in the Company's fiscal 2006 third quarter net earnings fromcontinuing operations being significantly below the same prior-yearperiod. The fiscal fourth quarter, therefore, should show asubstantial increase in net earnings from continuing operations versusthe prior year quarter.

For the Company's fiscal 2006 full-year results, net sales areexpected to grow approximately 3% in constant currency. The Companyexpects foreign currency to negatively impact its reported results byapproximately 1.5% versus fiscal 2005. At the same time the Companyexpects to achieve diluted earnings per share from continuingoperations of between $1.61 and $1.68 for the fiscal 2006 year,including approximately $.26 per share impact of one-time chargesassociated with the Company's savings initiatives. Geographic regionnet sales growth in constant currency is expected to be led byAsia/Pacific and Europe, the Middle East & Africa, followed by theAmericas. On a product category basis, in constant currency, sales inhair care and makeup are expected to be the leading sales growthcategories, followed by skin care, while fragrance is expected to posta decline.

In connection with its previously announced cost savingsinitiatives, the Company expects to deliver approximately $45 millionin incremental savings in the current fiscal year ending June 30,2006. The table below reflects the components of the expected costsavings.
Fiscal 2006 Full Year
(Unaudited; In millions)

Organizational efficiencies $24
Overhead efficiencies 12
Advertising and promotional effectiveness 9
---
Total savings opportunities $45
===

The annual savings related to these initiatives in future years is
expected to be approximately $75 million. During the current quarter,
the Company recorded a $1.6 million charge related to the
implementation of certain cost savings. The Company also expects to
record in the second half of fiscal 2006 one-time charges associated
with these savings initiatives of approximately $88.5 million, with
the majority occurring in the quarter ending March 31, 2006.

Forward-Looking Statements

The forward-looking statements in this press release, including
those containing words like "expect," "believe," "planned," "may,"
"could," "should," "anticipate," "estimate," those in Mr. Lauder's
remarks and those in the "Estimate of Fiscal 2006 Second Half 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;
(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) shifts in the preferences of consumers as to where and how they
shop for the types of products and services the Company sells;
(5) 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;
(6) changes in the laws, regulations and policies 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;
(7) 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;
(8) changes in global or local conditions, including those due to
natural or man-made disasters, real or perceived epidemics, or
energy costs, that could affect consumer purchasing, the
willingness of consumers to travel, the financial strength of the
Company's customers or suppliers, the Company's operations, the
cost and availability of capital which the Company may need for
new equipment, facilities or acquisitions, the cost and
availability of raw materials and the assumptions underlying the
Company's critical accounting estimates;
(9) 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 and inventory centers;
(10)real estate rates and availability, which may affect the
Company's ability to increase the number of retail locations at
which the Company sells its products and the costs associated with
the Company's other facilities;
(11)changes in product mix to products which are less profitable;
(12)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;
(13)the Company's ability to capitalize on opportunities for improved
efficiency, such as publicly-announced cost-savings initiatives
and the disposition of Stila, and to integrate acquired businesses
and realize value therefrom;
(14)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;
(15)the impact of repatriating certain of the Company's foreign
earnings to the United States in connection with The American Jobs
Creation Act of 2004; and
(16)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, 2005.

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 leadingmanufacturers and marketers of quality skin care, makeup, fragranceand hair care products. The Company's products are sold in over 130countries and territories under well-recognized brand names, includingEstee Lauder, Clinique, Aramis, Prescriptives, Origins, MAC, BobbiBrown, Tommy Hilfiger, La Mer, Donna Karan, Aveda, Jo Malone, Bumbleand bumble, Darphin, Michael Kors, Rodan + Fields, American Beauty,Flirt!, Good Skin(TM), Donald Trump The Fragrance, Grassroots and SeanJohn Fragrances.

An electronic version of this release can be found at theCompany's website, www.elcompanies.com.
THE ESTEE LAUDER COMPANIES INC.

SUMMARY OF CONSOLIDATED RESULTS
(Unaudited; In millions, except per share data)

Three Months Ended
December 31
------------------ Percent
2005 2004 Change
---- ---- ------
Net Sales $1,783.9 $1,736.3 2.7%
Cost of sales 458.5 443.9
--------- ---------
Gross Profit 1,325.4 1,292.4 2.6%
--------- ---------
Gross Margin 74.3% 74.4%

Operating expenses:
Selling, general and administrative 1,073.1 1,059.7
Cost savings initiative (A) 1.6 -
-------- --------
1,074.7 1,059.7 1.4%
--------- ---------
Operating Expense Margin 60.2% 61.0%

