Good day, everyone, and welcome to The Estée Lauder Companies Fiscal 2016 First Quarter Conference Call. Today's call is being recorded and webcast. For opening remarks and introduction, I would like to turn the call over to the Vice President of Investor Relations, Mr. Dennis D'Andrea. Please go ahead, sir.

Good morning, everyone. On today's call are Fabrizio Freda, President and Chief Executive Officer; and Tracey Travis, Executive Vice President and Chief Financial Officer. 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. To facilitate the discussion of our underlying business, our first quarter and full-year comparisons have been adjusted for the impact of the prior-year implementation of our Strategic Modernization Initiative. You can find reconciliations between GAAP and non-GAAP figures in our press release and on the Investor Relations section of our website. I'll turn the call over to Fabrizio now. Fabrizio Freda - President, Chief Executive Officer & Director: Thank you, Dennis, and good morning, everyone. Our fiscal 2016 year is off to a good start. In the first quarter, we delivered excellent financial results, generating strong adjusted constant currency sales growth of 8% and earnings per share growth of 16%. Our winning strategy and business model are at the core of our success. Our strength came from our broad portfolio of prestige beauty brands which is diversified by category, geography, and channel with multiple growth engines across all these areas. We can accelerate the ones working well and reallocate resources as market dynamics change. These factors continue to make us more resilient and position us for long-term, sustainable results. We are pleased to operate in the global prestige beauty industry which is growing fast even during volatile times. Within the industry, makeup is today the fastest-growing category, and we are a global leader in prestige makeup. Once again, our luxury and makeup brands were the best performers, fueled by the intrinsic brand equity, strong launches, and…

The floor is now open for questions. Our first question today comes from John Faucher with JPMorgan.

Yes. Good morning. I wanted to talk a little about the gross margin. And as you look out over the next couple of years, as you look at your business mix moving to more of a sort of company-owned store environment, how should we think about the gross margin? Because if you look at this quarter, obviously great top line growth, but not quite as much leverage there as I think some of us had hoped for. So can you give us a little bit of an outlook in terms of maybe is mix having a bigger impact than what we've currently been modeling? Thanks. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: Sure. We have different gross margins, depending on the different channels of business. So as it relates to our growth in retail, as we grow our retail business or our online business, for that matter, we would expect that gross margin – that's a benefit to our gross margin from an overall average company standpoint. There are other channels and brands that have lower gross margins. So as we've spoken in previous quarter calls, depending on the mix of our business in any given quarter, you would – you will see a range of gross profit margin performance and operating margin performance, which is why we continue to focus on the full year in terms of the guidance that we give and you should expect.

Your next question is from the line of Nik Modi with RBC Capital Markets.

Yeah. Thanks for the question. Just actually two quick questions. Fabrizio, I was wondering if you can give me or give us some thoughts on market share for Estée Lauder and Clinique, just kind of going around some of your largest region especially in China. And the second question just so I can understand this whole IT initiative, should we be expecting any disruption related to inventory like we saw with SMI or is this completely unrelated? Thanks. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: So I'll answer the second question first. Regarding this shift in terms of our IT infrastructure, it is not like the application that we implemented with the SAP initiative. So, the SMI initiatives though, we will not expect to have an inventory build similar to what you've seen, thankfully, for SMI over the last few years. Fabrizio Freda - President, Chief Executive Officer & Director: And in term of market share, as you can imagine, we are growing global market share, with net retail sales in the 8% range, and with the market growing at this point, from our estimate, around 4%, we are really growing strongly global market share. However, in some areas, in Lauder and Clinique particularly, the market share could be flat or declining. For example, you ask about Asia. In Asia, Lauder is the clear market leader in Hong Kong. And in China, with the softness of these two markets, obviously, the overall market share in Asia of the brand is under pressure. And Clinique, which is the overwhelming market leader in U.S. mid-tier department store, with the lower growth in this channel versus the other channels in the U.S., also Clinique market share overall in that area will be under pressure. But overall, globally, we are doing a very good progress in market share, again with the same strategy of a good portfolio by category, and then by channel and by country.

Your next question is from Caroline Levy with CLSA.

