Good day, everyone, and welcome to The Estée Lauder Companies Fiscal 2013 Fourth Quarter and Year-End Conference Call. Today's call is being recorded and webcast. For opening remarks and introductions, 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; Tracey Travis, Executive Vice President and Chief Financial Officer; and Daniel Rachmanis, President, Latin America. Daniel will give a strategic overview of this region. 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. Our discussion of our financial results and our expectations are before restructuring and other charges. You can find a reconciliation 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.

Thank you, Dennis, and good morning, everyone. I'm pleased to say that for the fourth consecutive year, our winning strategy steered our company to new heights of success. We delivered strong results in fiscal 2013 with solid sales gains and double-digit EPS growth, and our improvement was broad-based. Every product category grew in every region. This performance enabled us to gain share in global prestige beauty and strengthened our industry leadership. We delivered these results despite challenges in several important international markets and some lower growth in the U.S. Yet overall, our brands thrived, thanks to well-received product innovations, personalized High-Touch service and compelling advertising. Our sales rose 6% in local currency, 2 percentage points more than prestige beauty did worldwide, and EPS increased 16% to a record $2.64. Most of our brands contributed, fueled by targeted investment behind products in fast-growing channels and countries. We improved our leverage of consumer insights and our digital reach, which helped us connect with consumers of widely differing backgrounds in more than 150 markets, including many who were new to our brands. And we appealed to global consumers through local lens, with products and communications tailored to their desires and customs. By focusing our resources on our biggest and fastest-growing opportunities across consumer segments, categories, channels and countries, we achieved record financial results and hit some major milestones. In fiscal 2013, our sales topped $10 billion for the first time in our history. Globally, we gained 30 basis points of share, with gains in skin care and makeup and in Asia/Pacific, Western Europe and Latin America. By maintaining our financial discipline, we leveraged the higher sales and grew operating margin to an all-time high of 15.2%. Net earning passed the $1 billion mark for the first time. Our total stockholder return was 23.7%,…

Thank you, Fabrizio, and good morning, everyone. I joined the company in 2007, after 20 years in the industry. I was chosen to lead our newly established Latin American region in 2009 in order to build on our company's 50 years' history there and capitalize on the promising opportunities we see now and in the future. Our first priorities were to strengthen the teams in our 5 affiliates and develop best-in-class regional capabilities in finance, supply chain, human resources, consumer insights, digital and store design. We have made good progress in all these areas. Today, the Latin America region includes 17 countries, from Mexico down to Argentina. Since this regional structure was created, we have doubled our net sales to approximately $260 million, totaling approximately 3% of the company sales, and we have enjoyed a compound annual growth rate of 22%. In fiscal year '13, our sales growth was 11%, twice the rate of prestige beauty in the region, driven primarily by Brazil and Peru. We view Latin American's role in the geographic portfolio of the company as a profitable engine of growth. We have grown sales, and we'll continue growing twice as fast at the average of the company while, at the same time, being accretive to the company's profitability. Also, the investments we make in Latin America drive awareness for our brands among the millions of regional consumers who then buy our products in profitable channels such as travel retail and in destination cities across the United States and Europe. We estimate that for every $1 we sell in Brazil, for example, we sell another $1.50 in travel retail and North America. With the strong results we have generated, we now have a solid platform for additional growth in the coming years. To give you a sense of…

Thank you, Daniel, and good morning, everyone. I'll briefly review the highlights of our fiscal 2013 fourth quarter and full year financial performance and then frame for your expectations for the year ahead. As usual, my commentary on the financial results excludes the impact of restructuring and other charges. For the fourth quarter, net sales rose 7% to $2.41 billion. Excluding the impact of currency translations, sales grew 8%. Net earnings increased 40% to $96.8 million compared with $69.2 million in the prior year quarter, and diluted EPS was $0.24, above the top end of our expectations. The challenges that emerged in our third quarter with the latest wave of SMI have been resolved, and we have begun work on the last major wave of SMI implementation, which is scheduled to launch in July of 2014. Regarding sales, every region contributed to sales growth in the quarter. Sales in our Americas region increased 5% in local currency, with mid-single-digit growth in North America and high single-digit growth in Latin America. From a channel perspective, our North American sales at retail were mixed, with the strongest growth realized through multi-brand specialty stores, luxury department stores, online and our own freestanding stores. Mid-tier prestige department stores and salons were softer this quarter. The prior year included a reversal of a provision for sunscreen returns, which lowered growth in the Americas by approximately 2 percentage points in the quarter. In the Europe, Middle East & Africa region, sales increased 13% in local currency. We achieved double-digit sales gains in the developing markets of Turkey, the Middle East and South Africa, but also in many established markets in Western Europe, including Italy, Germany and the U.K. Our sales in the travel retail channel rose 15%, slightly ahead of sell-through. The region's growth was partially…

