ESTEE LAUDER COMPANIES INC, S-3, 1997-01-28

ESTEE LAUDER COMPANIES INC
S-3, 1997-01-28
PERFUMES, COSMETICS & OTHER TOILET PREPARATIONS

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As filed with the Securities and Exchange Commission on January 28, 1997

Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

-------------------

FORM S-3
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933

-------------

THE ESTEE LAUDER COMPANIES INC.
(Exact Name of Registrant as Specified in its Charter)

Delaware 2844 11-2408943
(State or Other Jurisdiction of (Primary (I.R.S. Employer
Incorporation or Organization) Standard Identification No.)
Industrial
Classification
Number)

767 Fifth Avenue
New York, New York 10153
(212) 572-4200
(Address, Including Zip Code, and Telephone Number,
including Area Code, of Registrant's Principal Executive Offices)

Saul H. Magram, Esq.
Senior Vice President, General Counsel and Secretary
The Estee Lauder Companies Inc.
767 Fifth Avenue
New York, New York 10153
(212) 572-4200
(Name and Address, Including Zip Code,
and Telephone Number, Including Area Code, of Agent For Service)
Please send copies of communications to:

Jeffrey J. Weinberg, Esq. Jean E. Hanson, Esq.
Akiko Mikumo, Esq. Fried, Frank, Harris,
Weil, Gotshal & Manges LLP Shriver & Jacobson
767 Fifth Avenue One New York Plaza
New York, New York 10153 New York, New York 10004
(212) 310-8000 (212) 859-8000

Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended ("Securities Act"), other than securities offered only
in connection with dividend or interest reinvestment plans, check the
following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. [_] __________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [_] __________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE
===============================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Securities to Amount to be Offering Price Per Aggregate Offering Amount of
be Registered Registered Unit Price Registration Fee
===============================================================================================================================
<S> <C> <C> <C> <C>
Class A Common Stock, par value $.01
per share . . . . . . . . . . . . . . 6,514,750 $49.75 $324,108,812.50 $98,215
===============================================================================================================================
<FN>
(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(c) under the Securities
Act of 1933, as amended, based upon the average of the high and low prices of shares as reported on the NYSE on
January 21, 1997.
</FN>
</TABLE>

The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section 8(a), may determine.
==============================================================================

<PAGE>

EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus: one
to be used in connection with a United States offering, and one to be
used in a concurrent international offering. The two prospectuses
will be identical in all respects except for the front and back cover
pages and the section entitled "Underwriting" and except that the
international prospectus contains an additional section entitled
"Certain United States Tax Consequences to Non-United States Holders".
Pages to be included in the international prospectus and not the U.S.
prospectus are marked "Alternate Pages for International Prospectus".

<PAGE>

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT
BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED JANUARY 28, 1997

5,665,000 SHARES

[LOGO] THE ESTEE LAUDER COMPANIES INC.

CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
__________________

Of the 5,665,000 shares of Class A Common Stock offered,
4,532,000 shares are being offered hereby in the United States and
1,133,000 shares are being offered in a concurrent international
offering outside the United States (the "Offerings"). The initial
public offering price and the aggregate underwriting discount per
share will be identical for both Offerings. See "Underwriting".

All the shares of Class A Common Stock offered are being sold by
the Selling Stockholders named herein. See "Selling Stockholders".
The Company will not receive any of the proceeds from the sale of the
shares being sold by the Selling Stockholders. After consummation of
the Offerings, members of the Lauder family will own shares of Class A
Common Stock and Class B Common Stock having 96.1% of the outstanding
voting power of the Company's Common Stock.

The last reported sale price of the Class A Common Stock, which
is listed under the symbol "EL", on the New York Stock Exchange on
January 27, 1997 was $50 3/8 per share. See "Price Range of Common Stock
and Dividends".
__________________

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
__________________

INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT (1) STOCKHOLDERS (2)
-------------- ------------ ----------------
<S> <C> <C> <C>
Per Share . . . . . . . . . . . $ $ $
Total (3) . . . . . . . . . . . $ $ $
<FN>
______________
(1) The Company and the Selling Stockholders have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $ _________ payable by the Selling Stockholders and the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase up to an additional 849,750
shares at the initial public offering price per share, less the underwriting discount, solely to cover
over-allotments. If such option is exercised in full, the total initial public offering price,
underwriting discount and proceeds to the Company will be $_________, $_________ and $__________,
respectively. See "Underwriting".
</FN>
</TABLE>

__________________

The shares offered hereby are offered severally by the U.S.
Underwriters, as specified herein, subject to receipt and acceptance
by them and subject to their right to reject any order in whole or in
part. It is expected that the certificates for the shares will be
ready for delivery in New York, New York, on or about _______, 1997,
against payment therefor in immediately available funds.

GOLDMAN, SACHS & CO.
DILLON, READ & CO. INC.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
______________
The date of this Prospectus is _______, 1997.

<PAGE>

IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF
THE CLASS A COMMON STOCK AT LEVELS ABOVE THOSE THAT MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.

AVAILABLE INFORMATION

The Estee Lauder Companies Inc. (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities
and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 or at
its regional offices located at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, 13th Floor, New
York, New York 10048. Copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549, at prescribed rates.
The Commission maintains a Web site at http://www.sec.gov that
contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission, including the Company. The Company's Class A Common
Stock, par value $.01 per share (the "Class A Common Stock"), is
listed on the New York Stock Exchange (the "NYSE"), and reports, proxy
statements and other information concerning the Company can be
inspected at the offices of the NYSE, 20 Broad Street, New York, New
York 10005.

This Prospectus constitutes a part of a Registration Statement on
Form S-3 filed by the Company with the Commission under the Securities
Act of 1933, as amended (the "Securities Act"). This Prospectus omits
certain information contained in the Registration Statement in
accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and related
exhibits for further information with respect to the Company and the
securities offered hereby. Statements contained herein concerning the
provisions of any document are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by such
reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents heretofore filed by the Company under the
Exchange Act with the Commission are incorporated herein by reference:

(i) the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1996;
(ii) the Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended September 30, 1996 and December 31, 1996; and
(iii) the description of the Class A Common Stock contained in the
Company's registration statement, dated November 8, 1995, on
Form 8-A.

All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus but prior to the termination of the Offerings, shall be
deemed to be incorporated in this Prospectus by reference and to be a
part hereof from the date of filing such documents. Any statement
contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or

2
<PAGE>

supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to
constitute part of this Prospectus.

The Company will provide without charge to each person, including
any beneficial owner, to whom a Prospectus is delivered, upon written
or oral request to such person, a copy of any or all of the documents
incorporated herein by reference (other than exhibits to such
documents unless such exhibits are specifically incorporated by
reference into the document that this Prospectus incorporates by
reference). Requests should be directed to Investor Relations
Department, The Estee Lauder Companies Inc., 767 Fifth Avenue, New
York, NY 10153, telephone number (212) 572-4184.

__________________________________________

Some of the information presented in or in connection with or
incorporated by reference in the Prospectus constitutes "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Although the Company believes that its
expectations are based on reasonable assumptions within the bounds of
its knowledge of its business and operations, there can be no
assurance that actual results will not differ materially from its
expectations. Factors that could cause actual results to differ from
expectations include: (i) increased competitive activity from
companies with greater resources and broader distribution channels
than the Company; (ii) consolidations and restructurings in the retail
industry causing a decrease in the number of stores that sell the
Company's products or an increase in the ownership concentration
within the retail industry; (iii) social, political and economic risks
to the Company's foreign manufacturing and retail operations,
including changes in foreign investment and trade policies and
regulations of the host countries and of the United States; (iv)
foreign currency fluctuations affecting the relative prices at which
the Company and foreign competitors sell their products in the same
market and the Company's operating and manufacturing costs outside of
the United States; and (v) shipment delays, depletion of inventory and
increased production costs resulting from disruptions of operations at
any of the facilities which, due to recent consolidations in the
Company's manufacturing operations, now manufacture nearly all of the
Company's supply of a particular type of product.

<PAGE>

PROSPECTUS SUMMARY

The following information is qualified in its entirety by the more
detailed information contained elsewhere in this Prospectus or
incorporated herein. Unless otherwise indicated, (i) all information
in this Prospectus assumes that the over-allotment option granted to
the Underwriters is not exercised, (ii) references to the Company
refer to The Estee Lauder Companies Inc., a Delaware corporation, and
its subsidiaries and (iii) references to a fiscal year refer to the
fiscal year of the Company which ends on June 30 of each year. The
Company's Class A Common Stock, par value $.01 per share, and Class B
Common Stock, par value $.01 per share, are sometimes collectively
referred to in this Prospectus as the "Common Stock".

THE COMPANY

The Estee Lauder Companies Inc., founded in 1946 by Estee and
Joseph Lauder, is one of the world's leading manufacturers and
marketers of prestige skin care, makeup and fragrance products. The
Company's products are sold in over 100 countries and territories
under the following well-recognized brand names: Estee Lauder,
Clinique, Aramis, Prescriptives, Origins, M.A.C. and Bobbi Brown
essentials. The Company is also the global licensee for fragrances
and cosmetics for the Tommy Hilfiger brand. The Company's net sales
and net earnings in fiscal 1996 were $3,194.5 million and $160.4
million, respectively, and its net sales have grown at a compound
annual rate of 9.1% from fiscal 1992 to fiscal 1996. The Company's
net sales are geographically diversified with approximately 56% of the
Company's fiscal 1996 net sales in the Americas, 27% in Europe, the
Middle East & Africa and 17% in Asia/Pacific.

The Company has been a pioneer in the cosmetics industry and
believes it is a leader in the industry due to the global recognition
of its brand names, its leadership in product innovation, its strong
market position in key geographic markets and the consistently high
quality of its products. The Company's Estee Lauder and Clinique
brands ranked first and second, respectively, in annual sales from
1986 through 1995 among the cosmetics brands sold at 2,800 department
stores and specialty stores in the United States, as reported by
Mottus & Associates. In 1995, the Company's brands together had a
41.7% market share of women's cosmetics sold at these stores. In
Western Europe, the Estee Lauder brand ranked first among 30 cosmetic
brands in sales per point of sale from 1989 through 1995 and the
Clinique brand ranked second in 1993, 1994 and 1995. In Japan, the
Clinique and the Estee Lauder brands ranked first and third,
respectively, in market share in 1993, 1994 and 1995 at the 179
department stores where the Company's products are sold, and, in 1995,
the Company's brands together represented 33% of the cosmetics sold at
these stores.

The Company sells its products principally through limited
distribution channels to complement the images associated with its
brands. These channels, encompassing over 8,000 points of sale,
consist primarily of upscale department stores, specialty retailers,
upscale perfumeries and pharmacies and, to a lesser extent, free-
standing company stores, stores on cruise ships, in-flight and duty
free shops in airports and cities. The Company believes that its
strategy of pursuing limited distribution strengthens its
relationships with retailers, enables its brands to be among the best
selling product lines at the stores and heightens the aspirational
quality of the Company's brands.

The Estee Lauder Companies Inc. has experienced more than 40
consecutive years of sales growth. The Company's strategy is to
maintain its leadership position and growth by (i) promoting
consistent global brand images, (ii) developing new innovative
products, (iii) expanding its international presence, (iv) increasing
consumer penetration, (v) improving operational efficiencies and
(vi) introducing brands.

The Company has been controlled by the Lauder family since its
founding. As of December 31, 1996, members of the Lauder family, some
of whom are directors, executive officers, and/or employees,
beneficially owned, directly or indirectly, shares of Class A Common
Stock and Class B Common Stock representing 84.1% of the outstanding
shares of Common Stock and 97.0% of the combined voting power of such
stock. Upon consummation of the Offerings, members of the Lauder
family will, in the aggregate, beneficially own 79.3% of

4
<PAGE>

the outstanding shares of Common Stock and 96.1% of the combined
voting power of such stock (78.6% and 96.0%, respectively, if the
Underwriters' over-allotment option is exercised in full).

The principal executive offices of the Company are located at 767
Fifth Avenue, New York, New York 10153. The telephone number at that
location is (212) 572-4200.

THE OFFERINGS
<S> <C>
Class A Common Stock offered hereby . . . . . . . . 5,665,000 shares(1)

Common Stock outstanding after the
Offerings:
Class A Common Stock . . . . . . . . . . . . . . 60,486,913 shares(2)(3)
Class B Common Stock . . . . . . . . . . . . . . 56,839,667 shares(3)
-----------
Total . . . . . . . . . . . . . . . . . 117,326,580 shares
===========

Voting rights . . . . . . . . . . . . . . . . . . The Class A Common Stock and Class B Common Stock vote as single class
on all matters, except as otherwise required by law, with each share of
Class A Common Stock entitling its holder to one vote and each share of
Class B Common Stock entitling its holder to ten votes.

NYSE symbol . . . . . . . . . . . . . . . . . . EL
<FN>
_____________
(1) Includes 4,532,000 shares of Class A Common Stock initially being offered in the United States and 1,133,000 shares of
Class A Common Stock initially being offered outside of the United States. Excludes 849,750 shares of Class A Common
Stock which will be issued by the Company upon exercise of the Underwriters' over-allotment option.

(2) Does not include approximately 4.9 million shares of Class A Common Stock subject to stock options and stock units
granted to employees under the Company's share incentive plan and certain employment agreements.