Good morning. Thank you. At one point, the Chinese traveler and locals, I think you believed were about 10% of your business. And with the shifts you've seen, Europe, it sounds like, is attracting more Chinese tourists, but Hong Kong isn't. And I wonder if you could just tell us what you think happened to growth of sales to the Chinese consumer overall? Was it up or down, or what are your thoughts there? Fabrizio Freda - President, Chief Executive Officer & Director: Yeah. Our estimate is, our sales to Chinese is up, and it continues to be very, very strong and very solid overall around the world, but as we explained, where this growth happens is changing. And then, depending of the market share of our brands in the specific area where the Chinese are going, then there could be a bigger or lower impact. So the fact that there is an issue in Hong Kong in this moment, obviously that's a negative for our sales to Chinese, because we are, as a company, the market leader in Hong Kong. But overall, as you said, we are getting great benefits in Europe and we see good progress in other markets where – like Japan, where the Chinese in this moment are going and buying a lot. Finally, you see an impact on the U.S., mainly in the U.S., because of the strong dollar. The amount of purchases to Chinese consumers has decreased in the last quarters. And obviously, we have a very high market share in the U.S. and we have been penalized by that trend. But all in all, again, we look at the long term, we believe Chinese consumers in mainland and around the world are, and will continue to be, a great source of growth, and a great source of business, and we remain completely focused on them, independently from the mix impacts in the short term. And we have been able to deliver a great growth in the quarter despite, in the quarter, a relatively negative mix impact of the Chinese spending.

Your next question is from the line of Chris Ferrara with Wells Fargo.

Hey, thanks. Guys, I guess I wanted to ask about EMEA, right. And I understand that you had an influx of, I guess, Chinese shoppers in there. I think you cited that as helping. But if you strip out the travel retail decline, it looks like EMEA, ex that travel retail decline, was up very substantially, right, maybe mid-teens, maybe high-teens? I guess – let me know if that's wrong. And if it's not, how sustainable is that in the near term? And do you get a bounce in Asia before you get what could be a slowdown in EMEA from those giant growth rates? Thanks. Fabrizio Freda - President, Chief Executive Officer & Director: We believe this is a strong trend. We are doing very well in EMEA, and growing market share in many, many of these markets. And we believe we have plans to continue this trend. UK is really booming. In the UK market, the market is growing 7% in prestige, more than mass. We are doing great job in attracting consumer for mass, and in growing market share across all channels. The emerging markets in EMEA, which are a big part of this, we are growing outstandingly. Just to – our total emerging market growth this quarter was 13%, excluding China was 31%. So, in the EMEA market, we are growing basically one-third of our business on top of what we had, and this is supposed to continue, and we have very clear plan on that. So, EMEA in total, excluding TR, by the way, is 23% growth. And so, really standing, and there are several reason why these strengths – I'm not sure as the same identical strengths of the quarter, but this good solid trend is expected to continue. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: And the only thing I'll add to that is, embedded within our guidance for the balance of the year; this was, to Fabrizio's point, a very, very strong quarter for EMEA, and we do expect that to continue, certainly benefiting from both the tourist as well as strong execution of our brand programs in the region. A bit moderating for the balance of the year, relative to what we experienced in the first quarter, largely benefiting, particularly from some of the shifts in the quarter that happened fairly quickly with the MERS situation, as well as the situation that we referred to in China, and people changing their travel plans, in addition to the benefiting from the lower currency in Europe.

Your next question is from the line of Jason English with Goldman Sachs. Jason M. English - Goldman Sachs & Co.: Hey. Good morning, folks. Thanks for the question. Actually, two questions, if I may. First, a simple one. Travel retail net sales have fallen short of what you've reported retail sales to be by double-digits for two consecutive quarters. So, given that, do you think we're going to see normalization and reversion of net sales, matching retail sales on a go-forward, and do you think this can sort of abate some of that, that margin headwind? And secondly, Fabrizio, during your prepared remarks, you made numerous mentions to sort of distribution build: new counters, new doors, new stores. Any sense of how much that, in aggregate, is contributing to your growth? Thank you. Fabrizio Freda - President, Chief Executive Officer & Director: Yeah, I'll start with the second question. Contribution to our growth is or distribution is 2%. So, 2 points of growth are distribution increases we met in the quarter, which is a continuing verse of what happened the last fiscal year. In terms of travel retail, what you should expect, first of all, the traffic increase of – in travel retail today is about 7%, and so remains very solid. But the mix of it, meaning there are less Brazilians, less Russians and Chinese are going in different places than Hong Kong, this mix has a negative impact in the short term on conversion, meaning on the number of travelers, that really buy, buy in a big way because different populations have different conversion rates. So, again, in this global, complex world, you need to keep in mind mix has a huge impact. So we believe that in the future, the mix impact should improve because, as you know, there is in the base the turmoil of Hong Kong that started in October, November. MERS should get out of the base as well, and meaning that the MERS impact should not be there anymore in the future. And then we, specifically as Estée Lauder Companies, as we are doing in every other aspect of the business, we are modifying our portfolio and adjusting and diversifying also our travel retail sales, meaning we are building stronger business in EMEA, stronger business in the Americas. We are diversifying our brands. We are launching new brands. We are covering more airports, more tier-2 airports. So we are continuing our strategy of diversification also in travel retail, and we expect this will benefit our trend, it will make us less dependent on short-term mix inputs in the travel retail evolution.