[Operator Instructions] Our first question today comes from Olivia Tong with Bank of America.

Just want to talk about the growth rate that you're expecting for this year. So relative to the 3% to 4%, you're saying 2x, plus 6% to 8%. You mentioned a big incremental increase in advertising in Q1, but can you provide some color on the cadence for the remainder of the year? And then also, can you provide some perspective on where you expect your share gains to come from? Is it stronger in one region versus another, or product category? And do you expect to source most of your share gains from bigger players or from smaller brands?

Well, for the full year, our advertising, marketing and promotion as a percent of sales will remain flat. So we do see a shift, as I had mentioned before, in the quarterly spend. And again, as we have mentioned before, supporting our launch activity, which is substantial, obviously, in the first quarter. Fabrizio mentioned DDML and Advanced Night Repair, which launched in July. We also have Modern Muse, which is the first relaunch in some time of a fragrance by the Estée Lauder brand in September. So the combination of those 3, as well as some of the other licensed brand fragrance activity that we have, is increasing the spend in the first quarter. It should normalize over the balance of the year to create a flat percent of sales for advertising promotion and marketing.

In terms of share gains, we assume to continue growing share in Western Europe, Asia, Latin America, and we believe we will stabilize our share situation also in the U.S. thanks to the innovation programs of the next 12 months.

Your next question comes from Jason English with Goldman Sachs.

I wanted to zoom in a little bit more on the U.S. Fabrizio and team, can you guys give us your perspective on what's caused the deceleration of the prestige category? And then within that, maybe touch on channel mix. I know last year, I think you said that your U.S. business, around 9% of those sales were coming from online. Where do we stand with that today?

Yes. So the -- first of all, the deceleration of the U.S. business that we have seen started in May. The U.S. business has been growing in prestige as per NPD at about 6.9% in the first part of last fiscal year, and then in quarter 4, it's 2.5%, and then June was minus 1%. So it's been clearly a softening in that period. Now we believe this just been a reduced traffic for several macroeconomic reasons, and we already see some improvements, and we believe that back-to-school and then later, the holiday season, should bring the U.S. market back to solid growth, although we believe will be a growth below what we've seen in fiscal year '12 and the beginning of fiscal year '13. In terms of channel mix, we are continuing expanding very strongly in e-commerce, and e-commerce is growing 20%-plus, and we believe this will continue. We are also growing in our freestanding stores at double digit, and we are continuing expanding in specialty-multi successfully. And -- however, independently from the soft last couple of months of the fiscal year, the -- we grew about 6% in the U.S. in fiscal year '13. So a pretty solid growth, and we believe that probably, this growth will be reduced but will remain solid over the fiscal year '14.

So just to add on to what Fabrizio said, as we have communicated all year, our online business has grown 2.5x to 3x what our regular business has grown. So in the U.S., it's approximately 10% now versus the 9% last year.

Your next question comes from Dara Mohsenian with Morgan Stanley.

So from a margin standpoint, your fiscal 2014 EPS guidance implies only about 40 basis points of margin expansion, even at the high end. Given your favorable pricing; channel mix; operating leverage; the drag from SMI, I would assume, is improving; why can't you do better than that? And what are the negative offsets to those positives I mentioned from a margin standpoint?

