Letter from the Executive Chairman

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Letter from the Executive Chairman

Dear Fellow Stockholders,

The Estée Lauder Companies achieved another year of strong performance in fiscal 2017. At the same time, our commitment to the well-being of our employees and the sustainability of the markets in which we work has never been stronger. We continue to build upon our position as The Global House of Prestige Beauty, delivering outstanding products and experiences to our consumers, while growing our global community investments in both scope and impact.

Our performance this year is a testament to our best-in-class global team and to the strength of our diversified portfolio and multiple engines of growth.

William P. Lauder

Our performance this year is a testament to our best-in-class global team and to the strength of our diversified portfolio and multiple engines of growth. Despite a constantly evolving landscape, our ability to embrace and initiate change has empowered us to successfully address industry shifts, reach new consumers, and position ourselves for continued long-term, sustainable growth.

In fiscal 2017, we welcomed two fast-growing makeup brands, Too Faced and BECCA, to The Estée Lauder Companies. Too Faced, a brand known for innovative formulas that create an authentic connection with consumers, has a strong following among Millennials. BECCA, a highly coveted brand, is committed to developing premium products in a range of wearable shades for all skin tones. Both brands are expected to strengthen the Company’s leadership in prestige beauty globally.

We are a Company that has invested in our digital capabilities for many years. Today, the intersection of social media, digital marketing, and e-commerce is integral to our brands’ strategies, and we are creating a digital-first mindset throughout the Company. In the past year, we have strengthened our social media capabilities, gained share in earned media value, and grown our brands’ influencer partnerships. We also re-launched our corporate website, ELCompanies.com, digitally showcasing our rich history and exceptional portfolio of brands.

As an organization made up of great brands and great people, fostering an innovative, collaborative, and creative culture has always been a top priority. We place the highest importance on providing ongoing development opportunities and offering recognition and advancement across our workforce – from our newest hires to our most seasoned executives. As a learning organization, we encourage employees to take smart risks and celebrate the potential of big ideas. We are proud to have created an environment in which leaders are dedicated to building future leaders, and the opportunities for education and shared insights are plentiful.

Again this year, we received numerous honors and awards that recognize our commitment to our employees. For example, we earned a coveted spot on Indeed’s “50 Best Places to Work in the Fortune 500”; were named one of the “Top Companies to Work for in the UAE” by the Great Place to Work Institute UAE; and in China, were presented with the “China Top Employer 2017” certification by the Top Employers Institute. We were also recognized in Mexico as one of “The Places Everyone Wants to Work” for the 10th consecutive year by Expansión Magazine, and in the U.K. & Ireland, The Estée Lauder Companies was ranked as one of the Sunday Times’ “30 Best Big Companies to Work For.”

We continue to follow in our founder’s footsteps to empower women at all levels of the Company. We recently underscored this effort by supporting the Equal Pay Act; a pledge that demonstrates our deep and ongoing commitment to wage parity. Additionally, this year we launched our newest Employee Resource Group, the Women's Leadership Network, which supports, encourages, and engages women across the Company to reach their full potential both personally and professionally. We are an active participant in the 30% Club, an organization committed to achieving a minimum of 30 percent of women on public company boards, sharing the belief that gender balance on boards encourages better leadership. At the start of the current fiscal 2018 year, about 84 percent of our global workforce is female, nearly 50 percent of U.S.-based senior positions are held by women, and women constitute 40 percent of our Board of Directors.

This year, and every year, we strive to be a welcoming and inclusive workplace for all of our diverse talent, encompassing a wide range of identities, points of view, and orientations. In December 2016, The Estée Lauder Companies achieved a perfect 100 percent score on the 2017 Corporate Equality Index, the most distinguished U.S. benchmarking report on corporate policies and practices related to LGBTQ workplace equality, administered by the Human Rights Campaign. In satisfying all the criteria in the 2017 Corporate Equality Index, the Company is recognized among "Best Places to Work for LGBT Equality."

Sustainability and social investment in the communities in which we live and work remain the key focus of our core values, and our employees continue to drive many of our initiatives in these areas. In our increasingly connected world, sustainable growth is a collective experience driven by shared responsibility. We are steadfast in our belief that in order to grow together, we must learn, act, and support our communities together.

The Estée Lauder Companies Charitable Foundation was established in fiscal 2016 with the launch of our multi-year Girls’ Education Initiative. In its second year, fiscal 2017, the Foundation granted funds to support 15 nonprofit organizations and reached more than 30,000 children across five continents via locally-tailored education programs.

The Breast Cancer Campaign, which will celebrate its 25th anniversary in fiscal 2018, has helped fund breast cancer research globally through brand contributions, employee fundraising, outside donations, and the sale of our brands’ Pink Ribbon products. In fiscal 2017 alone, the Campaign raised $7.3 million, $5.6 million of which was donated to the Breast Cancer Research Foundation to support individual research grants and research hours. Our goal is a world without breast cancer, and we are proud to be making great strides.

M·A·C has long been a leader in raising critical funds globally for HIV/AIDS awareness, treatment, and prevention through the M·A·C AIDS Fund, and it raised over $32 million this year through its annual VIVA GLAM Campaign. The original idea behind VIVA GLAM was to celebrate life, and this mission remains strong to this day; this year on World AIDS Day, more than 3,000 M·A·C employees volunteered at HIV/AIDS organizations in 35 countries, a tremendous achievement and show of service from the M·A·C team.

Environmentally, we are committed to reducing our own carbon footprint and doing our part to help ensure the health and beauty of our planet for future generations. We continue to hold ourselves accountable to thoughtfully managing our environmental and social impacts.

We are proud to be part of the fight against climate change. It is our responsibility as a global company, employer, and corporate citizen. We believe that working together toward a low-carbon future will help ensure a healthier and safer world for all, which is why in 2016, we made an important pledge to work towards a net zero carbon goal by the year 2020. In addition, by signing on to the We Are Still In campaign and joining RE100, we are underscoring our commitment and standing with cities, states, and businesses around the world on this important issue.

As we look forward to continuing our momentum and executing our long-term strategy, I extend my heartfelt thanks to my father, Leonard A. Lauder; our President and Chief Executive Officer, Fabrizio Freda; our Board of Directors; our Executive Leadership Team for their vision; to all of our employees for so successfully putting that vision in action; and to you, our stockholders for your continued support.

William P. Lauder

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The Estée Lauder Companies' Letter from the Executive Chairman

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