(3) Shares of Class B Common Stock are convertible at any time into Class A Common Stock on a one-for-one basis and
convert automatically into Class A Common Stock upon a transfer to anyone other than members of the Lauder family.
The Class A Common Stock and Class B Common Stock are identical in all respects, except for voting rights, conversion
rights and transfer restrictions. See "Description of Capital Stock".
</FN>
</TABLE>

<PAGE>

SUMMARY FINANCIAL DATA

Six Months Ended
December 31, Year Ended June 30,
------------------------- ------------------------------------------------------------------
1996 1995 1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------ ------------ ------------
(unaudited)
(in millions, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:(2)
Net sales . . . . . . . . . $ 1,814.3 $ 1,693.9 $3,194.5 $ 2,899.1 $ 2,576.4 $ 2,447.7 $ 2,251.9
Gross profit . . . . . . . . 1,396.9 1,290.2 2,463.5 2,224.3 1,956.1 1,855.2 1,682.9
Operating income . . . . . . 227.2 201.9 310.3 230.9 175.8 149.9 133.6
Earnings before accounting
changes . . . . . . . . . . 122.6 104.9 160.4 121.2 93.0 76.4 71.9
Net earnings . . . . . . . . 122.6 104.9 160.4 121.2 93.0 62.9(1) 71.9
Net earnings attributable to
common stock . . . . . . . 110.9 59.1 102.9 95.9 70.0 44.6 51.4
Net earnings per common
share(2) . . . . . . . . . .93
Weighted average common
shares outstanding(2) . . . 118.7
Pro forma net earnings
per common share(2) . . . . .81 1.17
Pro forma weighted average
common shares outstanding(2) 115.4 116.8

December 31, 1996
-----------------------
(unaudited)
(in millions)
<S> <C>
BALANCE SHEET DATA:
Working capital . . . . . . . $ 549.1
Total assets . . . . . . . . 1,939.3
Total debt . . . . . . . . . 56.1
Redeemable preferred stock . 360.0
Stockholders' equity . . . . 485.8

<FN>
_____________________
(1) Includes a one-time charge of $13.5 million attributable to the cumulative effect of accounting changes. See "Selected
Consolidated Financial Information".

(2) Due to the change in the capital structure effected by the Company's recapitalization in connection with the Company's
initial public offering in fiscal 1996, historical share and per share data for periods presented prior to the six months
ended December 31, 1996 are not presented. Net earnings per common share and weighted average shares outstanding for the
six months ended December 31, 1995 and the year ended June 30, 1996 are reflected on a pro forma basis as if the
recapitalization was effected at the beginning of fiscal 1996.
</FN>
</TABLE>

6
<PAGE>

PRICE RANGE OF COMMON STOCK AND DIVIDENDS

The Class A Common Stock is traded on the NYSE under the symbol
"EL". The following table sets forth for the calendar quarters
indicated the high and low sales prices for the Class A Common Stock,
as reported on the NYSE Composite Tape, and the dividends per share
declared or paid in respect of such quarters. The last reported sale
price of the Class A Common Stock on January 27, 1997 was $50 3/8 per
share. Prior to November 16, 1995, the Class A Common Stock was not
publicly traded.

MARKET PRICE OF
CLASS A COMMON STOCK CASH
--------------------
HIGH LOW DIVIDENDS
------ ----- ---------

1995
November 16 - December 31 . . . . $36 3/4 $26(1) __

1996
First Quarter . . . . . . . . . . 39 3/8 32 1/8 $.085
Second Quarter . . . . . . . . . 44 32 .085
Third Quarter . . . . . . . . . . 47 1/2 34 3/4 .085
Fourth Quarter . . . . . . . . . 53 1/2 42 3/8 .085

1997
First Quarter (through January 24, 1997) 52 1/4 47 5/8 (2)

___________________
(1) Denotes price per share in the initial public offering. The
lowest sales price as reported on the NYSE
Composite Tape was $31 3/4.
(2) The dividend with respect to the quarter ending March
31, 1997 is expected to be declared by the Board of Directors of
the Company in February 1997.

The Company expects to continue the payment of cash dividends in
the future, but there can be no assurance that such payment of cash
dividends will continue.

As of December 16, 1996, there were 2,269 record holders of Class
A Common Stock and 12 record holders of Class B Common Stock.

USE OF PROCEEDS

The Company will not receive any of the proceeds from the sale of
shares of the Class A Common Stock by the Selling Stockholders. See
"Selling Stockholders".

If the Company's over-allotment option granted to the
Underwriters is exercised in full, the Company will receive estimated
net proceeds of approximately $______ million, assuming an offering
price of $________ per share and after deducting the estimated
underwriting discount and the Company's offering expenses. Such net
proceeds to the Company will be used for general corporate purposes.

<PAGE>

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following income statement and balance sheet information has
been derived from the consolidated financial statements of the Company
as of and for each of the years in the five-year period ended June 30,
1996 and as of and for the six-month periods ended December 31, 1996
and 1995. This information should be read in conjunction with the
consolidated financial statements of the Company and the related notes
thereto incorporated herein by reference and "Management's Discussion
and Analysis of Financial Condition and Results of Operations". See
"Incorporation of Certain Documents by Reference". The results for
interim periods are not necessarily indicative of results that may be
expected for the full year.

Six Months Ended
December 31, Year Ended June 30,
--------------------------- ------------------------------------------------------------------
1996 1995 1996 1995 1994 1993 1992
-------------- ------------ ------------ ------------ ------------ ------------ ------------
(unaudited)
(in millions, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA:
Net sales . . . . . . . . . $ 1,814.3 $ 1,693.9 $3,194.5 $ 2,899.1 $ 2,576.4 $2,447.7 $ 2,251.9
Gross profit . . . . . . . 1,396.9 1,290.2 2,463.5 2,224.3 1,956.1 1,855.2 1,682.9
Operating income . . . . . 227.2 201.9 310.3 230.9 175.8 149.9 133.6
Earnings before income taxes,
minority interest and
accounting changes . . . 226.1 203.2 313.0 233.0 173.2 145.1 137.1
Earnings before accounting
changes . . . . . . . . . 122.6 104.9 160.4 121.2 93.0 76.4 71.9
Net earnings (1) . . . . . 122.6 104.9 160.4 121.2 93.0 62.9 71.9
Preferred stock dividends . 11.7 45.8 57.5 25.3 23.0 18.3 20.5
Net earnings attributable to
common stock . . . . . . 110.9 59.1 102.9 95.9 70.0 44.6 51.4
Net earnings per common
share(2) . . . . . . . . .93
Weighted average common
shares outstanding(2) . . 118.7
Pro forma net earnings per
common share (2):
Net earnings . . . . . $ 104.9 $ 160.4
Pro forma preferred stock
dividends . . . . . . 11.7 23.4
Pro forma net earnings
attributable to common
stock . . . . . . . . 93.2 137.0
Pro forma net earnings
per common share . . .81 1.17
Pro forma weighted
average common shares
outstanding . . . . . 115.4 116.8
Cash dividends declared per
common share . . . . . . $ .17 $ .17

<CAPTION>
December 31, June 30,
---------------------------------------------------------
1996 1996 1995 1994 1993 1992
----------- ----------------------------------------------------------
(unaudited)
(in millions)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital . . . . . . $ 549 .1 $ 467 .5 $ 469.6 $ 422.7 $ 368.7 $ 321.4
Total assets . . . . . . . 1,939 .3 1,821 .6 1,721.7 1,453.2 1,304.3 1,220.1
Total debt . . . . . . . . 56.1 127 .5 194.0 170.4 167.2 139.3
Redeemable preferred stock 360 .0 360 .0 360.0
Stockholders' equity . . . 485 .8 394 .2 335.1 577.7 508.0 502.0

____________
<FN>
(1) Net earnings for fiscal 1993 include a one-time charge of $13.5 million attributable to the cumulative effect of adopting
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions", and Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes".
(2) Due to the change in the capital structure effected by the Company's recapitalization in connection with the Company's
initial public offering in fiscal 1996, historical share and per share data for periods presented prior to the six months
ended December 31, 1996 are not presented. Net earnings per common share and weighted average shares outstanding for the
six months ended December 31, 1995 and the year ended June 30, 1996 are reflected on a pro forma basis as if the
recapitalization was effected at the beginning of fiscal 1996.
</FN>
</TABLE>

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

OVERVIEW

The Company manufactures skin care, makeup and fragrance products
which are distributed in over 100 countries and territories. The
Company's net sales and net earnings in fiscal 1996 were $3,194.5
million and $160.4 million, respectively, and its net sales have grown
at a compound annual rate of 9.1% from fiscal 1992 through fiscal
1996. The Company's net sales are geographically diversified with
approximately 56% of the Company's fiscal 1996 net sales in the
Americas, 27% in Europe, the Middle East & Africa and 17% in
Asia/Pacific.

The Company has experienced more than 40 consecutive years of
sales growth. The Company's strategy is to maintain its leadership
position and growth by (i) promoting consistent global brand images,
(ii) developing new innovative products, (iii) expanding its
international presence, (iv) increasing consumer penetration, (v)
improving operational efficiencies and (vi) introducing brands.

RESULTS OF OPERATIONS

The following tables set forth net sales by region and product
category and operating income by region for the six-month periods
ended December 31, 1996 and 1995 and the fiscal years ended June 30,
1996, 1995 and 1994.

SIX MONTHS
ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
-------------------------- -------------------------------------
1996 1995 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
NET SALES
BY REGION:
The Americas:
United States . . . . . . . . . . . . $ 993.8 $ 931.3 $1,683.0 $ 1,492.4 $ 1,377.6
Other Americas . . . . . . . . . . . 70.8 58.8 116.4 87.3 81.7
--------- --------- --------- --------- ---------
Total Americas . . . . . . . . . . 1,064.6 990.1 1,799.4 1,579.7 1,459.3
Europe, the Middle East & Africa . . . 472.7 425.3 855.9 786.0 673.7
Asia/Pacific . . . . . . . . . . . . . 277.0 278.5 539.2 533.4 443.4
--------- --------- --------- --------- ---------
$ 1,814.3 $ 1,693.9 $3,194.5 $ 2,899.1 $ 2,576.4
========= ========= ========= ========= =========
BY PRODUCT CATEGORY:
Skin Care . . . . . . . . . . . . . . . $ 650.2 $ 634.5 $1,287.3 $ 1,215.9 $ 1,091.6
Makeup . . . . . . . . . . . . . . . . . 637.0 563.0 1,131.6 1,003.3 866.6
Fragrance . . . . . . . . . . . . . . . 527.1 496.4 775.6 679.9 618.2
--------- --------- --------- --------- ---------
$ 1,814.3 $ 1,693.9 $3,194.5 $ 2,899.1 $ 2,576.4
========= ========= ========= ========= =========
OPERATING INCOME
The Americas:
United States . . . . . . . . . . . . $ 120.5 $ 112.0 $ 114.4 $ 93.8 $ 58.1
Other Americas . . . . . . . . . . . 22.5 10.6 18.6 1.5 6.1
--------- --------- --------- --------- ---------
Total Americas . . . . . . . . . . 143.0 122.6 133.0 95.3 64.2
Europe, the Middle East & Africa . . . . 59.3 40.1 115.5 72.2 63.2
Asia/Pacific . . . . . . . . . . . . . . 24.9 39.2 61.8 63.4 48.4
--------- --------- --------- --------- ---------
$ 227.2 $ 201.9 $ 310.3 $ 230.9 $ 175.8
========= ========= ========= ========= =========

</TABLE>

<PAGE>

The following table sets forth certain consolidated statement of
earnings data as a percentage of net sales:

Six Months
Ended
December 31, Year Ended June 30,
------------------------- ------------------------------------
1996 1995 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales . . . . . . . . . . . . . . 23.0 23.8 22.9 23.3 24.1
-------- ------- -------- ------- -------
Gross profit . . . . . . . . . . . . . . . 77.0 76.2 77.1 76.7 75.9
Selling, general and administrative
expenses:
Selling, general and administrative . . 63.5 63.0 66.2 67.5 67.8
Related party royalties . . . . . . . . 1.0 1.3 1.2 1.3 1.3
-------- ------- -------- ------- -------
64.5 64.3 67.4 68.8 69.1
-------- ------- -------- ------- -------
Operating income . . . . . . . . . . . . . 12.5 11.9 9.7 7.9 6.8
Interest income (expense), net . . . . . . 0.1 0.1 0.1 (0.1)
-------- ------- -------- ------- -------
Earnings before income taxes and
minority interest . . . . . . . . . . . 12.5 12.0 9.8 8.0 6.7
Provision for income taxes . . . . . . . . 5.2 5.4 4.3 3.7 3.1
Minority interest . . . . . . . . . . . . (0.5) (0.4) (0.5) (0.1)
-------- ------- -------- ------- -------
Net earnings . . . . . . . . . . . . . . . 6.8% 6.2% 5.0% 4.2% 3.6%
======== ======= ======== ======= =======

</TABLE>

SIX MONTHS ENDED DECEMBER 31, 1996 COMPARED WITH SIX MONTHS
ENDED DECEMBER 31, 1995

Net sales increased 7% to $1,814.3 million for the six-month
period ended December 31, 1996 from $1,693.9 million in the same
prior-year period, on the strength of new product launches, the global
rollout of recent fragrance introductions, the reformulation and
relaunch of Fruition Extra and the continued solid performance of
existing key products. The continuing strength of the U.S. dollar
negatively impacted net sales for the six-month period ended December
31, 1996 by approximately $39.0 million. This movement of the U.S.
dollar negatively affected the operating results of each of the
Company's regions and product categories. Excluding the impact of
foreign currency translation, net sales would have increased 9% during
the six months ended December 31, 1996. Net sales for such period
included six months of sales of Bobbi Brown essentials, in which a
100% interest was acquired in late October 1995.