So you may recall that we made the decision a quarter or so ago to extend SMI. So we do have an extra quarter of SMI this year that we did not expect to have previously. So that is creating some incremental expense. Largely, we have offset that incremental expense. We also have planned advertising increase, obviously, for the year, and as I mentioned right now, planned flat for the balance of the year. But we have other investments that we're making as well. We're making an investment in our HR systems. We're making investment in some of our marketing areas, as well, to support the growth in fiscal 2014 and beyond. Making some investment in our innovation areas as well. So that's the reason why the margin expansion is 40 basis points, 40 to 50 basis points. And we expect that, that will continue over the next 3 years. Once we have fully implemented SMI and start to really leverage it, and we expect to do some of that this year -- so one of the benefits that the delay has given us is the opportunity to focus on the first 3 waves of the rollout and really optimize some of the tools and the deployment of SMI and SAP, and that is expected to yield a benefit as well this year and certainly beyond.

Your next question comes from Ali Dibadj with Bernstein. Ali Dibadj - Sanford C. Bernstein & Co., LLC., Research Division: Guys, wanted to ask a little bit more about your thought process on just the incremental spend in 2014, because you are clearly increasing spend, but the top line isn't growing much faster than you have been without the spend. So I'm trying to get a better sense, I guess, of -- is it because it's just more difficult out there, so competition is greater and consumers are tougher? Or indeed, you're spending more for the future, whether it be innovation or distribution gains? So I'm trying to get an understanding of the mix between those 2. And I ask that particularly in the context -- you had it in your prepared remarks for the past 4 years, being very strong from restructuring and spend-back perspective. But now, as we look forward, we are, I think, having to expect a little bit more of a leverage on your current expenses. So I'm trying to tie those 2 together in terms of your spending more this year, growing the same this year and then going forward, we're expecting more leverage, I guess, on your current expenses. So I'm hoping to get some help tying those together.

Yes, let me explain what is the idea behind that. We definitely are preparing for an acceleration of top line growth. And this year was 6%, and we plan 6% to 8% next year. Now the acceleration should also be read in the context of the overall market, meaning we are very confident that the sum of our activities will provide the acceleration, I will give you some details in a second, but the market behind it is still some signs of softness. And Southern Europe, we believe, will continue to be soft. Korea will continue to be soft. And frankly, for the moment, we suspend our judgment on the U.S. temporary softness that we have seen in May and July, and we assume that this will not recover all the way to the levels of the U.S. that was last year. So with these assumptions -- that's why we say the market. If this assumption holds, the market will grow 3%, 4%, and we are saying 6% to 8%. So we are saying we will grow double than the market one more year in -- and to grow double than the market, frankly, we need the innovation and all the other -- and the investment in the advertising that we have created. Without that, it would be very difficult to beat the market in that way. Now obviously, if the market will grow better, it will be stronger over time, then we can see even better leverage from our investment in advertising and innovation in our top line. And we will see -- and we'll do, obviously, the best we can. The details I wanted to give is that, obviously, Korea, the current U.S. trend, Southern Europe are somehow concerning. But on the other side, we expect strong growth in developing areas like China, Middle East, Turkey, Latin America, as you heard. We expect double-digit growth in travel retail again in the year and a continuation of 20-plus percent growth in online. We are looking to our luxury group of brands like La Mer, Tom Ford, to continue to grow 20% more. And our innovation, as I explained, should be a strong driver. So we are, in my opinion, again, not only improving our productivity and ability to leverage our -- with growth our cost, but also, we're in a position to exploit our growth portfolio. Because even in a moment when we had a quarter of soft in the U.S., we have strong growth in China offsetting it. And Korea is down, Japan is back up. So the strengths of our portfolio that cover different regions, different categories, different channels is really one of the things that make us comfortable with a strong growth over the years, but obviously, reflecting the reality of the market in every given moment.

The only thing I would add to that is, Ali, and you mentioned this, we are seeding distribution for those mid-tier brands to continue to achieve the kind of growth that we've experienced this year both from a comp standpoint, they're doing terrific, but also from a distribution opportunity standpoint now that Jo Malone and La Mer continues to have momentum -- and Tom Ford and some of the other brands that we have at that -- next year, Aveda, for instance, that Daniel mentioned in terms of perhaps an opportunity for Latin America. So we are investing more in distribution, both for our newer brands as well as in emerging markets.

