Estee Lauder Companies Reports Third Quarter Results; Reconfirms Outlook for Fiscal Year

Primarily due to a special charge of $51.6 million, equal to $.15per common share associated with the Company's previously announcedcost savings initiative, the Company reported net earnings fromcontinuing operations for the quarter ended March 31, 2006 of $63.2million, compared with $107.6 million last year. Diluted earnings percommon share from continuing operations for the quarter was $.29compared with $.47 reported in the comparable prior-year quarter. Netearnings and diluted earnings per share for the quarter decreased 44%and 40%, respectively, compared with the prior-year quarter.

"Our results reflect sales growth in every region and every majorproduct category this quarter, despite contending with continuedconsolidation in the retail channel and some tough comparisons withprior year product launches," said William P. Lauder, President andChief Executive Officer. "We are seeing growth momentum in newerchannels, strategic international markets and many of our developingbrands. Our distribution diversification strategy is borne out by thestrong sales growth in our company-owned retail stores, and our travelretailing, salon, and online businesses. Key strategic markets such asChina, Russia and the Middle East are experiencing robust growth. Wecontinue to focus on strengthening our core brands, nurturing ourdeveloping brands and implementing cost savings to fuel futuregrowth."

Results by Product Category
---------------------------

Three Months Ended March 31
---------------------------
(Unaudited;
Dollars in Operating Percent
millions) Net Sales Percent Change Income Change
----------- ----------------- ----------------- ------------ ---------
Reported Local Reported
2006 2005 Basis Currency 2006 2005 Basis
-------- -------- -------- -------- ------ ------ --------
Skin Care $ 611.1 $ 608.2 0.5% 3.2% $80.3 $ 89.3 (10.1)%
Makeup 634.9 615.3 3.2 5.1 92.5 92.5 --
Fragrance 246.3 228.7 7.7 11.4 (11.7) (9.2) (27.2)
Hair Care 80.3 67.3 19.3 19.9 6.8 5.6 21.4
Other 5.6 5.8 (3.4) (3.4) - 0.6 (100.0)
Special
charges
related to
cost
savings
initiative - - (51.6) -
-------- -------- ------ ------ --------
Total $1,578.2 $1,525.3 3.5% 5.9% $116.3 $178.8 (35.0)%
======== ======== ====== ====== ========

Net sales of skin care products benefited from the recent launchof Resilience Lift Extreme Ultra Firming Cremes by Estee Lauder andTurnaround Concentrate Visible Skin Renewer from Clinique. Highersales of Re-Nutriv Ultimate Lifting Serum by Estee Lauder and the3-Step Skin Care System from Clinique also contributed to the currentquarter's growth. These increases were partially offset by lower salesof certain existing products. Operating income declined reflectingweak sales growth in certain core brands as compared to the launchactivity in the prior-year quarter.

Makeup sales for the quarter increased primarily reflecting solidgrowth from the Company's makeup artist brands, M-A-C and Bobbi Brown.Challenges in certain core brands, lower sales of some existingproducts, as well as declines in BeautyBank brands, whichsubstantially completed their initial rollout in the comparableprior-year quarter, partially offset these positive results. Overall,makeup operating results were flat as improvements in the Company'smakeup artist brands were offset by lower sales volume at certain corebrands and from BeautyBank brands.

Growth in fragrance sales was led by the initial sales ofUnforgivable by Sean John and the recent launch of Youth Dew AmberNude from Estee Lauder. Higher sales of Estee Lauder pleasures andBeautiful contributed to the category's growth. The fragrance categorycontinues to be challenging with lower sales in the Clinique Happyline, and from DKNY Be Delicious and DKNY Be Delicious Men, both ofwhich anniversaried launches in the same prior-year quarter. Operatingresults in the fragrance product category declined reflecting lowernet sales from certain of the Company's designer fragrances and higherpromotional costs related to new launch activity.

Sales of hair care products and services increased primarily dueto higher sales at Aveda and Bumble and bumble. Higher sales at Bumbleand bumble were primarily due to new points of distribution as well asthe launch of new hair shine and powder products. Aveda net salesgrowth was due to the recent acquisition of a distributor, continuedstrong demand for professional color products and the recent launch ofDamage Remedy hair care products. Hair care operating incomeincreased, principally at Bumble and bumble, due to higher sales.