Operating Income 250.7 232.7 7.7%
Operating Income Margin 14.1% 13.4%

Interest expense, net 6.9 3.3
--------- ---------
Earnings before Income Taxes, Minority
Interest and Discontinued Operations 243.8 229.4 6.3%
Provision for income taxes 90.2 86.3
Minority interest, net of tax (3.2) (3.4)
--------- ---------
Net Earnings from Continuing Operations 150.4 139.7 7.7%
Discontinued operations, net of tax (B) (68.7) (1.4)
--------- ---------
Net Earnings $ 81.7 $ 138.3 (40.9)%
========= =========
Basic net earnings per common share:
Net earnings from continuing operations $ .70 $ .62 13.1%
Discontinued operations, net of tax (.32) (.01)
--------- ---------
Net earnings $ .38 $ .61 (38.0)%
========= =========

Diluted net earnings per common share:
Net earnings from continuing operations $ .70 $ .61 13.8%
Discontinued operations, net of tax (.32) (.01)
--------- ---------
Net earnings $ .38 $ .60 (37.5)%
========= =========

Weighted average common shares outstanding:
Basic 214.7 225.6
Diluted 216.6 229.2

Six Months Ended
December 31
------------------ Percent
2005 2004 Change
---- ---- ------
Net Sales $3,281.0 $3,226.6 1.7%
Cost of sales 878.0 851.6
--------- ---------
Gross Profit 2,403.0 2,375.0 1.2%
--------- ---------
Gross Margin 73.2% 73.6%

Operating expenses:
Selling, general and administrative 2,045.6 1,986.0
Cost savings initiative (A) 1.6 -
--------- ---------
2,047.2 1,986.0 3.1%
--------- ---------
Operating Expense Margin 62.4% 61.6%

Operating Income 355.8 389.0 (8.5)%
Operating Income Margin 10.8% 12.0%

Interest expense, net 12.5 7.4
--------- ---------
Earnings before Income Taxes, Minority
Interest and Discontinued Operations 343.3 381.6 (10.0)%
Provision for income taxes 126.0 142.6
Minority interest, net of tax (5.1) (3.6)
--------- ---------
Net Earnings from Continuing Operations 212.2 235.4 (9.9)%
Discontinued operations, net of tax (B) (72.0) (2.1)
--------- ---------
Net Earnings $ 140.2 $ 233.3 (39.9)%
========= =========

Basic net earnings per common share:
Net earnings from continuing operations $ .97 $ 1.04 (6.3)%
Discontinued operations, net of tax (.33) (.01)
--------- ---------
Net earnings $ .64 $ 1.03 (37.5)%
========= =========

Diluted net earnings per common share:
Net earnings from continuing operations $ .97 $ 1.02 (5.8)%
Discontinued operations, net of tax (.33) (.01)
--------- ---------
Net earnings $ .64 $ 1.01 (37.1)%
========= =========
Weighted average common shares outstanding:
Basic 217.7 226.4
Diluted 220.1 230.2

(A) As part of an initiative to reduce expenses, the Company offered a
voluntary separation program to North America-based employees.
During the current quarter, the Company recorded a $1.6 million
charge related to the implementation of this cost savings
initiative. The charge represents the initial cost relating to one
element of the program. Additional non-recurring expenses of
approximately $88.5 million related to the Company's cost savings
initiatives are expected to be incurred during the remainder of
fiscal 2006.

(B) On September 30, 2005, the Company committed to a plan to sell the
assets and operations of its reporting unit that markets and sells
Stila brand products and to actively seek a buyer for the brand.
Following this decision, and as a result of the Company's efforts
to sell the assets and operations of this reporting unit during
the quarter ended December 31, 2005, the Company recorded a charge
of $68.7 million (net of $14.2 million tax benefit) and $72.0
million (net of $16.2 million tax benefit) as discontinued
operations for the three months and six months ended December 31,
2005, respectively. The charge reflects the anticipated loss on
sale of the business of $65.5 million, net of tax, and the
operating loss of $3.2 million and $6.5 million, net of tax, for
the three months and six months ended December 31, 2005,
respectively. Net sales associated with the discontinued
operations were $12.0 million and $25.6 million for the three and
six months ended December 31, 2005, respectively. All statement of
earnings information for the prior periods has been restated for
comparative purposes, including the restatement of the makeup
product category and each of the geographic regions.


THE ESTEE LAUDER COMPANIES INC.

SUMMARY OF CONSOLIDATED RESULTS
(Unaudited; Dollars in millions)

Three Months Ended
December 31 Percent Change
----------------- -----------------
Reported Local
2005 2004 Basis Currency
---- ---- ----- --------
NET SALES
By Region:
The Americas $ 878.8 $ 870.2 1.0% 0.7%
Europe, the Middle East & Africa 658.9 626.4 5.2% 11.0%
Asia/Pacific 246.2 239.7 2.7% 4.8%
-------- --------
Total $1,783.9 $1,736.3 2.7% 5.0%
======== ========

By Product Category:
Skin Care $ 644.1 $ 617.4 4.3% 6.9%
Makeup 642.3 578.4 11.0% 13.1%
Fragrance 407.9 458.6 (11.1)% (8.8)%
Hair Care 79.2 71.6 10.6% 11.5%
Other 10.4 10.3 1.0% 1.9%
-------- --------
Total $1,783.9 $1,736.3 2.7% 5.0%
======== ========