Your next question comes from Mark Astrachan with Stifel. Mark S. Astrachan - Stifel, Nicolaus & Co., Inc., Research Division: Wanted to ask quickly just on gross margins in the quarter in terms of sort of puts and takes there, why it was not up as strongly as it's been or why it was actually down a little bit. And then just back on ad spend, is it going to be in different regions and channels in fiscal '14? And how do you measure returns and efficiencies on the spend, considering the decision to maintain or to increase as you go forward?

Okay. So on the gross profit margin, there were a couple of different impacts. The mix favorability wasn't as great this quarter as it has been in previous quarters, but there was a favorability. So in addition to that, as we have called out, our inventory is at higher levels than certainly we had anticipated this year with some of the delay in the SMI conversion. So we ended the year with higher inventory. So we did make sure that we were properly provided, from an obsolescence standpoint, for that. And the last area is we did have a slight unfavorability in manufacturing variances for the quarter. But again, for the year, as you saw, we showed tremendous margin -- gross profit margin expansion. So it's more of a quarterly phenomenon than, certainly, an annual.

In terms of our advertising and promotional spending, we are very deliberate and strategic about the resource or location. We have a very thorough internal process to measure the return of these investments, and they vary a lot depending on, for example, which area of the world we are launching. If we do a big launch in China, this is normally more advertising intense than the Middle East, as an example. Or which brands. If we have a launch in M-A-C, it's obviously less advertising intense than Estée Lauder. Or the importance of innovation. If we launch a big -- like Advanced Night Repair relaunch, that's much more advertised than the next variant of BB cream. So it's very, very deliberate, and it depends from market, from kind of category and from the kind of innovation that we are getting better and better in measuring the return on investment of what we do.

Your next question comes from Alice Longley with Buckingham Research.

My major question is about the first half overall for fiscal '14. Can you tell us if the -- if we put the second quarter together with the first quarter, if the earnings for the first half of the year will grow roughly in line with your guidance for the year? And I'm just -- I'm assuming that there is a shift in timing of marketing away from the second quarter back to the first quarter, and maybe if we look at the 2 together, they'll be in line with the year? And then also, China, you under-shipped in the first quarter relative to sell-through at retail. Would you be back in the second quarter to shipping in line with sell-through at retail in China, so we'll get an acceleration in sales there?

So Alice, I'll start off and then let Fabrizio chime in. We are currently not giving second quarter guidance. I would, though, remind you that we had an SMI shift last year, where we actually pre-shipped product in the second quarter for the third quarter go-live of SMI release 3. So we -- just keep that in mind when you're looking at your model and modeling out the quarters. Certainly, from a mix standpoint, the first quarter, from an advertising, marketing and promotions standpoint, will be the highest as a percent of mix relative to the other 3 quarters. But that -- but we'll certainly be prepared to update second quarter when we have our next call.

In term of China, I mean, it is difficult, frankly, to provide reconciliations by quarter of every single country in this way, but we are pretty happy of our trends in China and pretty satisfied for the fiscal year that we are closing, meaning fiscal year '13. We grew 20-plus percent in China, again, at retail, and our same-door grew 5% at retail. So China is doing pretty well. And our strategy there is about reaching new consumers, the new growing middle class, via the ability to penetrate new cities and continuing increase distribution and also reaching the many traveling Chinese consumers that want to travel outside of China, which we often speak about, which has been 40 million in the closing year, but also the ones who travel within China, which we should not forget, at 350 million every year. And before, they were used to all buy in Beijing, but now they find the product in their own e-commerce site or in their own city. And obviously, this -- so they buy less in Beijing and more in their hometown, and we are favoring this process. That's why we should look at China as a whole and over time, and not divide it quarter by quarter, piece by piece, because a lot is depending on this incredible phenomenon of distribution expansion in the cities. Just to give you a data on this one, we have expanded, in 2013 fiscal year, 11 new cities in China. And we plan in fiscal year '14 to expand another 14 new cities in China.