Your next question is from Olivia Tong with Bank of America.

Okay. Thanks. So obviously, some of your Paris based trends had some pretty negative commentary overall particularly in travel retail. So can you just give us an update in terms of inter-quarter trends, if you saw any change through the quarter or through October so far? And then just update us on your assumption on industry growth for this year. Is it still 4% to 5%? Thanks so much. Fabrizio Freda - President, Chief Executive Officer & Director: No. I mean, on travel retail, the quarter was tough obviously. And so, I think we agree with the negative comment on the quarter. Our point of view on the long term future of travel retail remain however very positive and we believe travel retail is and will remain a strong channel, a channel of growth and a great opportunity for us. And then, we believe that in the continuation of this fiscal year in the next 12 months, we should see gradually an improvement of the trend as I was explaining because many negative impacts on the travel retail will be in the base – in the base (40:25). And so, that's the difference. And... Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: The market? Yes. We do still expect the market growth to be 4% to 5% this year.

Yeah.

Your next question is from Javier Escalante with Consumer Edge Research.

Hi. Good morning, everyone. My question has to do with the change – not call it the change, the emphasis on opening stores that you announced in August. If you can tell us how many stores have been opened this fiscal year, 2016, and what will be your corporate like-for-like growth, excluding M&A and new store openings? So that will be my question. And a clarification with regards to EMEA, it seems that I understood that – or at least this is what I gather – that ex- travel retail, all the other pieces in aggregate of EMEA could do 23%. So how much of that is a – you mentioned that emerging markets grew 31%, so the Western European piece grew very rapidly as well. Could you tell us what you're doing with Boots and Douglas? It seems that you had mentioned that on the passing. Are you opening more doors? If there is more opportunity to increase distribution in Boots and Douglas? Thank you very much. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: All right. So, Javier, let me go ahead and start. In terms of new door openings, for freestanding stores, now we referenced both freestanding store and freestanding format openings, as well as some of the openings that we're experiencing in travel retail. But as it relates to retail, freestanding stores and freestanding store formats, we expect to open about 250 this year. As it relates to in our growth algorithm of 6% to 8%, how much we're expecting to come from distribution, it's about 2% to 3% of the 6% to 8%. And as it relates to the acquisitions this year, we're expecting about 50 basis points of our growth in that 6% to 8% to come from the new acquisitions that we did last year.

Your next question is from Steph Wissink with Piper Jaffray. Stephanie Schiller Wissink - Piper Jaffray & Co (Broker): Thanks. Good morning, everyone. Congratulations on a nice quarter. Our question relates to your initiative, particularly around the Estée Lauder brand, to broaden the reach to the millennial customer. And maybe you could talk a little bit about your digital content initiative with respect to the brand portfolio more broadly. Thank you. Fabrizio Freda - President, Chief Executive Officer & Director: Thank you for your comment. And, yeah, the Estée Lauder brand, as we explained, is doing several trends to complete the turnaround, go back to long-term growth levels. One of these steps is focusing more on the millennials and attract new consumers and particularly younger consumers to the brand. The key activity recently has been with the new model Kendall and all the activities behind Kendall Jenner launch of the new fragrance or new makeup. And the daily social media activities behind these new launches, they've been very successful. And so, we will try to continue that. And as part to this plan to attract more millennials, behind Kendall, behind the social media, behind specific product launches, we attribute particularly high importance to the launch in Sephora U.S. of Estée Edit with 250 doors next March. Then we'll be continuing this progress in attracting to the (44:13) brand the millennial generation.