Net sales of skin care products increased 2% to $650.2 million
for the six months ended December 31, 1996 from $634.5 million in the
corresponding prior-year period. This increase was due in part to the
worldwide reformulation and relaunch of Fruition Extra, the
introduction of LipZone, Moisture On-Line and All About Lips, and the
continued growth of existing products such as Moisture On-Call,
Dramatically Different Moisturizing Lotion and Day Wear Super Anti-
Oxidant Complex. In addition, the six month period ended December 31,
1996 benefited from the domestic debut of Nutritious Bio-Moisture
Complex. Net sales of makeup products increased 13% to $637.0 million
for the six months ended December 31, 1996 from $563.0 million in the
same prior-year period. Higher makeup product sales were due to the
recent launches of City Base Compact Foundation, Long Last Soft Shine
Lipstick, Virtual Skin, Futurist Age-Resisting Makeup, Lip Shaper and
Ultra Mascara and increased sales of M.A.C. and Bobbi Brown products.
The current-year period also benefited from the international rollout
of True Lipstick and increased contributions from existing products
such as Soft Finish Makeup and Enlighten Skin-Enhancing Makeup. Net
sales of fragrance products for the six months ended December 31, 1996
rose 6% to $527.1 million from $496.4 million in the comparable prior-
year period. Outstanding sales results from the introduction of Estee
Lauder pleasures in the Asian markets and the initial holiday sales in
Europe, combined with increased worldwide sales of "tommy", the
successful fall 1996 domestic debut of "tommy girl", the launch of
Kiton in selected European markets and the international launch of
Havana Pour Elle were the primary factors contributing to the higher
sales in the fragrance product category. The highly successful
domestic launch of Estee Lauder pleasures in the six months ended
December 31, 1995 reduced the

<PAGE>

period over period favorable comparisons. The introduction of new
products may have some cannibalization effect on sales of existing
products, which is taken into account by the Company in its business
planning. The Company's periodic net sales are subject to seasonal
fluctuations, particularly in the fragrance category.

Sales in the Americas increased 8% to $1,064.6 million for the
six months ended December 31, 1996 from $990.1 million in the
corresponding prior-year period. This increase is driven by sales of
new products across all categories and sales growth of existing
products particularly in the United States coupled with higher sales
from the Company's Canadian operations. In Europe, the Middle East &
Africa, net sales increased 11% to $472.7 million for the six-month
period ended December 31, 1996 from $425.3 million in the same prior-
year period, primarily because of strong sales performances in the
United Kingdom, Italy, France, Benelux, distributor and travel retail
businesses and the inclusion of sales from the Company's recent joint
venture, which was formed for the purpose of developing and
distributing fragrances within Europe. Lower sales in Germany in the
six months ended December 31, 1996 resulting from a continuing
difficult retail environment partially offset these increases. Net
sales in Asia/Pacific for the six months ended December 31, 1996 were
$277.0 million, a 1% decrease from $278.5 million in the prior-year
period. All markets reported sales increases except Japan, with
strong sales growth in Taiwan, Korea, Australia and Hong Kong being
more than offset by lower Japan sales principally due to the impact of
the strength of the U.S. dollar versus the yen. In Japan, while units
sold increased, sales on a local currency basis declined slightly due
to selective price reductions on certain products, competitive pricing
on new product introductions and difficult market conditions.
Excluding the impact of currency translation, Asia/Pacific sales would
have grown 6% over the prior-year six-month period. The Company
strategically staggers its new product launches by geographic markets,
which may account for differences in regional sales growth.

Cost of sales for the six months ended December 31, 1996 was
23.0% of net sales compared with 23.8% of net sales in the prior-year
period. The improvement principally reflects the efficiencies
achieved as a result of the Company's continuing efforts to globalize
its sourcing and manufacturing activities, as well as shifts in
product mix.

Total selling, general and administrative expenses increased to
64.5% of net sales in the six months ended December 31, 1996, compared
with 64.3% of net sales in the same prior-year period. Higher
operating expenses primarily reflect increases in, and timing of, the
Company's advertising and promotional spending due to significant
fragrance launches and rollouts and incremental advertising in
selective markets. The increase was partially offset by lower related
party royalty expenses resulting from the purchase in the prior year
of a stockholder's rights to receive certain U.S. royalty payments.

Operating income rose 13% to $227.2 million in the six months
ended December 31, 1996 from $201.9 million in the same prior-year
period, which resulted in an operating margin of 12.5% in the six-
month period ended December 31, 1996 as compared to 11.9% in the six-
month period ended December 31, 1995. The increase in operating
income and margin was due to higher net sales coupled with cost of
sales efficiencies, partially offset by higher advertising and
promotional spending. Operating income in the Americas increased 17%
to $143.0 million for the six months ended December 31, 1996 from
$122.6 million in the same prior-year period, primarily due to the net
sales increase in the United States, the inclusion of a full six
months of operating results from Bobbi Brown and improved operating
results in Canada and Latin America. In Europe, the Middle East &
Africa, operating income increased 48% to $59.3 million for the six
months ended December 31, 1996 from $40.1 million in the corresponding
prior-year period, primarily because of improved operating results in
Germany, the United Kingdom, France, Benelux and the distributor and
travel retail businesses. In Asia/Pacific, operating income decreased
36% to $24.9 million for the six months ended December 31, 1996 from
$39.2 million in the same prior-year period due to an unfavorable
foreign exchange impact, an increase in promotional support for new
product launches and new Origins doors and a difficult retail
environment in Japan, which were minimally offset

11
<PAGE>

by improved operating results in Australia, Malaysia and Thailand.
The Company's quarterly operating results are subject to seasonal net
sales fluctuations in addition to the level, scope and timing of
expenditures related to product introductions.

Net interest expense was $1.1 million in the six-month period
ended December 31, 1996 compared with net interest income of $1.3
million in the corresponding prior-year period, primarily because the
six-month period ended December 31, 1995 included net interest income
from stockholders.

The provision for income taxes represents federal, foreign, state
and local income taxes. The effective rate for income taxes in the
six months ended December 31, 1996 was 42.0% compared with 45.0% for
the six months ended December 31, 1995. The decrease in the effective
tax rate is due to a relative change in the mix of earnings from
higher tax countries such as Japan to lower tax countries and the
reduced relative negative impact of a stockholder's rights to receive
certain U.S. royalty payments by reason of the Company's purchase of
the rights in November 1995.

FISCAL 1996 COMPARED WITH FISCAL 1995

Net sales in fiscal 1996 increased 10% to $3,194.5 million from
$2,899.1 million for fiscal 1995, reflecting the strength of sales of
new products in all product categories and continued strong growth in
sales of existing products at existing points of sale. The strength
of the U.S. dollar negatively impacted fiscal 1996 net sales by
approximately $35.0 million. Net sales for the fiscal 1996 included
twelve months of sales of M.A.C., in which a majority equity interest
was acquired in December 1994, compared with six months of sales in
fiscal 1995. Additionally, net sales for fiscal 1996 included eight
months of sales of Bobbi Brown, which was acquired in late October
1995.

Net sales of skin care products increased 6% in fiscal 1996 to
$1,287.3 million from $1,215.9 million in fiscal 1995. This increase
was due in part to the launch in fiscal 1996 of Moisture On-Call and
DayWear Super Anti-Oxidant Complex and the continued success of
existing products such as Daily Eye Saver, ThighZone Body Streamlining
Complex, Advanced Night Repair Protective Recovery Complex and
Dramatically Different Moisturizing Lotion, which were partially
offset by lower sales of Turnaround Cream. Net sales of makeup
products rose 13% to $1,131.6 million in fiscal 1996 compared with
$1,003.3 million in fiscal 1995. This increase primarily reflects the
inclusion of the M.A.C. and Bobbi Brown product lines, which are
predominantly makeup products, the launch of True Lipstick, and higher
sales of existing products such as Enlighten Skin-Enhancing Makeup and
Soft Finish Makeup. Net sales of fragrance products were up 14% to
$775.6 million in fiscal 1996 from $679.9 million in fiscal 1995,
driven by the outstanding debut in fiscal 1996 of Estee Lauder
pleasures along with the continued success of "tommy". In addition,
the Company's classic fragrances, such as Beautiful and White Linen,
continued to generate impressive sales in this category. The
introduction of new products may have some cannibalization effect on
sales of existing products, which is taken into account by the Company
in its business planning.

Sales in all geographic regions increased in fiscal 1996, with
strong increases in the Americas and Europe, the Middle East & Africa.
Net sales in the Americas rose 14% to $1,799.4 million in fiscal 1996
from $1,579.7 million in fiscal 1995. This increase reflects sales of
new products in all categories (including those from M.A.C. and Bobbi
Brown) and strong sales growth of existing products at existing points
of sale in the United States. In Europe, the Middle East & Africa,
fiscal 1996 net sales increased 9% to $855.9 million compared with
$786.0 million in the prior fiscal year, primarily because of strong
sales performances in South Africa, Spain, Italy, and the travel
retail business, partially offset by lower net sales in Germany. Net
sales in Asia/Pacific increased 1% to $539.2 million from $533.4
million for fiscal 1996, compared with the prior fiscal year; all
markets reported sales increases except Japan, with strong sales
growth in Taiwan, Korea and Hong

<PAGE>

Kong. Japan's sales were impacted by the strength of the U.S. dollar
versus the yen, however, Japan recorded increased sales in fiscal 1996
on a local currency basis. Excluding the impact of translation,
Asia/Pacific sales in fiscal 1996 would have grown 7% over the prior
fiscal year. The Company strategically staggers its new product
launches by geographic markets, which may account for differences in
regional sales growth.

Cost of sales in fiscal 1996 was 22.9% of net sales compared with
23.3% of net sales in fiscal 1995. The improvement principally
reflects the continued efficiencies resulting from the Company's
efforts to globalize its sourcing and manufacturing activities, as
well as shifts in product mix.

Selling, general and administrative expenses decreased to 67.4%
of net sales in fiscal 1996 compared with 68.8% of net sales in fiscal
1995. This decrease reflects expenses (including selling, shipping
and advertising/promotions) growing at a slower rate than net sales,
achieved by the Company's continued success in creating efficiencies
in its selling and marketing functions.

Operating income rose 34% to $310.3 million in fiscal 1996 from
$230.9 million in the prior fiscal year, which resulted in an
operating margin of 9.7% as compared to 7.9% in fiscal 1995. The
increase in operating income and margin was due to higher net sales
coupled with cost of sales efficiencies and successful efforts to keep
selling, general and administrative expenses at a slower growth rate
than net sales. Operating income in the Americas increased by 40% to
$133.0 million in fiscal 1996 from $95.3 million in fiscal 1995 due
primarily to the net sales increase in the United States, the
inclusion of twelve months of operating results from M.A.C. in fiscal
1996 compared with six months in the prior fiscal year and the
inclusion of operating results from Bobbi Brown since it was acquired
in October 1995. In Europe, the Middle East & Africa, operating
income increased by 60% to $115.5 million in fiscal 1996 compared with
$72.2 millon in fiscal 1995, primarily because of improved operating
results in Italy, the Nordic region, Austria and the travel retail
business. However, operating results in France decreased in fiscal
1996 resulting from general strikes and an unsettled business
environment and in Germany due to a sluggish economic environment. In
Asia/Pacific, operating income decreased 3% to $61.8 million from
$63.4 million for fiscal 1996 compared with fiscal 1995 due to
unfavorable foreign currency translation and expenditures associated
with the launch of Origins in Japan, partially offset by strong
results in Taiwan, Korea and Hong Kong. In local currency, operating
income in Asia/Pacific increased 4%.

Interest income, net was $2.7 million in fiscal 1996 compared
with $2.1 million in fiscal 1995. Increased interest income resulting
principally from higher average domestic and overseas net cash
positions was partially offset by lower net interest income from
stockholders.

The provision for income taxes represents federal, foreign, state
and local income taxes. The effective rate for income taxes in fiscal
1996 was 44.2% compared with 46.4% in fiscal 1995. These rates
reflect the effect of state and local taxes, higher tax rates in
certain foreign jurisdictions and certain nondeductible expenses. The
decrease in the effective income tax rate was principally attributable
to an increase in profits in lower taxed countries, the lessened
impact of a relatively higher Japanese rate and the reduced relative
negative impact of a stockholder's rights to receive certain U.S.
royalty payments by reason of the Company's purchase of the rights in
November 1995.

FISCAL 1995 COMPARED WITH FISCAL 1994

Net sales in fiscal 1995 increased by $322.7 million, or 13%, to
$2,899.1 million over fiscal 1994, reflecting the strength of sales of
new products in all product categories, introduction of additional
brands at points of sale in existing markets, expansion into new
international markets and continued strong growth in sales of existing
products at existing points of sale. Fiscal 1995 net sales were
positively impacted by the weakening of the U.S. dollar, which
contributed approximately 30% of the net sales increase. In addition,
fiscal 1995 net sales

<PAGE>

reflect six months of contributions, totaling $32.0 million, from
M.A.C., in which the Company acquired a majority equity interest in
December 1994.

Net sales of skin care products in fiscal 1995 increased 11% to
$1,215.9 million due in part to the launch of ThighZone Body
Streamlining Complex and Turnaround Cream for Dry Skin and increased
marketing support of existing products such as Fruition Triple
Reactivating Complex and Advanced Night Repair Protective Recovery
Complex. Net sales of makeup products increased 16% to $1,003.3
million primarily because of the launch of several new makeup products
including Double Color Everlasting Lipstick, Double Matte Moisturizing
Lipcolor, Enlighten Skin-Enhancing Makeup, Soft-Pressed Powder Blusher
and the inclusion of the M.A.C. product line. Net sales of fragrance
products increased 10% to $679.9 million primarily attributable to the
launch of "tommy", Havana, Chemistry and Spring Fever and the
repositioning of Tuscany per Donna. The introduction of new products
may have some cannibalization effect on sales of existing products,
which is taken into account by the Company in its business planning.

All geographic regions posted strong sales increases, with net
sales in the Americas increasing 8% to $1,579.7 million due to new
products launched in all categories and strong sales growth of
existing products at existing points of sale in the United States.
Net sales in the Americas were slightly offset by the currency
devaluations in Mexico and Venezuela. In Europe, the Middle East &
Africa, net sales increased 17% to $786.0 million; net sales in each
market in the region increased with particularly strong performances
in France, Italy, Spain and the United Kingdom and the travel retail
business. Net sales in Asia/Pacific increased by 20% to $533.4
million; net sales increased in each market in the region, except
Singapore, with particularly strong growth in Japan, Taiwan, Korea and
Thailand. In Europe, the Middle East & Africa and Asia/Pacific,
approximately one half of the net sales increase was attributable to
the weakening of the U.S. dollar. The Company strategically staggers
its new product launches by geographic markets, which may account for
differences in regional sales growth.