Results by Geographic Region
----------------------------

Three Months Ended March 31
---------------------------
(Unaudited;
Dollars in Operating Percent
millions) Net Sales Percent Change Income Change
----------- ----------------- ---------------- ------------ --------
Reported Local Reported
2006 2005 Basis Currency 2006 2005 Basis
-------- -------- ------- -------- ------ ------ -------
The Americas $ 870.1 $ 838.7 3.7% 3.4% $99.2 $115.9 (14.4)%
Europe,
the Middle
East &
Africa 501.5 493.4 1.6 8.4 54.9 52.7 4.2
Asia/
Pacific 206.6 193.2 6.9 10.2 13.8 10.2 35.3
Special
charges
related to
cost
savings
initiative - - (51.6) -
-------- --------- ------ ------
Total $1,578.2 $1,525.3 3.5% 5.9% $116.3 $178.8 (35.0)%
======== ========= ====== ======

In the Americas, net sales for the quarter increased, led bygrowth in the hair care, fragrance and makeup product categories andoverall growth in the Company's online business, Canada and Mexico.Sales in the region were tempered by decreases in certain core brandswhich continue to be challenged by competitive pressures and retailerconsolidations. Additionally, net sales were lower at the Company'sBeautyBank brands, which substantially completed their initial rolloutin the comparable prior-year quarter. As a result of these challengingfactors, and incremental expenses related to new accounting rules forstock-based compensation, operating income in the Americas declinedfrom the year-ago period.

Net sales rose in Europe, the Middle East & Africa. In constantcurrency, the higher sales were led by the Company's travel retail anddistributor businesses, France, the United Kingdom, Russia and Italy.Partially offsetting these results were lower sales in Spain.Operating profitability increased primarily due to improved results inRussia, France, Germany and the Company's Middle East distributorbusiness. These increases were partially offset by lower results inSpain and Portugal.

Asia/Pacific reported solid net sales growth with virtually allcountries recording local currency increases led by strongdouble-digit growth in China and Hong Kong, and solid growth in Koreaand Japan. Operating profit in the region increased, reflecting higherresults in Japan, Australia and Hong Kong, partially offset by lowerresults in Taiwan and Korea.

Nine-Month Results

For the nine months ended March 31, 2006, the Company reported netsales of $4.86 billion, a 2% increase from $4.75 billion in thecomparable prior-year period. Excluding the impact of foreign currencytranslation, net sales rose 4%. Net earnings from continuingoperations, including special charges, were $275.4 million for thenine months compared with $343.0 million in the same period last year.Diluted earnings per common share from continuing operations for thenine months ended March 31, 2006 were $1.26, compared with $1.50reported in the prior-year period. The decrease included the specialcharges of $.15 per diluted common share associated with the Company'scost savings initiative.

Cash Flows

For the nine months ended March 31, 2006, the Company generated$476.3 million in cash flow provided by operating activities fromcontinuing operations, a 61% increase compared with $295.7 million inthe prior-year period. The increase 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, dividend payments and the repayment oflong-term debt.

Estimate of Fiscal 2006 Full Year

-- Net sales are expected to grow approximately 3% in constant currency.

-- Foreign currency is expected to negatively impact reported results by approximately 1.5% versus fiscal 2005

-- Diluted earnings per share from continuing operations is projected to be between $1.61 and $1.72, including $.22 to $.26 per share impact of special charges associated with the Company's savings initiatives. The current diluted earnings per share projection is consistent with the projection of $1.87 to $1.94 made in October 2005, which did not specifically include the special charges.

-- Geographic region net sales growth in constant currency is expected to be led by Asia/Pacific and Europe, the Middle East & Africa, followed by the Americas.

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

-- The Company continues to expect to deliver approximately $45 million in incremental savings in the current fiscal year ending June 30, 2006, under its cost savings initiative.

-- The annual savings related to this initiative in future years is expected to be approximately $75 million. During the three and nine months ended March 31, 2006, the Company recorded charges of $51.6 million and $53.2 million, respectively, related to the implementation of the cost savings initiative. The Company expects to record in the fourth quarter of fiscal 2006 special charges associated with savings initiatives of up to $37 million.