Your next question comes from Bill Schmitz with Deutsche Bank.

Can you talk about the trends on the Asian margin front? Because, obviously, I think this quarter was an anomaly. But can you just sort of explain what happened in the quarter and kind of how you're going to look at the margin profitability in Asia going forward? And then just a housekeeping item, is there any share repurchase included in your guidance for '14?

So certainly, on a reported basis, obviously, we have the impact of exchange on the margin in Asia in the quarter. In addition to that, obviously, we spoke about the fact that the shipments in China were a bit less in the quarter because of the amount of inventory that the trade was still working through. So the retails continue to be strong, but our shipments were less, given the shipments that were made in Q2 to support the rollout of Q3 in China. So the foreign exchange, Korea, obviously, being down significantly, as we've talked about, all impacted the margins in Asia/Pacific. It is a tremendous high-growth region for us, as you know, and it's a profitable region for us. So we certainly expect that to continue into fiscal 2014.

Your next question comes from Caroline Levy with CLSA.

Couple of things. On the big push behind fragrance over the next year-plus, what impact do you expect that to have on your margins? My understanding historically is that there's a lot of A&M that goes with it. But if you restructured in that business, is it possible for that to meet or beat your current average margins? And then the second question is on Europe. Excluding travel retail, you must have seen enormous share gains. And I was wondering what particular product might have driven that and if some of what you're seeing in Europe is Middle East shoppers and things like that. So just a little understanding of what happened in Europe that was so strong.

Yes, sure. Let me first answer the fragrance question. Is -- our fragrance portfolio is better in margin overall, but the different components have different margins levels. So the high end, like Jo Malone or certain brands like Clinique, they have definitely the opportunity to be accretive in terms of margin as they grow. Other brands, more the designer fragrance portfolio, as you know, as an example, are in a position where they're not accretive, but they are in a much better margin position. So the impact, also, of the accelerated of fragrances will be to enable our acceleration of growth because this is an important category, which embrace 30% of the global market, and we need to be able to grow in this. This growth will allow us to leverage our cost base in a better way across the company. So it's not necessarily being accretive as a category, but it definitely is going to be important in certain parts of it and also in terms, as I said, will be also accretive, but is going to be important to accelerated growth and leverage our cost base over time. In terms of what's happening in Europe, we are doing very well, as I said. I gave in my prepared remarks the example of Italy, but we are doing very well in many developed markets, even the ones which are very soft. And so what's happened is that we're winning there. We're winning there with our innovation because we are investing in this difficult moment. And so in this way, we are building market share. This, for us, is a big strategic decision because never, never miss to exploit a crisis is our way of thinking, in a sense, that we -- our market share in Europe is not very high in all of these markets. So that's the moment where we have the opportunity to establish us as bigger player in Western Europe, and then benefit of it for the many years to come when we are starting from a higher market share when those markets will recover, as we believe will happen at a certain moment in time. The other thing which is happening in this area is huge success in emerging markets. The Middle East is doing very, very well. For us, it's 20-plus growth. Turkey is doing very, very well. South Africa is doing very, very well. So -- and the Russia situation has stabilized. So in this situation, we see EMEA, as we call this region, doing pretty well, despite the softness in Southern Europe.

Your next question comes from Neely Tamminga with Piper Jaffray.

Fabrizio, you guys have been so innovative on the product side, and I just want to talk a little bit more on the marketing side as well. Could you give us a sense of how you are thinking about your digital ad spend overall, how that's trended from last year to this year and maybe, ultimately, where you think your total ad spend can go and maybe some of the innovation behind that to drive these excellent e-commerce sales?

So -- you mean the advertising in the digital part. So our digital budget in advertising is increasing significantly. It's tripled in the last year. So we are spending much more in digital, and we will continue to increase our digital spending. Obviously, there are some of our brands, which use digital online communication, digital advertising and all the e-commerce activities as their main communication activity. Example, this is very important area for M-A-C, while there are other brands, which are using more TV or more print. So this is, again, not -- I cannot speak about -- the company average, in other words, doesn't give you a real sense of the reality. It's by brand, our decision making, and our return on investment is calculated by brand. So -- but on average, we are definitely increasing our investment in digital in a very significant way.