Cost of sales in fiscal 1995 decreased to 23.3% of net sales
compared with 24.1% of net sales in fiscal 1994. The improvement
reflects continued efficiencies resulting from the Company's efforts
to globalize its sourcing and manufacturing activities, reduced
packaging costs, introduction of new products with more favorable
manufacturing cost and the increased use of sell-through data, which
allows the Company to increase manufacturing productivity. Cost of
sales was unfavorably impacted by the weakening of the U.S. dollar.

Selling, general and administrative expenses decreased to 68.8%
of net sales in fiscal 1995 compared with 69.1% of net sales in fiscal
1994. This decrease is primarily due to increased efficiencies in the
Company's sales and administrative operations, offset by increased
advertising and promotional spending and the weakening of the U.S.
dollar. The efficiencies were achieved through the introduction of
programs for sales and administrative staff which increased
productivity, and through increased utilization of technology to
reduce administrative overhead.

Operating income rose 31% in fiscal 1995 to $230.9 million, which
resulted in an operating margin of 7.9% as compared to 6.8% in fiscal
1994. The increase in operating income and margin was due to higher
net sales coupled with cost of sales efficiencies and successful
efforts to keep expense growth at a slower rate than net sales.
Operating income increased in each of the three principal regions.
Operating income in the Americas increased by 48% to $95.3 million due
primarily to the net sales increase in the United States and the
inclusion of six months operating results from M.A.C., partially
offset by the impact of the currency devaluations in Mexico and
Venezuela and lower results in Canada. In Europe, the Middle East &
Africa, operating income increased by 14% to $72.2 million resulting
from increased net sales in France, Spain, the United Kingdom and the
travel retail business, which was partially offset by development
expenses in the Czech Republic. In Asia/Pacific, operating

<PAGE>

income increased by 31% to $63.4 million based in part on the strong
net sales performance in Japan, Taiwan, Korea and Thailand, partially
offset by lower results in Singapore and Australia.

Interest income, net was $2.1 million in fiscal 1995 compared
with interest expense, net of $2.6 million in fiscal 1994, as a result
of increased net interest income due from stockholders and increased
interest income earned on higher overseas cash balances which were
partially offset by increased interest expense on higher domestic
borrowings.

The provision for income taxes in fiscal 1995 and 1994
represented federal, foreign, state and local income taxes. The
effective rate for income taxes in fiscal 1995 was 46.4% compared with
46.3% in fiscal 1994. These rates partially reflect higher tax rates
in certain foreign jurisdictions and certain nondeductible expenses.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal sources of funds have historically been,
and are expected to continue to be, cash flow from operations and
borrowings under uncommitted and committed credit lines provided by
banks in the United States and abroad. At December 31, 1996, the
Company had cash and cash equivalents of $288.5 million compared with
$254.8 million at June 30, 1996.

Uncommitted lines of credit amounted to $312.1 million at
December 31, 1996, of which $12.4 million were used. Unused committed
lines of credit available to the Company at December 31, 1996 amounted
to $400 million. Total debt as a percentage of total capitalization
(including short-term debt) was 6% at December 31, 1996 and 14% at
June 30, 1996. This decrease is due to a lower level of notes payable
resulting from reduced seasonal working capital borrowing
requirements, the repayment of long-term debt and the Company's
profitability during the six months ended December 31, 1996.

Net cash provided by operating activities decreased to $154.5
million in the six months ended December 31, 1996 from $171.5 million
in the corresponding prior-year period. This decrease is due to
higher working capital levels during the six-month period ended
December 31, 1996 as compared to the same prior-year period,
principally attributable to a higher level of activity occurring in
the latter part of the current six-month period in certain working
capital components, such as accounts receivable, inventories and
promotional merchandise and accounts payable. Net cash used for
investing activities of $30.7 million and $22.4 million in the six
months ended December 31, 1996 and 1995, respectively, principally
reflects capital expenditures, which primarily include the continued
upgrade of manufacturing and computer equipment, dies and molds, store
and counter construction and renovations. In addition, investment
activities in the six months ended December 31, 1995, reflect cash
generated from a decrease in marketable securities. Financing
activities reflect dividends paid and repayment of debt and, in 1995,
cash proceeds received from the issuance of Common Stock in the
Company's initial public offering.

The Company owns a majority equity interest in M.A.C. and through
contractual agreement, the Company has the right to acquire the
remaining interest in M.A.C. at certain times between 1997 and 1999.
The Company anticipates that it will exercise its right to acquire an
additional interest in M.A.C. during the second half of fiscal 1997.

The Company has developed plans to construct a state-of-the-art
warehouse and distribution center in Lachen, Switzerland, which is
being designed to accommodate the Company's projected future growth.
The Company plans on beginning construction in fiscal 1997 and
anticipates completion in approximately one to two years. The cost of
the new facility is estimated at approximately $22.0 million at
current exchange rates.

<PAGE>

Dividend payments were $21.7 million in the six months ended
December 31, 1996, a decrease from $75.6 million in the same prior-
year period. The decrease reflects the absence of dividends paid on
the Company's Participating Class I Preferred Stock and the special
dividends discussed below. The Participating Class I Preferred Stock
ceased to be outstanding after the Company completed a
recapitalization in connection with its initial public offering in
November 1995. Immediately prior to the recapitalization, Estee
Lauder AG Lachen, a subsidiary of the Company, declared a special cash
dividend in the aggregate amount of $20.0 million payable to the then
holders of its SFr 1,000 par value shares. The Company also declared
a special dividend, payable to the then holders of its common stock,
consisting of interests in corporations and partnerships holding
certain assets of the Company, which were unrelated to the Company's
core business, and $29.6 million in cash. The aggregate fair value of
the assets in such corporations and partnerships was $19.6 million.
The dividend payments for the six months ended December 31, 1996
reflect dividends of approximately $10.0 million on the Company's
Common Stock, which dividends on such stock in the prior year were not
declared and paid until the prior year fiscal third quarter. In
November 1996, the Company declared a quarterly dividend on its Common
Stock totaling approximately $10.0 million which was paid in January
1997.

The Company enters into forward foreign exchange contracts and
purchases foreign currency options to hedge foreign currency
transactions for periods consistent with its identified exposures.
The purpose of the hedging activities is to minimize the effect of
foreign exchange rate movements on the Company's costs and on the cash
flows which it receives from its foreign subsidiaries. Almost all
foreign currency contracts are denominated in currencies of major
industrial countries and are with large financial institutions rated
as strong investment grade by a major rating agency. The contracts
have varying maturities with none exceeding 24 months. As hedges,
gains and losses on forward contracts are reflected in operating
income along with the corresponding underlying transactions. Premiums
on foreign currency options are amortized over the period being
hedged. Costs associated with entering into such contracts have not
been material to the Company's financial results. As a matter of
policy, the Company does not engage in currency speculation. At
December 31, 1996, the Company had contracts to exchange foreign
currencies in the form of purchased currency options and forward
exchange contracts in the amount of $61.5 million and $147.0 million,
respectively. Foreign currencies exchanged under these contracts are
principally the Belgian franc, U.K. pound, and Swiss franc.

The Company believes that cash on hand, internally generated cash
flow and available credit lines will be adequate to support currently
planned business operations and capital expenditures both on a near-
term and long-term basis.

EFFECTS OF ACCOUNTING FOR STOCK-BASED COMPENSATION

In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock-Based Compensation". The statement encourages,
but does not require, companies to account for stock compensation
awards based on their fair value at the date the awards are granted.
The resulting compensation award would be shown as an expense on the
statement of earnings. Alternatively, the statement allows companies
not to apply the new accounting method and continue to apply existing
accounting standards, which generally result in no compensation cost
for most fixed stock-option plans. Companies that do not elect the
new method of accounting under SFAS No. 123 will be required to
provide pro forma disclosures as if the fair value method had been
applied. The Company will adopt the provisions of SFAS No. 123 in the
current fiscal year by providing the required year end pro forma
disclosures.

16
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BUSINESS

The Company has been a pioneer in the cosmetics industry and
believes it is a leader in the industry due to the global recognition
of its brand names, its leadership in product innovation, its strong
market position in key geographic markets and the consistently high
quality of its products. The Company's Estee Lauder and Clinique
brands ranked first and second, respectively, in annual sales from
1986 through 1995 among the cosmetics brands sold at 2,800 department
stores and specialty stores in the United States, as reported by
Mottus & Associates. In 1995, the Company's brands together had a
41.7% market share of women's cosmetics sold at these stores. In
Western Europe, the Estee Lauder brand ranked first among 30 cosmetic
brands in sales per point of sale from 1989 through 1995 and the
Clinique brand ranked second in 1993, 1994 and 1995. In Japan, the
Clinique and Estee Lauder brands ranked first and third, respectively,
in market share in 1993, 1994 and 1995 at the 179 department stores
where the Company's products are sold, and, in 1995, the Company's
brands together represented 33% of the cosmetics sold at these stores.

PRODUCTS

Estee Lauder, Clinique, Aramis, Prescriptives, Origins, Tommy
Hilfiger, M.A.C. and Bobbi Brown essentials are premier brand names
that are widely recognized by retailers and consumers.

ESTEE LAUDER - Estee Lauder brand products, which have been sold
since 1946, are positioned as luxurious, classic and aspirational.
The Company believes that Estee Lauder brand products are technologi-
cally advanced and innovative and have a worldwide reputation for
excellence. The broad product line principally consists of skin care,
makeup and fragrance products which are presented in high quality
packaging.

CLINIQUE - First introduced by the Company in 1968, Clinique's
skin care and makeup products are all allergy tested and 100%
fragrance free and have been designed to address individual skin types
and needs. The

17
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products are based on the research and related expertise of leading
dermatologists. Clinique's skin care products are marketed as part of
the Three-Step System: Cleanse, Exfoliate, Moisturize.

ARAMIS - The Company pioneered the marketing of prestige men's
grooming and skin care products and fragrances with the introduction
of Aramis products in 1964. Aramis continues to offer one of the
broadest lines of prestige men's products and has extended the line to
include fragrances for women, such as Tuscany per Donna and Havana
Pour Elle.

PRESCRIPTIVES - The Company developed and introduced
Prescriptives in 1979. Prescriptives is positioned as a color
authority with an advanced collection of highly individualized
products primarily addressing the makeup and skin care needs of
contemporary women with active lifestyles. The products are
characterized by simple concepts, minimalist design and an innovative
image, and through a system of color application and extensive range
of makeup shades, accommodate a diverse group of consumers.

ORIGINS - Origins, the Company's most recent internally-developed
brand, was introduced in 1990. It is positioned as a natural
cosmetics line of skin care, makeup and sensory therapy products that
combines time-tested botanical ingredients with modern science to
promote total well-being. In addition to traditional retail counters,
Origins sells its products in 22 Origins stores and has opened 104
stores-within-stores, which are designed to replicate the Origins
store environment within a department store.

TOMMY HILFIGER - The Company has an exclusive global license
arrangement to develop and market a line of men's and women's
fragrances and cosmetics under the Tommy Hilfiger brand. In 1995, the
Company launched a men's fragrance "tommy", with cologne and
aftershave products, and launched a women's fragrance, "tommy girl",
in the fall of 1996.

M.A.C. - The Company acquired a majority equity interest in
M.A.C. and was appointed the exclusive distributor of M.A.C. products
outside the United States and Canada in December 1994. M.A.C.
products comprise a broad line of color-oriented, professional
cosmetics and professional makeup tools targeting make-up artists and
fashion-conscious consumers. The products are sold through a limited
number of department and specialty retail stores and through 26 free-
standing M.A.C. stores. The Company began to sell M.A.C. products in
Hong Kong in fiscal 1996 and in France in fiscal 1997 and is planning
to expand distribution to other countries, including Germany, Italy
and Singapore. The surviving founders of M.A.C. continue to manage
the marketing, product development, manufacturing and U.S. and
Canadian distribution of M.A.C. products and they also continue to
control the interests in M.A.C. not owned by the Company.

BOBBI BROWN ESSENTIALS - In October 1995, the Company acquired
the Bobbi Brown essentials line of color cosmetics, professional
makeup brushes and skin care products. Bobbi Brown products are sold
through a limited number of department and specialty stores. The
founders of Bobbi Brown essentials continue to manage Bobbi Brown's
domestic business.

In addition to the foregoing brands, the Company also
manufactures and sells Creme de la Mer, a skin care product acquired
by the Company and marketed separately from its other brands, and
through a joint venture formed for the purpose of developing and
distributing fragrances, the Company launched in September 1996 a
men's fragrance, Kiton, in selected European markets.

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DISTRIBUTION

The Company's products are sold at more than 8,000 points of sale
in over 100 countries and territories. In each geographic market, the
products are sold through limited distribution channels that
complement the quality image of the Company's products. These
channels consist primarily of upscale department stores, specialty
retailers, upscale perfumeries and pharmacies and, to a lesser extent,
free-standing company stores, stores on cruise ships, in-flight and
duty-free shops in airports and cities.

The Company maintains a dedicated sales force (consisting of
approximately 4,000 employees as of June 30, 1996) who sell to the
Company's retail accounts in North America and in the Company's major
overseas markets, such as Western Europe and Japan. The Company has
wholly-owned operations in over 30 countries and territories through
which it markets, sells and distributes its products throughout the
world. In certain markets, the Company sells its products through
selected local distributors under contractual arrangements designed to
protect the image and position of the Company's brands. In addition,
the Company sells certain products in selected domestic and
international military locations.

CUSTOMERS

The Company's strategy has been to build strong strategic
relationships with selected retailers globally. The Company's senior
management works with executives of its major retail accounts on a
regular basis, and the Company believes it is viewed as an important
supplier to these customers.