Forward-Looking Statements

The forward-looking statements in this press release, includingthose containing words like "expect," "believe," "planned," "may,""could," "should," "anticipate," "estimate," those in Mr. Lauder'sremarks and those in the "Estimate of Fiscal 2006 Full Year" sectioninvolve risks and uncertainties. Factors that could cause actualresults to differ materially from those forward-looking statementsinclude 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 success of Stila under new ownership, 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-lookingstatements 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, Aramis, Clinique, Prescriptives, Origins, M-A-C, 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, SeanJohn and Missoni.

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
March 31
--------------------- Percent
2006 2005 Change
---------- ---------- ----------
Net Sales $ 1,578.2 $ 1,525.3 3.5%
Cost of sales 411.5 383.7
---------- ----------
Gross Profit 1,166.7 1,141.6 2.2%
---------- ----------
Gross Margin 73.9% 74.8%

Operating expenses:
Selling, general and administrative 998.8 962.8
Special charge related to cost
savings initiative (A) 51.6 -
---------- ----------
1,050.4 962.8 9.1%
---------- ----------
Operating Expense Margin 66.5% 63.1%

Operating Income 116.3 178.8 (35.0)%
Operating Income Margin 7.4% 11.7%

Interest expense, net 6.6 3.3
---------- ----------
Earnings before Income Taxes,
Minority Interest and Discontinued
Operations 109.7 175.5 (37.5)%
Provision for income taxes 43.4 65.7
Minority interest, net of tax (3.1) (2.2)
---------- ----------
Net Earnings from Continuing
Operations 63.2 107.6 (41.3)%
Discontinued operations,
net of tax (B) (3.7) (1.4)
---------- ----------
Net Earnings $ 59.5 $ 106.2 (44.0)%
========== ==========

Basic net earnings per common share:
Net earnings from continuing
operations $ .30 $ .48 (37.7)%
Discontinued operations, net of tax (.02) (.01)
---------- ----------
Net earnings $ .28 $ .47 (40.6)%
========== ==========

Diluted net earnings per common
share:
Net earnings from continuing
operations $ .29 $ .47 (37.4)%
Discontinued operations, net of tax (.01) (.01)
---------- ----------
Net earnings $ .28 $ .46 (40.3)%
========== ==========

Weighted average common shares
outstanding:
Basic 212.4 225.5
Diluted 214.9 228.7


Nine Months Ended
March 31
--------------------- Percent
2006 2005 Change
---------- ---------- ----------
Net Sales $ 4,859.2 $ 4,751.9 2.3%
Cost of sales 1,289.5 1,235.3
---------- ----------
Gross Profit 3,569.7 3,516.6 1.5%
---------- ----------
Gross Margin 73.5% 74.0%

Operating expenses:
Selling, general and administrative 3,044.4 2,948.8
Special charge related to cost
savings initiative (A) 53.2 -
---------- ----------
3,097.6 2,948.8 5.0%
---------- ----------
Operating Expense Margin 63.8% 62.1%

Operating Income 472.1 567.8 (16.9)%
Operating Income Margin 9.7% 11.9%

Interest expense, net 19.1 10.7
---------- ----------
Earnings before Income Taxes,
Minority Interest and Discontinued
Operations 453.0 557.1 (18.7)%
Provision for income taxes 169.4 208.3
Minority interest, net of tax (8.2) (5.8)
---------- ----------
Net Earnings from Continuing
Operations 275.4 343.0 (19.7)%
Discontinued operations,
net of tax (B) (75.7) (3.5)
---------- ----------
Net Earnings $ 199.7 $ 339.5 (41.2)%
========== ==========
Basic net earnings per common share:
Net earnings from continuing
operations $ 1.27 $ 1.52 (15.9)%
Discontinued operations, net of tax (.35) (.02)
Net earnings $ .92 $ 1.50 (38.4)%
========== ==========

Diluted net earnings per common
share:
Net earnings from continuing
operations $ 1.26 $ 1.50 (15.5)%
Discontinued operations, net of tax (.35) (.02)
Net earnings $ .91 $ 1.48 (38.2)%
========== ==========