Your next question is from Dara Mohsenian with Morgan Stanley. Dara W. Mohsenian - Morgan Stanley & Co. LLC: Good morning. So, Fabrizio or Tracey, given the challenging macros out there, I'm surprised you're willing to raise your FX-neutral EPS guidance so early in the year here after the Q1 beat. So, I was just hoping to get a sense of what was really driving that. Your FX-neutral sales range remains the same, but maybe you're more comfortable where you're landing within that. Or is it more due to the margin side and maybe the cost of doing business is not as high as you expected? And just to your level of conviction that you can deliver that earnings growth with the global volatility out there will be helpful. Thanks. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: Yeah. So, I will start on and I'll let Fabrizio pick up on the environment and our expectation as it relates to sales. But I think in terms of our comfort level with raising our guidance, one of the things that we are saying is better leverage on some of the initiatives that we were expecting for this year. We've talked a lot about our flexibility and agility as it relates to expenses. And the ability that we have created over the last few years to shift resources to fund the initiatives that are driving more momentum. This certainly starting this quarter there was a tremendous amount of uncertainly, we bet on some strong winners this quarter. Hence, we're able to deliver the quarter and we think we have better insight into what will work for the balance of the year relative to the initiatives that we started the year with. So, that gives us comfort in terms of our ability to deleverage our initiatives a bit better than what we had initially anticipated. Fabrizio Freda - President, Chief Executive Officer & Director: And then overall, I think you posed the question that say, is it really overall, is the amount of confidence and the amount of things that progressed well in the quarter, like our cost savings, our activity internally and also to the mix because we were anticipating a softer Hong Kong or softer China and we have planned to offset, I said, to reallocate the resources in EMEA and in other areas and to accelerate the United States and North America in general. Obviously, the softer part was more sure than the good part and the good part was validated with the activity we've done in the quarter. And so, the reassurance that we saw in the fact that our strong offsetting investment we are working well gave us more confidence to get the balance of the fiscal year in the direction we just stated.

Your next question is from Mark Astrachan with Stifel Nicolaus. Mark S. Astrachan - Stifel, Nicolaus & Co., Inc.: Thanks and good morning, everybody. I just wanted to clarify. So, is your expectation still that Clinique and Estée brands get back to growth this year? And then, sort of more broadly on the same brand, I guess, investors – it seems to us at least, lump those two brands together. But I'm curious internally how you view longer-term growth prospects for each brand? And obviously, they're different brands, different positioning. And in terms of the Clinique brand, it seems a little harder, to sort of get a sense of how it fits in with a consumer that wants either lower end or higher end with the entry-level Prestige brand perhaps becoming more squeezed from a consumer purchase standpoint longer-term. I'm just curious how you think about that and could there ever be a scenario where you look to dispose of that brand in favor of investing in other things? Fabrizio Freda - President, Chief Executive Officer & Director: So, let me answer (48:14) question. There is no scenario in which we dispose of any of these two brands. Those are two core brands of the company, it will continue to be our priority. And, yes, our goal is to bring these brands back to single-digit growth as soon as possible. Now, the brands are very different, you stated one from another. So, the brands are making progress as I stated in my prepared remarks, both brands, but let me take them one-by-one. The Estée Lauder brand is making progress in makeup. We already turned around the makeup part, and we will continue to accelerate that. We have a strong holiday plan on fragrances with Modern Muse Le Rouge plan, and…

Your next question is from Bill Schmitz with Deutsche Bank.

Hi. Good morning. Could you guys talk about a few things? First, shipments versus consumption in the quarter – and I know it is not a great resource, but it looks like NPD continues to pretty dramatically trail some of the numbers you're reporting. So I would love any commentary you have there? And then, the price harmonization impact in China – so I know it is fairly early, but I'm just trying to figure out, are the Chinese shoppers – is it price-driven, or is it experience-driven, when they buy overseas? Are you seeing them by only in travel retail; outlets, because it is cheaper because of the duties; or are they buying it more exponentially, and I think probably the latter is better than the former? And then, just lastly, very quickly, have you ever thought about like a more of an omni-channel approach to Clinique, including maybe going into masks? I know you have done very well in Boots in the UK. I think you have a decent business at Shoppers Drug. So I wonder if you ever explore like CVS or Walgreens with Clinique. I am out of breath. Thanks. Fabrizio Freda - President, Chief Executive Officer & Director: Wow. So, again, let me start from the last part, no. We have no intention to bring Clinique in any other distribution than prestige global distribution. So there will not be expansion of Clinique to mass. Clinique is a prestige, luxury brand that need service element attached to the business model to be successful around the world. This will remain the same. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: And Bill, as it relates to NPD information and shipments versus sell-through, I assume you're referring to the U.S., the North America NPD numbers. And a couple of things that I would point out; in our first quarter, September is a pretty heavy shipping month for holiday sales, so that would affect shipments, and you wouldn't necessarily see that in the retail sell-throughs and the market share information. And also, free standing stores are not in that information... Fabrizio Freda - President, Chief Executive Officer & Director: And online. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: ...and online, so – or not our online site. So those are two elements that are missing that are certainly in our numbers when we report, that you don't see in the NPD numbers.