Your next question comes from Connie Maneaty with BMO Capital Markets.

Could you talk a little bit about the 2% in sales from pricing? Does this mean you're raising the price with the innovation that's coming on DDML and Advanced Night Repair? And are these actual price increases, or with the introduction of new fragrance, is there also a positive mix shift because the fragrances are more expensive? And then just a follow-on, could you give us an update on Osiao?

Yes. On pricing, the 2% is more or less in line with the cost inflation. So overall, how the 2% is driven is a mix of some regular price increases in certain countries, where the inflation and the reality of the market allow us to do that, and some of the innovation comes through higher prices. And then finally, there are also some price decreases, meaning 2% is the average. But to be very clear, we are decreasing price, including of some of this new innovation in certain markets, particularly in Asia, where it was appropriate to decrease the prices. We are increasing the prices in other markets, where it was the right decision. And then the innovation mix is positive. Some innovation is higher priced, some is lower priced. So price is a pretty sophisticated exercise. The result of it is an average of 2% to cover our cost inflation, and that's, obviously, our minimum objective to go forward. That is not an average number that we use. We use a very specific number by brand and by activity.

Your next question comes from David Wu with Telsey Advisory.

Can you perhaps talk about your R&D spending goals in FY '14 and any new hires or changes that you plan to make in the department and which sort of product attributes you plan to focus the innovation on? And just secondly, can you update us on your new distribution, especially in the specialty beauty retailers, and how the testing of Estée Lauder at Sephora North America is progressing and also your plans to increase distribution there? And also, similarly, with La Mer in Sephora China and France?

Are you answering the first question?

In terms -- can you repeat your first -- the first part of your question?

[Operator Instructions]

It was on the R&D and our R&D spend. So we are slightly increasing, as a percent of mix, our R&D spend this year. And again, our R&D spend is certainly disclosed in our financial statement so that you know what we're investing. And a good portion of that, as Fabrizio said, as we looked at our strategy over next 3 years, new products and innovation have always been a critical element of the company. And we have a tremendous amount of leverage and momentum to increase that now. And it's been a stated focus of the organization for the last few years, and we've achieved good results in that area. So we are seeing a slight increase in the percent of spend of R&D this year versus last year. Certainly, a portion of that, as you mentioned, will be incremental headcount, and we are -- and the R&D team is certainly executing against that. In terms of Estée Lauder in Sephora in North America.

Yes. In terms of our distribution, so the test on Sephora Estée Lauder is continuing and was planned for 18 months, and so we probably make a final decision in the next 6 months. And in terms of our distribution plan overall, we are increasing distribution next year, and we have done it in fiscal year '13 and we'll continue to do next year in a very significant way in some emerging markets, as I said, in secondary cities, in smaller cities around the world. And in the new growth channel, expanding e-commerce, expanding travel retail, expanding specialty-multi, including our partner, Sephora, in many parts of the world, all this is up. And just to give you maybe the sense of our 6% to 8% growth, 2% come from pricing, as we just discussed, and 1.5% to 2% will come from distribution expansion. The rest will be organic growth. And so distribution is increased -- is a very important piece in our model. And I want to take the opportunity because I forgot to answer Osiao before, and so for fairness, I want to say that we continue our test of Osiao. We are encouraged by the results, but we are still in a testing mode on this brand.

Your next question comes from Lauren Lieberman with Barclays.

I just want to follow up on your comment that there was going to be -- Tracey said there's growth coming from some of the small and midsize brands, and I didn't know if that specifically referred to fiscal '14 that, that starts to accelerate, or was it a longer-term comment? Because it's particularly interesting in the context of this enormous launch activity in both Estée and Clinique just even in the first quarter.