Weighted average common shares
outstanding:
Basic 215.9 226.1
Diluted 218.4 229.7


(A) As part of an initiative to reduce expenses, the Company commenced
streamlined process and organizational changes. The principal
component of the initiative is a voluntary separation program
offered to employees. During the three and nine months ended March
31, 2006, the Company recorded charges of $51.6 million and $53.2
million, respectively, related to the implementation of this cost
savings initiative. Additional charges of up to $37 million
related to the Company's cost savings initiative are expected to
be incurred during the remainder of fiscal 2006.


THE ESTEE LAUDER COMPANIES INC.

SUMMARY OF CONSOLIDATED RESULTS


(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.
Subsequent to March 31, 2006, the Company sold certain assets and
operations of the Stila business, and pursuant to such sale, has
agreed to divest itself of continuing involvement in the Stila
business. In order to facilitate the transition of the Stila
business to the purchaser, the Company will, for a stated period
of time, continue to provide certain information systems,
accounting, manufacturing, distribution and other back office
services to the purchaser. As a result of the operations of this
business through March 31, 2006 and in consideration of the then
pending sale of certain assets and operations of this reporting
unit, the Company recorded a charge of $3.7 million (net of $24.5
million tax benefit) and $75.7 million (net of $40.7 million tax
benefit) to discontinued operations for the three and nine months
ended March 31, 2006, respectively. The charges reflect the
anticipated loss on the disposition of the business of $0.8
million and $66.3 million, net of tax, for the three and nine
months ended March 31, 2006, respectively, which represent
adjustments to the fair value of assets held for sale, the costs
to dispose of those assets not acquired by the purchaser and other
costs anticipated in connection with the sale. The charges also
include the operating losses of $2.9 million and $9.4 million, net
of tax, for the three and nine months ended March 31, 2006,
respectively. In connection with this transaction, the Company
anticipates additional future losses of approximately $6 million,
net of tax, substantially related to employee separation benefits,
beginning in the fourth quarter of fiscal 2006 and continuing into
fiscal 2007. Net sales associated with the discontinued operations
were $12.6 million and $38.3 million for the three and nine months
ended March 31, 2006, respectively. All statements of earnings
information for the prior periods have 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
March 31 Percent Change
--------------------- ---------------------
Reported Local
2006 2005 Basis Currency
---------- ---------- ---------- ----------
NET SALES
By Region:
The Americas $ 870.1 $ 838.7 3.7% 3.4%
Europe, the Middle East
& Africa 501.5 493.4 1.6 8.4
Asia/Pacific 206.6 193.2 6.9 10.2
---------- ----------
Total $ 1,578.2 $ 1,525.3 3.5% 5.9%
========== ==========


By Product Category:
Skin Care $ 611.1 $ 608.2 0.5% 3.2%
Makeup 634.9 615.3 3.2 5.1
Fragrance 246.3 228.7 7.7 11.4
Hair Care 80.3 67.3 19.3 19.9
Other 5.6 5.8 (3.4) (3.4)
---------- ----------
Total $ 1,578.2 $ 1,525.3 3.5% 5.9%
========== ==========


OPERATING INCOME (LOSS)
By Region:
The Americas $ 99.2 $ 115.9 (14.4)%
Europe, the Middle East
& Africa 54.9 52.7 4.2
Asia/Pacific 13.8 10.2 35.3
Special charges related
to cost savings
initiative (51.6) -
---------- ----------
Total $ 116.3 $ 178.8 (35.0)%
========== ==========


By Product Category:
Skin Care $ 80.3 $ 89.3 (10.1)%
Makeup 92.5 92.5 --
Fragrance (11.7) (9.2) (27.2)
Hair Care 6.8 5.6 21.4
Other - 0.6 (100.0)
Special charges related
to cost savings
initiative (51.6) -
---------- ----------
Total $ 116.3 $ 178.8 (35.0)%
========== ==========