No customer or group of affiliated customers accounted for more
than 10% of the Company's net sales in fiscal 1994. In fiscal 1995
and 1996, customers affiliated with Federated Department Stores Inc.
(e.g., Bloomingdale's, Burdines, Macy's and Rich's/Lazarus) accounted
for 11% and 13% of the Company's net sales, respectively. In
addition, in fiscal 1996, customers affiliated with The May Department
Stores Company (e.g., Foley's, Lord & Taylor and Robinsons-May)
accounted for 10% of the Company's net sales.

MARKETING

The Company's marketing strategy is built around its "vision"
statement: "Bringing the Best to Everyone We Touch". Estee Lauder
formulated this marketing philosophy to provide high quality service
and products as the foundation for a solid and loyal consumer base.

The Company focuses its marketing efforts on promoting the
quality and benefits of its products. Each of the Company's brands is
distinctively positioned, has a single global image, and is promoted
with consistent logos, packaging and advertising designed to enhance
its image and differentiate it from other brands. In recent years,
the Company has increased its emphasis on media advertising while
decreasing the level of promotional spending as a percentage of sales.
The Company regularly advertises its products on television and radio,
in upscale magazines and prestigious newspapers and through direct
mail and photo displays at international airports. Promotional
activities and in-store displays are designed to introduce existing
consumers to different products in the line and to attract new
consumers. The Company's marketing efforts also benefit from
cooperative advertising programs with retailers, some of which are
supported by coordinated promotions, such as "Gift with Purchase" and
"Purchase with Purchase". At in-store counters, the Company offers
personal demonstrations to market individual products as well as to
provide education on basic skin care and makeup application. The
Company conducts extensive sampling programs. The Company pioneered
"Gift with Purchase" as a sampling program and believes that the
quality and perceived benefits of sample products have been effective
inducements in selling products to existing and new consumers.

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<PAGE>

Nearly all of the creative work for Estee Lauder, Clinique,
Aramis, Prescriptives, Origins, M.A.C. and Bobbi Brown essentials is
done by brand specific in-house creative teams. The creative staff
designs and produces the sales materials, advertisements and packaging
for all products in the brand. The Company's total advertising and
promotional expenditures in fiscal 1996 were $921.2 million, or 28.8%
of net sales. In addition, the Company's products receive extensive
editorial coverage in prestige publications and other media worldwide.

The marketing and sales executives of the Company spend
considerable time in the field meeting with consumers, checking
activities of competitors and consulting with the approximately 25,000
sales representatives at the points of sale. These include Estee
Lauder Beauty Advisors, Clinique Consultants, Aramis Selling
Specialists, Prescriptives Analysts and Origins Guides. The costs
associated with these sales representatives, who typically are
employees of the department stores, generally are shared by the
retailer and the Company and, to a lesser extent, borne solely by the
retailer. The marketing and sales executives also frequently visit
worldwide points of sale and jointly develop with key retailers
specific marketing strategies for increasing growth and profitability.

As is customary in the cosmetics industry, the Company's practice
is to accept returns of its products from retailers. In accepting
returns, the Company typically provides a credit to the retailer with
respect to accounts receivable from that retailer on a dollar-for-
dollar basis. In recognition of this practice, and in accordance with
generally accepted accounting principles, the Company reports its
sales levels on a net sales basis, which is computed by deducting from
gross sales the amount of actual returns and the amount of reserve
established for anticipated returns. As a percentage of gross sales,
returns were approximately 4.9%, 4.3% and 4.8% in fiscal 1996, 1995
and 1994, respectively.

MANAGEMENT INFORMATION SYSTEMS

The Company's management information systems provide order
processing, production and accounting support for the Company's
business. The Company is implementing a sales analysis system to
track weekly sales by stock keeping unit (i.e., sell-through data).
The system is currently tracking sales at approximately 95% of the
Company's points of sale in the United States and Canada. The
increased understanding of consumer preferences gained from sell-
through data enables the Company to coordinate more effectively its
product development, manufacturing and marketing strategies. The
Company also is implementing similar systems in certain international
markets.

In addition, the Company has entered into automated replenishment
arrangements with a number of its key customers in the United States
and Canada. These arrangements enable the Company to replenish
inventories for individual points of sale automatically, with minimal
paperwork. Approximately 70% of the Company's orders in the United
States are placed through automated replenishment systems.

The use of sell-through data combined with the implementation of
automated replenishment systems has resulted in increased sales, fewer
"out-of-stocks" and reduced retail inventories. The Company's
management expects that these systems will continue to provide
inventory and sales efficiencies during the next several years as
their implementation is completed.

RESEARCH AND DEVELOPMENT

The Company believes that it is an industry leader in the
development of new products. The Company's marketing, product
development and packaging groups work with its research and
development group to identify shifts in consumer preferences, develop
new products and redesign or reformulate existing products. In
addition, research and development personnel work closely with quality
assurance and manufacturing personnel on a

20
<PAGE>

worldwide basis to ensure a consistent global standard for products
and to deliver products with attributes that fulfill consumer
expectations. The Company maintains ongoing research and development
programs at its facilities in Melville, New York, Oevel, Belgium and
Tokyo, Japan.

MANUFACTURING AND RAW MATERIALS

The Company manufactures skin care, makeup and fragrance products
in the United States, Belgium, Switzerland, the United Kingdom and
Canada and, to a lesser extent, in Australia, Venezuela and South
Africa. In 1993, the Company began a program to streamline its
manufacturing and sourcing to increase efficiencies and reduce costs.
As part of this program, the Company is converting a portion of its
manufacturing facilities at selected sites into "focus" plants that
will manufacture one type of product (e.g., powders) for all the
Company's principal brands. Management believes that the Company's
manufacturing facilities are sufficient to meet its current and
reasonably anticipated manufacturing and related requirements. The
Company's plants are modern and its manufacturing processes are
substantially automated. A limited number of finished products are
manufactured to the Company's specifications by third parties.

The principal raw materials used by the Company in the
manufacture of its products are essential oils, alcohol and specialty
chemicals. The Company also purchases packaging components, which are
manufactured to its design specifications. Procurement of materials
for all manufacturing facilities is made on a global basis through the
Company's centralized supplier relations department, and it is
expected that the use of "focus" plants will also contribute to
greater efficiencies in sourcing. The Company typically enters into
arrangements with suppliers for periods of one to four years to obtain
cost advantages and ensure quality. The Company is not dependent upon
a single supplier (or a single facility of any supplier) for materials
that are either essential to its business or not otherwise
commercially available to the Company. The Company has been able to
obtain an adequate supply of raw materials and believes it has
adequate alternate sources of supply for all principal components of
its products. The Company does not believe that the loss of any one
supplier would have a material adverse effect on its results of
operations or financial condition.

COMPETITION

The skin care, makeup and fragrance businesses are characterized
by vigorous competition throughout the world. Product recognition,
quality, performance and price have a significant influence on
consumers' choices among competing products and brands. Advertising,
promotion, merchandising, the pace and timing of new product
introductions and line extensions and the quality of in-store sales
staff also have a significant impact on consumer buying decisions.
The Company competes against a number of manufacturers and marketers
of skin care, makeup and fragrance products, some of which have
substantially greater resources than the Company and many of which
sell their products through broader distribution channels than the
Company.

The Company's principal competitors among manufacturers and
marketers of prestige skin care, makeup and fragrance products brands
include L'Oreal S.A. (which markets Lancome, Ralph Lauren and other
products), Unilever N.V. (which markets Calvin Klein, Elizabeth Arden
and other products), The Procter & Gamble Company (which markets
Giorgio fragrances, Max Factor and other products). LVMH Moet
Hennessy Louis Vuitton (which markets Christian Dior, Givenchy and
Guerlain products), Shiseido Company, Ltd. (which markets Shiseido
products), Elf Sanofi S.A. (which markets Nina Ricci, Yves Rocher and
Yves St. Laurent products), Joh. A. Benckiser GmbH (which markets
Lancaster, Davidoff, Joop and Jil Sander products), Chanel, Inc.
(which markets Chanel and Bourjois products) and Clarins (which
markets Clarins products). Some of these competitors, as well as other
manufacturers and marketers, market and sell branded products through
broader distribution channels. These include Avon Products, Inc.,
Joh. A. Benckiser GmbH (which markets Coty products), L'Oreal

<PAGE>

(which markets L'Oreal, Maybelline and Plenitude Products), The
Procter & Gamble Company (which markets Cover Girl products) and
Revlon, Inc. (which markets Revlon, Almay and Moon Drops products).

TRADEMARKS AND PATENTS

The Company owns all of the material trademark rights used in
connection with the production, marketing and distribution of its
major products both in the United States and in the other countries in
which its products are principally sold, except the trademark rights
relating to Tommy Hilfiger which are licensed. The Company acquired
the Estee Lauder trademark from Mrs. Estee Lauder in 1969 in exchange
for an agreement to pay her for the remainder of her life royalties
based on the domestic and international sales of Estee Lauder brand
products. The royalty payments also relate to sales of Prescriptives
products, which were initially sold under the Estee Lauder brand. In
June 1994, Mrs. Lauder transferred her rights to payments in respect
of domestic sales to The Estee Lauder 1994 Trust. In November 1995,
the Company purchased those rights from the trust. The Company will
continue to pay the royalty based on international sales until Mrs.
Lauder's death. The Company has an exclusive license to use the Tommy
Hilfiger trademark (and related marks) worldwide in connection with
the production, marketing and distribution of the Tommy Hilfiger line
of fragrances and cosmetics.

The Company's major trademarks are registered in the United
States and in each of the countries in which the Company's products
are sold. The Company's major trademarks include the brand names
Estee Lauder, Clinique, Aramis, Prescriptives, Origins, M.A.C. and
Bobbi Brown essentials and the names of most of the products sold
under each of these brands. The Company considers the protection of
its trademarks to be important to its business.

A number of the Company's products incorporate patented or
patent-pending formulations. In addition, several of the Company's
products are covered by design patents or patent applications. While
management considers these patents and the protection thereof to be
important, no single patent is considered material to the conduct of
the Company's business.

EMPLOYEES

As of June 30, 1996, the Company had approximately 13,500 full-
time employees worldwide (inclusive of sales representatives at points
of sale who are employed by the Company), of whom approximately 5,000
were employed in the United States and 8,500 abroad. None of the
Company's U.S. employees is covered by a collective bargaining
agreement. Approximately 550 employees in Europe are covered by Work
Council agreements. Management believes that the Company's relations
with its employees are good. The Company has never encountered a
strike or material work stoppage in the United States or in any other
country in which it has a significant number of employees.

GOVERNMENT REGULATION

The Company and its products are subject to regulation by the
Food and Drug Administration and the Federal Trade Commission in the
United States, as well as various other federal, state and local and
foreign regulatory authorities. Such regulations relate principally
to the ingredients, labeling, packaging and marketing of the Company's
products. The Company believes that it is in substantial compliance
with such regulations, as well as applicable federal, state, local and
foreign rules and regulations governing the discharge of materials
hazardous to the environment. There are no significant capital
expenditures for environmental control matters either estimated in the
current year or expected in the near future.

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<PAGE>

SEASONALITY

The Company's results of operations are subject to seasonal
fluctuations, with net sales in the first and second fiscal quarters
typically being slightly higher than in the third and fourth fiscal
quarters. The higher net sales in the first two fiscal quarters are
attributable to the increased levels of purchasing by retailers for
the Christmas selling period and for fall fashion makeup
introductions. Greater variation exists in quarterly operating income
and margin, which typically are lower in the second half of the fiscal
year than in the first half. In addition to the effect of lower net
sales on operating income in the third and fourth fiscal quarters as
compared to the first and second fiscal quarters, operating income and
operating margin in the third and fourth fiscal quarters are
negatively affected by the relatively consistent dollar amount of
advertising and promotional spending by the Company in each fiscal
quarter. In addition, fluctuations in net sales and operating income
in any fiscal quarter may be attributable to the level and scope of
new product introductions.

LEGAL PROCEEDINGS

The Company is involved in various routine legal proceedings
incident to the ordinary course of its business. The Company believes
that the outcome of all pending legal proceedings in the aggregate
will not have a material adverse effect on its business or financial
condition.

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect
to the directors and executive officers of the Company.

NAME AGE POSITION(S) HELD
---- --- ----------------

Leonard A. Lauder . 63 Chairman of the Board of Directors and
Chief Executive Officer
Ronald S. Lauder . 52 Chairman of Clinique Laboratories, Inc.
and Estee Lauder
International, Inc. and a Director
Fred H. Langhammer 53 President and Chief Operating Officer
and a Director
William P. Lauder . 36 President of Origins Natural Resources,
Inc. and a Director
Marshall Rose . . . 60 Director
P. Roy Vagelos, M.D. 67 Director
Faye Wattleton . . 53 Director
Robert J. Bigler . 48 Senior Vice President and Chief
Financial Officer
Daniel J. Brestle . 51 President of Clinique Laboratories, Inc.
Robin R. Burns . . 44 President of Estee Lauder (U.S.A. and
Canada)
Andrew J. Cavanaugh 49 Senior Vice President - Corporate Human
Resources
John B. Chilton . . 65 Senior Vice President - Global
Operations
Joseph Gubernick . 62 Senior Vice President - Research and
Development
Evelyn H. Lauder . 60 Senior Corporate Vice President
Mary Carroll Linder 49 Senior Vice President - Global
Communications
Saul H. Magram . . 65 Senior Vice President, General Counsel
and Secretary
Robert A. Nielsen . 66 President of Aramis Inc. and
Prescriptives Inc.
Jeanette S. Wagner 67 President of Estee Lauder International,
Inc.

23
<PAGE>

LEONARD A. LAUDER has served as Chief Executive Officer of the
Company since 1982 and as President from 1972 until 1995. He became
Chairman of the Board of Directors of the Company in 1995. He has
been a director since 1958. Mr. Lauder formally joined the Company in
1958 after serving as an officer in the United States Navy. Since
joining the Company, he has served in various positions, including
executive officer positions other than those described above. He is
Chairman of the Board of Trustees of the Whitney Museum of American
Art, a Charter Trustee of the University of Pennsylvania and a Trustee
of The Aspen Institute. He also served as a member of the White House
Advisory Committee on Trade Policy and Negotiations under President
Reagan.