So it is a longer-term comment, Lauren. And the kind of growth, as we had shared with you, that those brands had in fiscal 2013, we certainly expect that they will have continued momentum, both based on their innovation programs for fiscal '14 and beyond, as well as the distribution opportunities for those brands. They're obviously not as widely distributed. And Jo Malone in the U.K. is doing tremendously well. Tom Ford has had some terrific success. Aveda has been a call-out for us all year with some of the new products that they've launched, and there's still a tremendous amount of international opportunity for the Aveda brand. So we're very excited about not only our heritage brands and all of the wonderful innovation that we have this year planned for them, and certainly that should make for an exciting year for Estée Lauder, Clinique and M-A-C, but also for that next year. So we have -- we are continuing to diversify our portfolio. Over the next 3 years, we actually expect the mix of those brands to be a higher-percent penetration.

Yes. And I just want to add on this point that this is a deliberate strategy. We have 3 very big and successful brands: Estée Lauder, Clinique and M-A-C. And we need to continue building the rest of the portfolio to critical mass and critical size, and we are very successful. The moment we do that, brands like Bobbi Brown, La Mer, Jo Malone, the moment they reach this critical mass level, they contribute enormously more in absolute terms, obviously, to the growth of the company. And this is happening, and this is making us, again, stronger in terms of ability to grow and ability to penetrate different categories, spanning from skin care to makeup to hair care to fragrances, in the correct way.

Your next question comes from Joe Lachky with Wells Fargo Securities.

I wanted to take advantage of Daniel and ask about Brazil. Historically, it's a direct selling and mass market, but how do you see the market evolving over time? And specifically, do you see door-to-door share of the market deteriorating over time? And then also, can you gain material share with your own stores, or will you require additional department store build-out before it really becomes a material part of the company's business overall?

Yes, you're absolutely right. Door-to-door is the main distribution channel for beauty in Brazil. And if you look at the results of some of the door-to-door players this last year, indeed, we have seen some slowdown in their sales growth. On the other side, the prestige market is growing much, much faster than mass in Brazil, almost 4 points faster, and that's the area where we are focusing on. We see emerging distribution, such as specialty-multi and e-commerce, developing in Brazil. We see the middle class demanding better products, better services, and I believe our brands are perfectly positioned to offer those better products and better brands going forward, as prestige distribution in the country increases. So very clearly, we are in Brazil for the long term. It's one of the key markets. It's one of the largest consumer markets in the world. So I think we're just touching the surface of our opportunities as we launch new brands and develop distribution in the country.

I just would like to add one concept that was in the prepared remark of Daniel that Latin America, for us, is small but provides great opportunity for growth in the future. And our strategy, like in many emerging market, is to grow profitably from day 1. So we are maybe taking less advantage of the speed of addressing the market because we are growing more gradually, but we are growing profitably so that the growth of this market will be accretive to the company average. And we have chosen this strategy for the several reason that Daniel has explained in the prepared remark.

Your next question comes from Wendy Nicholson with Citi Research.

Two things. First, on travel retail. Tracey, I think you said that the 15% was ahead of sell-through. And is that just intentional because of the timing of SMI or -- maybe you can explain that gap? And then second thing, someone asked about share buybacks, and I don't think you answered the question whether the earning -- the EPS guidance for 2014 includes buybacks or not.

So in terms of travel retail, there are different -- slight differences in timing between sell-in and sell-through. They're never quite exactly matched from quarter-to-quarter. So no, it had nothing to do with SMI as it relates to fiscal -- the end of fiscal '13 and fiscal '14, since the next wave is, obviously, beginning in July of 2015, Wendy. But we certainly expect continued strong double-digit growth from travel retail in fiscal '14 and believe that it's an exciting channel for us. In terms of our share repurchase and the guidance that we've given, yes, some of it -- there is a slight amount of share repurchase, primarily to offset dilution in -- from our equity program.

Your next question comes from Joe Altobello with Oppenheimer. Joseph Altobello - Oppenheimer & Co. Inc., Research Division: Just wanted to stay on the inventory question in terms of sell-in versus sell-through. I think in the past, you've talked about sell-in trailing sell-through by about 2 points. That was most acute, I think, in travel retail. That's been, I guess, solved this quarter, and I think also in Europe. So could you give us a sense of what sell-through looks like in Europe at this point versus sell-in?