OPERATING INCOME
By Region:
The Americas $ 78.0 $ 86.0 (9.3)%
Europe, the Middle East & Africa 132.0 117.1 12.7%
Asia/Pacific 40.7 29.6 37.5%
-------- --------
Total $ 250.7 $ 232.7 7.7%
======== ========


By Product Category:
Skin Care $ 132.8 $ 120.9 9.8%
Makeup 91.8 74.6 23.1%
Fragrance 17.6 27.2 (35.3)%
Hair Care 7.5 9.3 (19.4)%
Other 1.0 0.7 42.9%
-------- --------
Total $ 250.7 $ 232.7 7.7%
======== ========

Six Months Ended
December 31 Percent Change
----------------- -----------------
Reported Local
2005 2004 Basis Currency
---- ---- ----- --------
NET SALES
By Region:
The Americas $1,759.8 $1,750.0 0.6% 0.1%
Europe, the Middle East & Africa 1,076.4 1,048.4 2.7% 6.3%
Asia/Pacific 444.8 428.2 3.9% 3.5%
-------- --------
Total $3,281.0 $3,226.6 1.7% 2.6%
======== ========

By Product Category:
Skin Care $1,167.5 $1,141.7 2.3% 3.2%
Makeup 1,247.2 1,164.1 7.1% 7.8%
Fragrance 701.1 770.3 (9.0)% (7.8)%
Hair Care 149.6 134.7 11.1% 11.2%
Other 15.6 15.8 (1.3)% (0.6)%
-------- --------
Total $3,281.0 $3,226.6 1.7% 2.6%
======== ========

OPERATING INCOME
By Region:
The Americas $ 158.4 $ 194.5 (18.6)%
Europe, the Middle East & Africa 154.4 159.1 (3.0)%
Asia/Pacific 43.0 35.4 21.5%
-------- --------
Total $ 355.8 $ 389.0 (8.5)%
======== ========

By Product Category:
Skin Care $ 171.6 $ 185.7 (7.6)%
Makeup 152.3 140.4 8.5%
Fragrance 16.6 49.5 ( 66.5)%
Hair Care 12.8 12.1 5.8%
Other 2.5 1.3 92.3%
-------- --------
Total $ 355.8 $ 389.0 (8.5)%
======== ========

THE ESTEE LAUDER COMPANIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; In millions)

December 31 June 30 December 31
2005 2005 2004
---- ---- ----
ASSETS
Current Assets
Cash and cash equivalents $ 370.3 $ 553.3 $ 577.9
Accounts receivable, net 832.3 776.6 844.4
Inventory and promotional merchandise,
net 726.6 768.3 699.1
Prepaid expenses and other current assets 227.6 204.4 283.1
Assets held for sale 44.8 - -
-------- -------- ----------
Total Current Assets 2,201.6 2,302.6 2,404.5
-------- -------- ----------

Property, Plant and Equipment, net 693.2 694.2 683.1
Other Assets 806.2 889.0 867.2
-------- -------- ----------
Total Assets $3,701.0 $3,885.8 $3,954.8
======== ======== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 209.6 $ 263.6 $ 80.4
Accounts payable 244.6 249.4 293.6
Other current liabilities 1,071.7 984.7 1,091.6
Liabilities related to assets held for
sale 4.8 - -
-------- -------- ----------
Total Current Liabilities 1,530.7 1,497.7 1,465.6
-------- -------- ----------

Noncurrent Liabilities
Long-term debt 441.6 451.1 472.8
Other noncurrent liabilities and minority
interest 241.1 244.2 215.1
Total Stockholders' Equity 1,487.6 1,692.8 1,801.3
-------- -------- ----------
Total Liabilities and Stockholders'
Equity $3,701.0 $3,885.8 $3,954.8
======== ======== ==========

SELECTED CASH FLOW DATA
(Unaudited; In millions)

Six Months Ended
December 31
------------------
2005 2004
---- ----
Cash Flows from Operating Activities
Net earnings $ 140.2 $ 233.3
Depreciation and amortization 97.1 94.5
Deferred income taxes (18.6) 22.1
Discontinued operations 72.0 -
Other items 27.0 9.0
Changes in operating assets and liabilities:
Increase in accounts receivable, net (76.0) (128.6)
Decrease (increase) in inventory and promotional
merchandise, net 23.8 (15.1)
Increase in accounts payable and other accrued
liabilities 132.3 91.0
Other operating assets and liabilities, net (9.1) (1.6)
-------- ---------
Net cash flows provided by operating activities
from continuing operations $ 388.7 $ 304.6
======== =========

Capital expenditures 104.0 110.0
Payments to acquire treasury stock 305.8 187.7
Dividends paid 85.4 90.1