Nine Months Ended
March 31 Percent Change
--------------------- ---------------------
Reported Local
2006 2005 Basis Currency
---------- ---------- ---------- ----------
NET SALES
By Region:
The Americas $ 2,629.9 $ 2,588.7 1.6% 1.2%
Europe, the Middle East
& Africa 1,577.9 1,541.8 2.3 7.0
Asia/Pacific 651.4 621.4 4.8 5.6
---------- ----------
Total $ 4,859.2 $ 4,751.9 2.3% 3.6%
========== ==========


By Product Category:
Skin Care $ 1,778.6 $ 1,749.9 1.6% 3.2%
Makeup 1,882.1 1,779.4 5.8 6.9
Fragrance 947.4 999.0 (5.2) (3.4)
Hair Care 229.9 202.0 13.8 14.1
Other 21.2 21.6 (1.9) (1.4)
---------- ----------
Total $ 4,859.2 $ 4,751.9 2.3% 3.6%
========== ==========


OPERATING INCOME (LOSS)
By Region:
The Americas $ 259.2 $ 310.4 (16.5)%
Europe, the Middle East
& Africa 209.3 211.8 (1.2)
Asia/Pacific 56.8 45.6 24.6
Special charges related
to cost savings
initiative (53.2) -
---------- ----------
Total $ 472.1 $ 567.8 (16.9)%
========== ==========


By Product Category:
Skin Care $ 252.4 $ 275.0 (8.2)%
Makeup 245.5 232.9 5.4
Fragrance 5.2 40.3 (87.1)
Hair Care 19.7 17.7 11.3
Other 2.5 1.9 31.6
Special charges related
to cost savings
initiative (53.2) -
---------- ----------
Total $ 472.1 $ 567.8 (16.9)%
========== ==========


THE ESTEE LAUDER COMPANIES INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; In millions)

March 31 June 30 March 31
2006 2005 2005
---------- ---------- ----------

ASSETS

Current Assets
Cash and cash equivalents $ 268.3 $ 553.3 $ 518.0
Accounts receivable, net 900.1 776.6 921.5
Inventory and promotional
merchandise, net 718.1 768.3 723.3
Prepaid expenses and other current
assets 256.7 204.4 267.1
Assets held for sale 27.3 - -
---------- ---------- ----------
Total Current Assets 2,170.5 2,302.6 2,429.9
---------- ---------- ----------

Property, Plant and Equipment, net 709.0 694.2 690.4
Other Assets 817.5 889.0 863.9
---------- ---------- ----------
Total Assets $ 3,697.0 $ 3,885.8 $ 3,984.2
========== ========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Short-term debt $ 119.1 $ 263.6 $ 113.8
Accounts payable 239.5 249.4 251.0
Other current liabilities 1,089.6 984.7 1,038.9
Liabilities related to assets held
for sale 12.2 - -
---------- ---------- ----------
Total Current Liabilities 1,460.4 1,497.7 1,403.7
---------- ---------- ----------

Noncurrent Liabilities
Long-term debt 436.3 451.1 441.8
Other noncurrent liabilities and
minority interest 261.9 244.2 224.9
Total Stockholders' Equity 1,538.4 1,692.8 1,913.8
---------- ---------- ----------
Total Liabilities and
Stockholders' Equity $ 3,697.0 $ 3,885.8 $ 3,984.2
========== ========== ==========


SELECTED CASH FLOW DATA
(Unaudited; In millions)

Nine Months Ended
March 31
---------------------
2006 2005
---------- ----------
Cash Flows from Operating Activities
Net earnings $ 199.7 $ 339.5
Depreciation and amortization 147.0 144.0
Deferred income taxes (57.5) 36.1
Discontinued operations 75.7 -
Other items 39.0 13.8
Changes in operating assets and
liabilities:
Increase in accounts
receivable, net (136.7) (215.2)
Decrease (increase) in
inventory and promotional
merchandise, net 36.1 (41.2)
Increase in accounts payable
and other accrued liabilities 162.0 12.3
Other operating assets and
liabilities, net 11.0 6.4
---------- ----------
Net cash flows provided by
operating activities from
continuing operations $ 476.3 $ 295.7
========== ==========

Capital expenditures 170.1 162.5
Payments to acquire treasury stock 352.5 217.1
Dividends paid 85.4 90.1