RONALD S. LAUDER is a member of the Board of Directors. He has
served as a director of the Company from 1968 to 1986 and since 1988.
He has served as Chairman of Clinique Laboratories, Inc. and Chairman
of Estee Lauder International, Inc. since returning from government
service in 1987. Mr. Lauder joined the Company in 1964 and has served
in various capacities, including those described above, since then.
From 1983 to 1986, Mr. Lauder served as Deputy Assistant Secretary of
Defense for European and NATO Affairs. From 1986 to 1987, he served
as U.S. Ambassador to Austria. Since 1990, he has been Chairman of
the Central European Development Corporation, an investment company.
He serves as Chairman of the Board of Directors of Central European
Media Enterprises Ltd., an owner and operator of commercial television
stations in Central and Eastern Europe and Germany, and as Chairman of
the Board of Trustees of the Museum of Modern Art and is Chairman of
the New York State Research Council on Privatization.

FRED H. LANGHAMMER has been President of the Company since 1995
and Chief Operating Officer of the Company since 1985. He has been a
Director of the Company since 1996. He was Executive Vice President
from 1985 until 1995. Mr. Langhammer joined the Company in 1975 as
President of its operations in Japan. In 1982, he was appointed
Managing Director of the Company's operations in Germany. Prior to
joining the Company, Mr. Langhammer was General Manager of Dodwell
(Japan), a global trading company. He is a member of the Board of
Directors of the Cosmetics, Toiletries and Fragrance Association, an
industry group, and serves on the Board of the American Institute for
Contemporary German Studies at Johns Hopkins University.

WILLIAM P. LAUDER is President of Origins Natural Resources,
Inc., and has been the senior officer of such division since its
inception in 1990. He joined the Company in 1986 and has been a
director since 1996. From 1983 until he joined the Company, Mr.
Lauder was associated with Macy's, a department store chain. He is a
member of the Board of Trustees of The Trinity School in New York City
and the Board of Directors of the Educational Foundation of Fashion
Industries.

MARSHALL ROSE is managing partner of The Georgetown Group, a
privately held real estate development and financial service group.
He has been a Director of the Company since 1996. He is a Trustee of
BRT Realty Trust and a Director of Golden Books Family Entertainment
Company Inc. and One Liberty Properties. Among his numerous civic
activities, he is Chairman of the Executive Committee and Chairman
Emeritus of The New York Public Library and a member of the Executive
Committee of the Board of Advisors of The Graduate School and
University Center of the City University of New York. Mr. Rose is a
member of the Audit Committee and the Compensation Committee.

P. ROY VAGELOS, M.D. is Chairman of the Board of Regeneron
Pharmaceuticals. He was the Chairman and Chief Executive Officer of
Merck & Co., Inc. from 1985 to 1994. He has been a director of the
Company since 1996. Dr. Vagelos is also a director of PepsiCo,
Prudential Insurance Co. of America and McDonnell Douglas Corporation.
He is also Chairman of the Board of Trustees of The University of
Pennsylvania. Dr. Vagelos is Chairman of the Compensation Committee
and a member of the Audit Committee.

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<PAGE>

FAYE WATTLETON is an author, lecturer and consultant to
businesses, health organizations and nonprofit entities. She has been
a Director of the Company since 1996. She was the President of
Planned Parenthood Federation of America, Inc. from 1979 to 1992. She
is a Director of Empire Blue Cross & Blue Shield, the Henry J. Kaiser
Foundation, Leslie Fay, Inc., Quidel Corporation and Thirteen/WNET.
She is also a Director of the Institute for International Education
and a member of the Advisory Council of Columbia University School of
Public Health. Ms. Wattleton is Chairman of the Audit Committee.

ROBERT J. BIGLER is Senior Vice President and Chief Financial
Officer of the Company, a position he assumed in 1992. Before that,
he had served as Senior Vice President - Controller of Estee Lauder
International, Inc. from 1986. He is a certified public accountant,
and was associated with Peat, Marwick and Mitchell, an accounting
firm, from 1969 until he joined the Company in 1975.

DANIEL J. BRESTLE is President of Clinique Laboratories Inc. and
has been the senior officer of that division since 1992. Prior
thereto, he was President of Prescriptives U.S.A. since 1988. Mr.
Brestle joined the Company in 1978. From 1973 to 1978 he was
associated with Johnson & Johnson, a consumer products company.

ROBIN R. BURNS has served as President of Estee Lauder (U.S.A.)
since 1990. Her duties were expanded in 1995 to include Canada. From
1983 to 1990, Ms. Burns was President of Calvin Klein Cosmetics. From
1974 to 1983, she was associated with Bloomingdale's, a department
store chain, where she attained the position of Cosmetics Divisional
Merchandising Manager for all stores. She is a member of the Board of
Directors of the Cosmetics, Toiletries and Fragrance Association and a
member of the Board of Trustees of Fashion Institute of Technology.

ANDREW J. CAVANAUGH has been Senior Vice President - Corporate
Human Resources since 1994. Mr. Cavanaugh joined the Company in 1988
as Executive Director - Human Resources. From 1986 to 1988, he was
Senior Consultant with Coopers & Lybrand L.L.P., an accounting and
consulting firm, and from 1983 to 1986, he was Senior Vice President -
Administration of Paramount Pictures Corporation. Since 1993, he has
been a member of the Board of Directors of Lewis Galoob Toys, Inc.

JOHN B. CHILTON is Senior Vice President - Global Operations and
has been in charge of the Company's global manufacturing operations
since 1993. Before that, Mr. Chilton managed the Company's United
States manufacturing operations since 1978. He joined the Company in
1973 as Managing Director of the Company's manufacturing unit in the
United Kingdom, and managed international operations from 1974 to
1978. Mr. Chilton previously held senior manufacturing positions with
Cadbury Schweppes, a food products company, and Cheesebrough Pond's, a
consumer products company, in the United Kingdom.

JOSEPH GUBERNICK is Senior Vice President - Research and
Development of the Company. Mr. Gubernick joined the Company in 1972
as Vice President - Research and Development. Prior thereto, Mr.
Gubernick was Director of Research for Revlon, Inc., a cosmetics
manufacturer.

EVELYN H. LAUDER has been Senior Corporate Vice President of the
Company since 1989, and previously served as Vice President and in
other executive capacities since first joining the Company in 1959 as
Education Director. She is a member of the Board of Overseers,
Memorial Sloan-Kettering Cancer Center, a member of the Board of
Trustees of Central Park Conservancy, Inc. and The Trinity School in
New York City, a member of the Board of Directors of The Parks Council
and the Founder, President and a Director of The Breast Cancer
Research Foundation.

25
<PAGE>

MARY CARROLL LINDER has been Senior Vice President - Global
Communications since 1996. Ms. Linder previously headed the public
relations area of Grand Metropolitan, PLC, a broadly based consumer
products company, as Group Corporate Communications Director and,
prior thereto, represented prestige properties under the
InterContinental and Hilton International names.

SAUL H. MAGRAM is Senior Vice President, General Counsel and
Secretary of the Company. Mr. Magram has been the senior legal
officer of the Company since he joined in 1968. Prior to that, Mr.
Magram held the position of Associate Counsel with Revlon, Inc. from
1960.

ROBERT A. NIELSEN is President of Aramis Inc. and President of
Prescriptives Inc. and has been senior officer of those divisions
since 1992 and 1995, respectively. Mr. Nielsen first joined the
Company in 1960 and has been associated with it on three occasions
since that date. From 1987 to 1990, Mr. Nielsen was a senior
executive officer of Revlon, Inc. with responsibility for its prestige
cosmetics businesses. From 1990 to 1992, Mr. Nielsen was a management
development consultant in the fashion industry.

JEANETTE S. WAGNER is President of Estee Lauder International,
Inc., a position she has held since 1985. Mrs. Wagner joined the
Company in 1975 to head the activity of the Estee Lauder brand in
international markets. Prior to assuming her current
responsibilities, Mrs. Wagner served as Senior Vice President -
Corporate Development from 1982 to 1985. Mrs. Wagner has been a
member of the Board of Directors of the American Greetings Corporation
since 1990 and The Stride Rite Corporation since 1994. In 1994, Mrs.
Wagner was appointed by President Clinton to serve on the White House
Advisory Committee on Trade Policy and Negotiations, and she currently
serves as the Chairman of the Fragrance Foundation, an industry group.

<PAGE>

SELLING STOCKHOLDERS

The following table sets forth certain information for each
Selling Stockholder identified below with respect to (i) such Selling
Stockholder's beneficial ownership of Class A Common Stock and Class B
Common Stock prior to the Offerings and the percentage of total voting
power represented thereby and (ii) the number of shares of Class A
Common Stock and Class B Common Stock to be beneficially owned by such
Selling Stockholder after the Offerings and the percentage of total
voting power represented thereby.

<TABLE>
<CAPTION>
Shares of Common
Class A Stock to be
Common Stock Common Beneficially
Beneficially Percentage Stock Owned Percentage
Owned of Total to be After the of Total
Name of Selling Before the Voting Sold in the Offerings Voting
Stockholder Offerings Power Offerings (1) Power
----------- --------- ----- --------- ------------------ --------
Class A Class B Class A Class A Class B
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Leonard A. Lauder
and members of his
immediate family and
entities in which one
or more of them has
an economic or
beneficial interest (1) . . . . 28,498,952 32,428,835 56.1 1,600,000 26,898,952 32,428,835 55.8
Ronald S. Lauder
and members of his
immediate family and
entities in which one
or more of them has
an economic or
beneficial interest (2) . . . . 26,262,982 32,428,835 55.7 4,065,000 22,197,982 32,428,835 55.1
<FN>

________________________
(1) The identity of Selling Stockholder(s) will be determined prior to the consummation of the Offerings. Includes shares of
Common Stock with respect to which beneficial ownership is shared with Ronald S. Lauder.

(2) The identity of Selling Stockholder(s) will be determined prior to the consummation of the Offerings. Includes shares of
Common Stock with respect to which beneficial ownership is shared with Leonard A. Lauder.
</FN>
</TABLE>

DESCRIPTION OF CAPITAL STOCK

The authorized capital stock of the Company consists of
300,000,000 shares of Class A Common Stock, 120,000,000 shares of
Class B Common Stock, and 23,600,000 shares of Preferred Stock, par
value $.01 per share, including 3,600,000 shares of $6.50 Cumulative
Redeemable Preferred Stock. As of January 27, 1997, there were
60,486,913 shares of Class A Common Stock and 56,839,667 shares of
Class B Common Stock outstanding. All of the shares of Class B Common
Stock are beneficially owned by members of the Lauder family. Of the
authorized shares of Preferred Stock, 3,600,000 shares of $6.50
Cumulative Redeemable Preferred Stock are outstanding and, as of the
date of this Prospectus, are beneficially owned by members of the
Lauder family. The following description is a summary and is subject
to and qualified in its entirety by reference to the provisions of the
Restated Certificate of Incorporation filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.

27
<PAGE>

COMMON STOCK

The shares of Class A Common Stock and Class B Common Stock are
identical in all respects, except for voting rights, certain
conversion rights and transfer restrictions in respect of the shares
of the Class B Common Stock, as described below.

VOTING RIGHTS. Each share of Class A Common Stock entitles the
holder to one vote on each matter submitted to a vote of the Company's
stockholders and each share of Class B Common Stock entitles the
holder to ten votes on each such matter, including the election of
directors. There is no cumulative voting. Except as required by
applicable law, holders of the Class A Common Stock and Class B Common
Stock will vote together on all matters submitted to a vote of the
stockholders. With respect to certain corporate changes, such as
liquidations, reorganizations, recapitalizations, mergers,
consolidations and sales of all or substantially all of the Company's
assets, holders of the Class A Common Stock and Class B Common Stock
will vote together as a single class and the approval of 75% of the
outstanding voting power is required to authorize or approve such
transactions.

Any action that can be taken at a meeting of the stockholders may
be taken by written consent in lieu of the meeting if the Company
receives consents signed by stockholders having the minimum number of
votes that would be necessary to approve the action at a meeting at
which all shares entitled to vote on the matter were present. This
could permit the holders of Class B Common Stock to take all actions
required to be taken by the stockholders without providing the other
stockholders the opportunity to make nominations or raise other
matters at a meeting. The right to take action by less than unanimous
written consent expires at such time as there are no shares of Class B
Common Stock outstanding.

DIVIDENDS. Holders of Class A Common Stock and Class B Common
Stock are entitled to receive dividends at the same rate if, as and
when such dividends are declared by the Board of Directors of the
Company out of assets legally available therefor after payment of
dividends required to be paid on shares of preferred stock, if any.

If a dividend or distribution payable in shares of Class A Common
Stock is made on the Class A Common Stock, the Company must also make
a pro rata and simultaneous dividend or distribution on the Class B
Common Stock payable in shares of Class B Common Stock. Conversely,
if a dividend or distribution payable in shares of Class B Common
Stock is made on the Class B Common Stock, the Company must also make
a pro rata and simultaneous dividend or distribution on the Class A
Common Stock payable in shares of Class A Common Stock.

RESTRICTIONS ON TRANSFER. If a holder of Class B Common Stock
transfers such shares, whether by sale, assignment, gift, bequest,
appointment or otherwise, to a person other than a Lauder Family
Member (as defined below), such shares will be converted automatically
into shares of Class A Common Stock. In the case of a pledge of
shares of Class B Common Stock to a financial institution, such shares
will not be deemed to be transferred unless and until a foreclosure
occurs.