Your next question is from Lauren Lieberman with Barclays Capital.

Thanks. Good morning. I actually wanted to talk a little bit about holiday, just kind of in general, your outlook in terms of the broader retail environment. I know sometimes when there's heavy promotion around other areas of retail, it can impact category growth in beauty. So a little bit on that. Anything you are doing differently in terms of gift sets, or positioning around holiday would be great. And then, secondly, within the U.S., just curious on Estée. Because you've had New Dimension in the market for the better part of the quarter, how skin care for Estée performed in the U.S., and just any kind of color on the outlook for New Dimension's momentum forward. Thank you. Fabrizio Freda - President, Chief Executive Officer & Director: Okay, so on holiday, we feel confident we have a good set of activities, particularly strong on our fragrance business, on our makeup business, and we believe we are well prepared. There will be also our portfolio brands, and the growth we have seen in brands like Jo Malone, Tom Ford is reinforcing the part of our portfolio which has the possibility of having great traction during the holiday. So we see improvements ,not only in our gift sets and in the promotionality of holidays, but we really see improvements also in the kind of portfolio choices that we can offer for gifts during the holiday period everywhere in the world. The other aspect that we are improving is that a lot of the holiday sales are going to be directed online, in our retail dot-com areas and online in general. And we continue to improve our online readiness for having a great gift season. Now for the other question, is New Dimension of Lauder was in line with the expectations around the world, including in the U.S., is particularly successful in the beginning in certain European markets. But in the UK, also was very successful as of July. And in U.S., I would say, more or less in line with expectations. And the impact on the overall skin care Lauder is positive. We see the New Dimension brings new consumers into the game. And so, we believe can have a good impact in the long term. However, last year during the same period, we had launched Advanced Night Repair eye product, that was a very successful initiative. So in some markets, including the United States, we see that New Dimension launch was not able to completely offset the Advanced Night Repair launch in the previous year. But again, we'll continue to grow and attract new consumers to the brand, in our estimate.

Your next question is from Wendy Nicholson with Citi Investment Research.

Hi. It's not entirely clear to me, because the first quarter was stronger than we expected, clearly on the top line and the bottom line, and much stronger than your guidance – why you wouldn't be raising the full-year numbers. I'm just trying to understand, was there more pipeline fill? Was it that shift – I know, Tracey, you mentioned a shift in some marketing expenses. Or is it that you feel incrementally cautious about the macro environment? Or are you just being wildly conservative with the second quarter and the full-year numbers? Thanks. Tracey Thomas Travis - Chief Financial Officer & Executive Vice President: So, Wendy, we're definitely not being wildly conservative with the numbers. We actually did, when you think about the fact that we maintained our full-year guidance and we talked about experiencing another $0.06, or expecting to experience another $0.06 of currency impact based on the current spot rates, indeed we did raise our guidance for the full year. So, we did flow some of the beat in the first quarter through to the full year. But it is a very uncertain macro environment and, as Fabrizio mentioned, there are many markets that are volatile right now, and currency still remains volatile right now. So, we were not comfortable flowing 100% of the beat through in the first quarter to the full year, but we certainly flowed a portion of it through.

Your next question is from Ali Dibadj with Bernstein Research. Ali Dibadj - Sanford C. Bernstein & Co. LLC: I have a couple things. One is, on the SG&A beat, based on lower spending. Given the commentary that we've heard for a while now about agility and nimbleness, is there any way to help us think about how much less volatile you may be today, given some of these kind of organizational capabilities you've built, about reacting more quickly and stuff? Because – and if you could be specific about what you've actually done. Because it has always been a concern, I think, among investors – among us as well – that you are not really a staple company, right, you're much more discretionary, so macro has to be much more concerning for you guys. Can you give us a sense of how your organizational capabilities have changed? And if you can tell us how much less volatile you might be, so we can be less concerned about macro, that might be helpful. Tough question, but love some context there. And then, second thing is around the dividend increase of 25% – good; again, I think that was 20% last year, so now 25% this time. How should we think about where you're funding that from? I mean, clearly, the payout ratio seems to be going up because the EPS growth, ex-currency, is 10% to 12%. Should we expect some more debt load? Lower stock buybacks? Is it just kind of the payout ratio going up, working capital improvements? How should we think about that from a signaling perspective, given your dividend's going up so much? Thanks, guys. Fabrizio Freda - President, Chief Executive Officer & Director: So, I'll take the first one and Tracey will cover the second one.…

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 PM Eastern Time today through November 16. To hear a recording of the call, please dial 855-859-2056, pass code 64698005. 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.