At this point, our sell-in and sell-through are aligned. Even in travel retail, what you mentioned is the beginning of last fiscal year, when there was destocking, then the stock normalized over the year. Travel retail finished in a balanced way. And the same thing we see in Europe. In this moment, I think, our stock situation is pretty balanced versus what it's been in the past few years.

Your next question comes from Alec Patterson with AGI RCM.

I was just curious about your strategy in Korea. It seems like a market which has got maybe more structural issues in terms of the prestige category. And so how are you thinking about handling that? And to what degree does that impact the travel retail segment of Korea?

Yes, that's a great question. I completely agree. Korea is -- there is a structural thing. The structural thing is that during this recession, or at least this very difficult economic situation that the country went through, consumers started to trade down. And so the -- and some local brands did a good job to attract particularly young consumers. So we are working on a rethinking on the way to manage our brands in the future, go back to advertise them in the correct way, analyze the right distribution opportunities and, particularly, manage innovation in a much more locally relevant way, able to attract all the young, emerging consumer segments and their way of thinking. And so that's why we are guiding Korea as continuing to be soft next year because we absolutely need time to fix this market for the long term. However, we will fix this market. This is a very important market for us and for the long term and will have influence on total Asia over time. So we are working very diligently to adapt to the new reality and continue growth in Korea in the future. Onto the travel retail side, on the contrary, there are good news. Our Korea travel retail, as we explained last time, is 13% of the global travel retail and is growing again, because the travel retail is recovering faster, with the -- also the currency situation is improving there. So on the travel retail side, we are doing better and we are growing again, so it's an area of recovery.

Your last question comes from Javier Escalante with Consumer Edge Research.

I have a still -- a question with regards to -- and it had been alluded several times during the call, which is the difference between shipments and like-for-like sales, if you will. And I still fully don't understand essentially -- if you can help us understand, division-by-division, the following, and I'm going to give you a list because I've been kind of like not fully tracking what the crumbles of information that you had given: What was your shipment to department stores in the U.S., given that retail sales were flat? What was your shipment to Western Europe, given that the industry is flat? And what is your shipment in travel retail, given that it's growing only at 10%? And in the case of Asia, why is it that -- I understand that you mentioned about the destocking in China because you overshipped at the beginning of the year. But you mentioned that your retail sales in Asia were up 20%, and that is an acceleration from what you just -- what you saw in the first 2 quarters that you said that same-store sales were growing 2% to 6%. So I'm confused with regards to what is same-store sales, what is shipments. So if you can clarify this in a more systematic way, as I said, department stores in the U.S., if you please, Western Europe, travel retail and China, that will be very, very helpful.

Well, Javier, I'm not sure we can clarify all of those individual areas. I mean, there are certainly differences in timing. As you know, shipments precede sell-through, and shipments are for comp doors as well as new doors. So to the extent that we, along with our retail partners, project sales to occur, and therefore, we ship them product, if the environment changes suddenly, there is a difference between retail sell-through and our shipments that ends up curing itself when we ship less product in a subsequent quarter. So certainly, there are different dynamics that have occurred over the last year, 1.5 years, if you will, between the different channels and the different environments in North America, in travel retail and in other parts of the world. But it all normalizes out over the course of a year or so. So I think that, as you look at our patterns of shipments year-over-year, other than the major call-outs as it relates to destocking that occurred last year and created some challenges for us earlier in the year, very specific to travel retail, by and large, our shipments year-over-year and the retail sales pattern year-over-year is the same with the exception of when we have promotions and launches, and that will obviously affect some of the year-over-year piece. So again, I would remind you that shipments also include new distribution, not just same-store sales. It may be a bit confusing. And perhaps, we will certainly look at clarifying, when we're talking about retail sales, we're talking about our -- the sell-through, if you will, versus the shipments. And so -- but certainly, we can spend some more time with you later on in the day and walk you through that in more detail. If we can provide greater clarity, we'd be happy to do that.

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 p.m. Eastern Time today through August 29. To hear a recording of the call, please dial (855) 859-2056 and enter passcode 17155041. 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.