As used in this Prospectus, the term "Lauder Family Members"
includes only the following persons: (i) Mrs. Lauder and her estate,
guardian, conservator or committee; (ii) each descendant of Mrs. Estee
Lauder (a "Lauder Descendant") and their respective estates,
guardians, conservators or committees; (iii) each "Family Controlled
Entity" (as defined below); and (iv) the trustees, in their respective
capacities as such, of each "Family Controlled Trust" (as defined
below). The term "Family Controlled Entity" means (i) any not-for-
profit corporation if at least 80% of its board of directors is
composed of Mrs. Lauder and/or Lauder Descendants; (ii)

28
<PAGE>

any other corporation if at least 80% of the value of its outstanding
equity is owned by Lauder Family Members; (iii) any partnership if at
least 80% of the value of its partnership interests are owned by
Lauder Family Members; and (iv) any limited liability or similar
company if at least 80% of the value of the company is owned by Lauder
Family Members. The term "Family Controlled Trust" includes certain
trusts existing on November 16, 1995 and trusts the primary
beneficiaries of which are Mrs. Lauder, Lauder Descendants, spouses of
Lauder Descendants and/or charitable organizations provided that if
the trust is a wholly charitable trust, at least 80% of the trustees
of such trust consist of Mrs. Lauder and/or Lauder Descendants.

CONVERSION. Class A Common Stock has no conversion rights.
Class B Common Stock is convertible into Class A Common Stock, in
whole or in part, at any time and from time to time at the option of
the holder, on the basis of one share of Class A Common Stock for each
share of Class B Common Stock converted. In the event of a transfer
of shares of Class B Common stock to any person other than a Lauder
Family Member, each share of Class B Common Stock so transferred
automatically will be converted into one share of Class A Common
Stock. Each share of Class B Common Stock will also automatically
convert into one share of Class A Common Stock if, on the record date
for any meeting of the stockholders, the number of shares of Class B
Common Stock then outstanding is less than 10% of the aggregate number
of shares of Class A Common Stock and Class B Common Stock then
outstanding.

LIQUIDATION. In the event of liquidation, after payment of the
debts and other liabilities of the Company and after making provision
for the holders of Preferred Stock, if any, the remaining assets of
the Company will be distributable ratably among the holders of the
Class A Common Stock and Class B Common Stock treated as a single
class.

MERGERS AND OTHER BUSINESS COMBINATIONS. Upon the merger or
consolidation of the Company, holders of each class of Common Stock
are entitled to receive equal per share payments or distributions,
except that in any transaction in which shares of capital stock are
distributed, such shares may differ as to voting rights to the extent
and only to the extent that the voting rights of the Class A Common
Stock and Class B Common Stock differ at that time. The Company may
not dispose of all or any substantial part of the assets of the
Company to, or merge or consolidate with, any person, entity or
"group" (as defined in Rule 13d-5 of the Exchange Act), which
beneficially owns in the aggregate ten percent or more of the
outstanding Common Stock of the Company (a "Related Person") without
the affirmative vote of the holders, other than such Related Person,
of not less than 75% of the voting power of outstanding Class A Common
Stock and Class B Common Stock voting as a single class. For the sole
purpose of determining the 75% vote, a Related Person will also
include the seller or sellers from whom the Related Person acquired,
during the preceding six months, at least five percent of the
outstanding shares of Class A Common Stock in a single transaction or
series of related transactions pursuant to one or more agreements or
other arrangements (and not through a brokers' transaction) but only
if such seller or sellers have beneficial ownership of shares of
Common Stock having a fair market value in excess of $10 million in
the aggregate following such disposition to such Related Person. This
75% voting requirement is not applicable, however, if (i) the proposed
transaction is approved by a vote of not less than a majority of the
Board of Directors of the Company who are neither affiliated nor
associated with the Related Person (or the seller of shares to the
Related Person as described above) or (ii) in the case of a
transaction pursuant to which the holders of Common Stock are entitled
to receive cash, property, securities or other consideration, the cash
or fair market value of the property, securities or other
consideration to be received per share in such transaction is not less
than the higher of (A) the highest price per share paid by the Related
Person for any of its holders of Common Stock within the two-year
period immediately prior to the announcement of the proposed
transaction or (B) the highest closing sale price during the 30-day
period immediately preceding such date or during the 30-day period
immediately preceding the date on which the Related Person became a
Related Person, whichever is higher.

<PAGE>

OTHER PROVISIONS. The holders of the Class A Common Stock and
Class B Common Stock are not entitled to preemptive rights. Neither
the Class A Common Stock nor the Class B Common Stock may be
subdivided or combined in any manner unless the other class is
subdivided or combined in the same proportion.

TRANSFER AGENT AND REGISTRAR. The Transfer Agent and Registrar
for the Class A Common Stock is ChaseMellon Shareholder Services.

PREFERRED STOCK

$6.50 CUMULATIVE REDEEMABLE PREFERRED STOCK. Holders of the
$6.50 Cumulative Redeemable Preferred Stock are entitled to receive
cumulative cash dividends at a rate of $6.50 per annum per share
payable in quarterly installments. If such dividends are not paid in
full, or declared in full and sums set apart for full payment thereof,
then no dividends may be paid or declared upon the Common Stock or any
other capital stock ranking junior to or on parity with such $6.50
Cumulative Redeemable Preferred Stock. If, at the time of an annual
meeting of stockholders, the equivalent of six quarterly dividends are
in arrears, then the number of directors of the Company will be
increased by two and the holders of the outstanding $6.50 Cumulative
Redeemable Preferred Stock voting separately as a class will be
entitled at the meeting to vote for the election of two directors.
The right to elect two directors and such directors' terms on the
board of directors will continue until such arrearage in the payment
of dividends ceases to exist. Shares of $6.50 Cumulative Redeemable
Preferred Stock are subject to mandatory redemption on June 30, 2005
at a redemption price of $100 per share. Following such date and so
long as such mandatory redemption obligations have not been discharged
in full, no dividends may be paid or declared upon the Common Stock,
or on any other capital stock ranking junior to or on a parity with
such $6.50 Cumulative Redeemable Preferred Stock and no shares of
Common Stock or such junior or parity stock may be redeemed or
acquired for any consideration by the Company. The Company may redeem
the $6.50 Cumulative Redeemable Preferred Stock owned by the Estee
Lauder 1994 Trust ("EL 1994 Trust") and a trust for the primary
benefit of Leonard A. Lauder ("LAL 1995 Trust"), in whole or in part,
after the death of Mrs. Lauder or, if owned by persons other than the
EL 1994 Trust or the LAL 1995 Trust, after five years following the
disposition of such shares by the EL 1994 Trust or the LAL 1995 Trust,
as the case may be. After the later of June 30, 2000 and Mrs.
Lauder's death, holders of the $6.50 Cumulative Redeemable Preferred
Stock may put such shares to the Company at a price of $100 per share
(which amount represents the liquidation preference per share).

OTHER PREFERRED STOCK. The Board of Directors is authorized,
subject to any limitations prescribed by Delaware law or the rules of
the NYSE or other organizations on whose systems stock of the Company
may be quoted or listed, to provide for the issuance of additional
shares of Preferred Stock in one or more series, to establish from
time to time the number of shares to be included in each such series,
to fix the rights, powers, preferences and privileges of the shares of
each wholly unissued series and any qualifications, limitations or
restrictions thereon, and to increase or decrease the number of shares
of such series, without any further vote or action by the
stockholders. The approval of the holders of at least 75% of the
outstanding shares of Class B Common Stock, however, is required for
the issuance of shares of Preferred Stock that have the right to vote
for the election of directors under ordinary circumstances or to elect
50% or more of the directors under any circumstances. Depending upon
the terms of the Preferred Stock established by the Board of
Directors, any or all series of Preferred Stock could have preference
over the Common Stock with respect to dividends and other
distributions and upon liquidation of the Company or could have voting
or conversion rights that could adversely affect the holders of the
outstanding Common Stock. In addition, the Preferred Stock could
delay, defer or prevent a change of control of the Company. The
Company has no present plans to issue any additional shares of
Preferred Stock.

30
<PAGE>

STOCKHOLDERS' AGREEMENT. All Lauder Family Members (other than
The Lauder Foundation, a tax exempt, private foundation) who
beneficially own shares of Common Stock have agreed pursuant to a
stockholders' agreement with the Company to vote all shares
beneficially owned by them for Leonard A. Lauder, Ronald S. Lauder and
one person (if any) designated by each as directors of the Company.
As of December 31, 1996, such stockholders beneficially owned, in the
aggregate, shares of Common Stock having 97.0% of the voting power of
the Company.

REGISTRATION RIGHTS AGREEMENT. Certain members of the Lauder
family, certain trusts and other entities controlled by members of the
Lauder family, Morgan Guaranty Trust Company of New York ("Morgan
Guaranty") and the Company are parties to a Registration Rights
Agreement (the "Master Registration Rights Agreement"), pursuant to
which each of Leonard A. Lauder, Ronald S. Lauder and Morgan Guaranty
have three demand registration rights and the EL 1994 Trust has six
demand registration rights in respect of shares of Class A Common
Stock (including Class A Common Stock issued upon conversion of Class
B Common Stock) held by them. All the parties to the Master
Registration Rights Agreement (other than the Company) also have an
unlimited number of piggyback registration rights in respect of their
shares. The rights of Morgan Guaranty and any pledgee of the EL 1994
Trust under the Master Registration Rights Agreement will be
exercisable only in the event of a default under certain loan
arrangements.

UNDERWRITING

Subject to the terms and conditions of the Underwriting
Agreement, the Selling Stockholders have agreed to sell to each of the
U.S. Underwriters named below, and each of such U.S. Underwriters, for
whom Goldman, Sachs & Co., Dillon, Read & Co. Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities Inc.
are acting as representatives, has severally agreed to purchase from
the Selling Stockholders, the respective number of shares of Class A
Common Stock set forth opposite its name below:

Number of Shares of
U.S. Underwriters Class A Common Stock
----------------- --------------------
<S> <C>
Goldman, Sachs & Co. . . . . . . . . . .
Dillon, Read & Co. Inc. . . . . . . . . .
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . . . .
J.P. Morgan Securities Inc. . . . . . . .
-----------
Total . . . . . . . . . . . . . . . . 4,532,000
===========

</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
U.S. Underwriters are committed to take and pay for all of the shares
offered hereby, if any are taken.

The U.S. Underwriters propose to offer the shares of Class A
Common Stock in part directly to the public and at the initial public
offering price set forth on the cover page of this Prospectus and in
part to certain securities dealers at such price less a concession of
$ ____ per share. The U.S. Underwriters may allow, and such dealers
may reallow, a concession not in excess of $ ____ per share to certain
brokers and dealers. After the shares of Class A Common Stock are
released for sale to the public, the offering price and other selling
terms may from time to time be varied by the representatives of the
U.S. Underwriters and the International Underwriters.

The Company and the Selling Stockholders have entered into an
underwriting agreement (the "International Underwriting Agreement")
with the underwriters (the "International Underwriters") for the
Offering outside of the United States (the "International Offering"),
providing for the concurrent offer and sale of

31
<PAGE>

1,133,000 shares of Class A Common Stock in the International
Offering. The initial public offering price and aggregate
underwriting discounts and commissions per share for the Offerings are
identical. The closing of the offering made hereby is a condition to
the closing of the International Offering, and vice versa. The
representatives of the International Underwriters are Goldman Sachs
International, Dillon, Read & Co. Inc., Merrill Lynch International
and J.P. Morgan Securities Ltd.

Pursuant to the agreement between the U.S. and International
Underwriting Syndicates (the "Agreement Between") relating to the
Offerings, each of the U.S. Underwriters named herein has agreed that,
as a part of the distribution of the shares offered as a part of the
U.S. Offering and subject to certain exceptions, it will offer, sell
or deliver the shares of Class A Common Stock, directly or indirectly,
only in the United States (including the States and the District of
Columbia), its territories, its possessions and other areas subject to
its jurisdiction (the "United States") and to U.S. persons which term
shall mean, for purposes of this paragraph: (a) any individual who is
a resident of the United States or (b) any corporation, partnership or
other entity organized in or under the laws of the United States or
any political subdivision thereof and whose office most directly
involved with the purchase is located in the United States. Each of
the International Underwriters has agreed or will agree pursuant to
the Agreement Between that, as a part of the distribution of the
shares offered as a part of the International Offering, and subject to
certain exceptions, it will (i) not, directly or indirectly, offer,
sell or deliver shares of Class A Common Stock (a) in the United
States or to any U.S. person or (b) to any person who it believes
intends to reoffer, resell or deliver the shares in the United States
or to any U.S. person, and (ii) cause any dealer to whom it may sell
such shares at any concession to agree to observe a similar
restriction.

Pursuant to the Agreement Between, sales may be made between the
U.S. Underwriters and International Underwriters of such number of
shares of Class A Common Stock as may be mutually agreed. The price
of any shares so sold shall be the initial public offering price, less
an amount not greater than the selling concession.

The Company has granted the U.S. Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase
up to an aggregate of 679,800 additional shares of Class A Common
Stock solely to cover over-allotments, if any. If the U.S.
Underwriters exercise their over-allotment option, the U.S.
Underwriters have severally agreed, subject to certain conditions, to
purchase approximately the same percentage thereof that the number of
shares to be purchased by each of them, as shown in the foregoing
table, bears to the 4,532,000 shares of Class A Common Stock offered
hereby. The Company has granted the International Underwriters a
similar option exercisable for up to an aggregate of 169,950
additional shares of Class A Common Stock.

The Company, the Selling Stockholders, the other Lauder Family
Members who are stockholders of the Company (other than The Lauder
Foundation) and Morgan Guaranty have agreed that, during the period
beginning from the date of this Prospectus and continuing and
including the date 90 days after the date of the Prospectus, they will
not offer, sell, contract to sell or otherwise dispose of any shares
of Class A Common Stock or any security convertible into or
exchangeable for shares of Class A Common Stock without the prior
written consent of Goldman, Sachs & Co., except as otherwise provided
in the Underwriting Agreement and the International Underwriting
Agreement and except for transfers among Lauder Family Members.

The Company and the Selling Stockholders have agreed to indemnify
the several Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933.

32
<PAGE>

commissions. Morgan Guaranty, an affiliate of J.P. Morgan Securities
Inc. and J.P. Morgan Securities Ltd., is a lender to the Company and
certain Lauder Family Members.

LEGAL MATTERS

The validity of the shares of Common Stock being offered hereby
will be passed upon for the Company by Weil, Gotshal & Manges LLP, New
York, New York (members of which own approximately 38,000 shares of
Class A Common Stock) and certain legal matters will be passed upon
for the Underwriters by Fried, Frank, Harris, Shriver & Jacobson (a
partnership including professional corporations).

EXPERTS

The financial statements and schedule incorporated by reference
in this Prospectus that are contained in the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 1996 have been audited
by Arthur Andersen LLP, independent public accountants, as indicated
in their reports with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.

<PAGE>

================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

_______________

TABLE OF CONTENTS

PAGE
----
Available Information . . . . . . . . . 2
Incorporation of Certain Documents
by Reference . . . . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . 4
Price Range of Common Stock and
Dividends . . . . . . . . . . . . . . 7
Use of Proceeds . . . . . . . . . . . . 7
Selected Consolidated
Financial Information. . . . . . . . . 8
Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . 9
Business. . . . . . . . . . . . . . . . 17
Directors and Executive Officers. . . . 23
Selling Stockholders. . . . . . . . . . 27
Description of Capital Stock. . . . . . 27
Underwriting. . . . . . . . . . . . . . 31
Legal Matters . . . . . . . . . . . . . 33
Experts . . . . . . . . . . . . . . . . 33

5,665,000 SHARES

THE ESTEE LAUDER
COMPANIES INC.

CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)

------------------

[Logo]

------------------

GOLDMAN, SACHS & CO.

DILLON, READ & CO. INC.

MERRILL LYNCH & CO.

J.P. MORGAN & CO.

REPRESENTATIVES OF THE
UNDERWRITERS

================================================================================

<PAGE>

SUBJECT TO COMPLETION, DATED JANUARY 28, 1997

[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]

5,665,000 SHARES

[LOGO] THE ESTEE LAUDER COMPANIES INC.

CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
__________________

Of the 5,665,000 shares of Class A Common Stock offered,
1,133,000 shares are being offered hereby in an international offering
outside the United States and 4,532,000 shares are being offered in a
concurrent offering in the United States (the "Offerings"). The
initial public offering price and the aggregate underwriting discount
per share will be identical for both Offerings. See "Underwriting".

INITIAL PUBLIC UNDERWRITING PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT (1) STOCKHOLDERS (2)
-------------- ------------ ----------------
<S> <C> <C> <C>
Per Share . . . . . . . . . . . $ $ $
Total (3) . . . . . . . . . . . $ $ $
<FN>
______________
(1) The Company and the Selling Stockholders have agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $ _________ payable by the Selling Stockholders and the Company.
(3) The Company has granted the Underwriters an option for 30 days to purchase up to an additional 849,750
shares at the initial public offering price per share, less the underwriting discount, solely to cover
over-allotments. If such option is exercised in full, the total initial public offering price,
underwriting discount and proceeds to the Company will be $_________, $_________ and $_________,
respectively. See "Underwriting".
</FN>
</TABLE>
__________________

The shares offered hereby are offered severally by the
International Underwriters, as specified herein, subject to receipt
and acceptance by them and subject to their right to reject any order
in whole or in part. It is expected that the certificates for the
shares will be ready for delivery in New York, New York, on or about
_______, 1997, against payment therefor in immediately available
funds.

GOLDMAN SACHS INTERNATIONAL
DILLON, READ & CO. INC.
MERRILL LYNCH INTERNATIONAL
J.P. MORGAN SECURITIES LTD.
______________

The date of this Prospectus is _______, 1997.

<PAGE>

[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]

CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS

The following is a general discussion of certain U.S. federal
income and estate tax consequences of the ownership and disposition of
Class A Common Stock applicable to Non-U.S. Holders of such Class A
Common Stock. A "Non-U.S. Holder" is a person other than (i) a
citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the
laws of the United States or of any state, or (iii) an estate or trust
whose income is includable in gross income for United States federal
income tax purposes regardless of source. For purposes of the
withholding tax on dividends discussed below, a non-resident fiduciary
of an estate or trust will be considered a Non-U.S. Holder.

An individual may, subject to certain exceptions, be deemed to be a
resident alien (as opposed to a non-resident alien) by virtue of being
present in the United States for at least 31 days in the calendar year
and for an aggregate of at least 183 days during a three-year period
ending in the current calendar year (counting for such purposes all of
the days present in the current year, one-third of the days present in
the immediately preceding year, and one-sixth of the days present in
the second preceding year). Resident aliens are subject to tax as if
they were U.S. citizens.

This discussion does not consider specific facts and circumstances
that may be relevant to a particular Non-U.S. Holder's tax position
(including the fact that in the case of a Non-U.S. Holder that is a
partnership, the U.S. tax consequences of holding and disposing of
shares of Class A Common Stock may be affected by certain
determinations made at the partner level) and does not consider U.S.
state and local or non-U.S. tax consequences. This discussion also
does not consider the tax consequences for any person who is a
shareholder, partner or beneficiary of a holder of the Class A Common
Stock. Further, it does not consider Non-U.S. Holders subject to
special tax treatment under the federal income tax laws (including
banks and insurance companies, dealers in securities, and holders of
securities held as part of a "straddle", "hedge", or "conversion
transaction"). The following discussion is based on provisions of the
United States Internal Revenue Code of 1986, as amended (the "Code"),
the applicable Treasury regulations promulgated and proposed
thereunder, and administrative and judicial interpretations as of the
date hereof, all of which are subject to change either retroactively
or prospectively. The following summary is included herein for
general information. Accordingly, each prospective Non-U.S. Holder is
urged to consult a tax advisor with respect to the United States
federal tax consequences of holding and disposing of Class A Common
Stock, as well as any tax consequences that may arise under the laws
of any U.S. state, local, or other U.S. or non-U.S. taxing
jurisdiction.

DIVIDENDS

In general, dividends paid to a Non-U.S. Holder of Class A Common
Stock will be subject to withholding of U.S. federal income tax at a
30% rate or such lower rate as may be specified by an applicable
income tax treaty. Dividends that are effectively connected with such
holder's conduct of a trade or business in the United States or, if a
tax treaty applies, attributable to permanent establishment, or, in
the case of an individual, a "fixed base", in the United States ("U.S.
trade or business income") are generally subject to U.S. federal
income tax on a net income basis at regular graduated rates, but are
not generally subject to the 30% withholding tax if the Non-U.S.
Holder files the appropriate IRS form with the payor. Any U.S. trade
or business income received by a Non-U.S. Holder that is a corporation
may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate or such lower rate as may be
applicable under an income tax treaty.

Under current U.S. Treasury regulations, dividends paid to an
address in a foreign country are presumed (absent actual knowledge to
the contrary) to be paid to a resident of such country for purposes of
the withholding discussed above and for purposes of determining the
applicability of a tax treaty rate. Under proposed U.S. Treasury
regulations not currently in effect but proposed to be effective with
respect to payments made after

<PAGE>

[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]

December 31, 1997, however, a Non-U.S. Holder of Class A Common Stock
who wishes to claim the benefit of an applicable treaty rate generally
would be required to satisfy applicable certification and other
requirements.

A Non-U.S. Holder of Class A Common Stock that is eligible for a
reduced rate of U.S. withholding tax pursuant to an income tax treaty
may obtain a refund of any excess amounts currently withheld by filing
an appropriate claim for a refund with the IRS.

DISPOSITION OF CLASS A COMMON STOCK

Under current U.S. law, a Non-U.S. holder generally will not be
subject to U.S. federal income tax in respect of gain recognized on a
disposition of Class A Common Stock unless: (i) the gain is U.S. trade
or business income (in which case, the branch profits tax described
above may also apply to a corporate non-U.S. Holder), (ii) the Non-
U.S. Holder is an individual who holds the Class A Common Stock as a
capital asset within the meaning of Section 1221 of the Code, is
present in the United States for 183 or more days in the taxable year
of the disposition and meets certain other requirements, (iii) the
Non-U.S. Holder is subject to tax pursuant to the provision of the
U.S. tax law applicable to certain United States expatriates, or (iv)
the Company is or has been a "U.S. real property holding corporation"
for federal income tax purposes at any time during the five-year
period ending on the date of disposition or such shorter period that
the Class A Common Stock was held (unless the Non-U.S. Holder did not
hold, directly or indirectly, at any time during this period, more
than 5% of the Class A Common Stock and such stock is regularly traded
on an established securities market). The Company believes that it is
not now and has not been within the past five years, and anticipates
that it will not become, a "U.S. real property holding corporation"
for U.S. federal income tax purposes.

FEDERAL ESTATE TAXES

Class A Common Stock owned or treated as owned by an individual who
is a Non-U.S. Holder at the time of death will be included in the
individual's gross estate for U.S. federal estate tax purposes, unless
an applicable estate tax treaty provides otherwise. Such individual's
estate may be subject to U.S. federal estate tax on the property
includable in the gross estate for U.S. federal estate tax purposes.

U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX

The Company must report annually to the IRS and to each Non-U.S.
Holder the amount of dividends paid to, and the tax withheld with
respect to, each Non-U.S. Holder. These reporting requirements apply
whether or not withholding was reduced or eliminated by an applicable
tax treaty. Copies of these information returns may also be made
available under the provisions of a specific treaty or agreement with
the tax authorities in the country in which the Non-U.S. Holder
resides. The United States backup withholding tax (which generally is
a withholding tax imposed at the rate of 31% on certain payments to
persons that fail to furnish the information required under the United
States information reporting requirements) generally will not apply to
dividends paid on Class A Common Stock to a Non-U.S. Holder at an
address outside the United States. However, backup withholding and
information reporting generally will apply to dividends paid on Class
A Common Stock to beneficial owners with addresses in the United
States that are not "exempt recipients" and that fail to provide in
the manner required certain identifying information.

The payment of the proceeds from the disposition of Class A Common
Stock to or through the U.S. office of a broker is subject to
information reporting and backup withholding at a rate of 31% unless
the owner certifies its non-U.S. status under penalty of perjury or
otherwise establishes an exemption. The payment of the proceeds from
the disposition of Class A Common Stock to or through the foreign
office of a foreign broker generally will not be subject to backup
withholding and information reporting. In the case of the payment of
proceeds from the disposition of Class A Common Stock effected by a
foreign office of a broker that is a U.S. person or a "U.S.

<PAGE>

[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]

related person", existing regulations require information reporting on
the payment unless the broker receives a statement from the owner,
signed under penalty of perjury, certifying its non-U.S. status or the
broker has documentary evidence in its files as to the Non-U.S.
Holder's foreign status and the broker has no actual knowledge to the
contrary. For this purpose, a "U.S. related person" is (i) a
"controlled foreign corporation" for U.S. federal income tax purposes
or (ii) a foreign person 50% or more of whose gross income from all
sources for the three-year period ending with the close of its taxable
year preceding the payment (or for such part of the period that the
broker has been in existence) is derived from activities that are
effectively connected with the conduct of a U.S. trade or business.

Any amounts withheld under the backup withholding rules from a
payment to a Non-U.S. Holder will be allowed as a refund or a credit
against such Non-U.S. Holder's U.S. federal income tax liability,
provided that the required information is furnished to the IRS.

UNDERWRITING

Subject to the terms and conditions of the Underwriting
Agreement, the Selling Stockholders have agreed to sell to each of the
International Underwriters named below, and each of such International
Underwriters, for whom Goldman Sachs International, Dillon, Read &
Co. Inc., Merrill Lynch International and J.P. Morgan Securities Ltd.
are acting as representatives, has severally agreed to purchase from
the Selling Stockholders, the respective number of shares of Class A
Common Stock set forth opposite its name below:

Number of Shares of
International Underwriters Class A Common Stock
-------------------------- --------------------
<S> <C>
Goldman Sachs International . . . . . . .
Dillon, Read & Co. Inc. . . . . . . . . .
Merrill Lynch International . . . . . . .
J.P. Morgan Securities Ltd. . . . . . . .
-----------
Total . . . . . . . . . . . . . . . . 1,133,000
===========

</TABLE>

Under the terms and conditions of the Underwriting Agreement, the
International Underwriters are committed to take and pay for all of
the shares offered hereby, if any are taken.

The International Underwriters propose to offer the shares of
Class A Common Stock in part directly to the public at the initial
public offering price set forth on the cover page of this Prospectus
and in part to certain securities dealers at such price less a
concession of $ ____ per share. The International Underwriters may
allow, and such dealers may reallow, a concession not in excess of $
____ per share to certain brokers and dealers. After the shares of
Class A Common Stock are released for sale to the public, the offering
price and other selling terms may from time to time be varied by the
representatives of the U.S. Underwriters and the International
Underwriters.

The Company and the Selling Stockholders have entered into an
underwriting agreement (the "U.S. Underwriting Agreement") with the
underwriters (the "U.S. Underwriters") for the Offering in the United
States (the "U.S. Offering"), providing for the concurrent offer and
sale of 4,532,000 shares of Class A Common Stock in the U.S. Offering.
The initial public offering price and aggregate underwriting discounts
and commissions per share for the Offerings are identical. The
closing of the offering made hereby is a condition to the closing of
the U.S. Offering, and vice versa. The representatives of the U.S.
Underwriters are Goldman, Sachs & Co., Dillon, Read & Co. Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and J.P. Morgan Securities
Inc.

Pursuant to the agreement between the U.S. and International
Underwriting Syndicates (the "Agreement Between") relating to the
Offerings, each of the International Underwriters has agreed or will
agree pursuant to the Agreement Between that, as a part of the
distribution of the shares offered as a part of the International

<PAGE>

[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]

Offering, and subject to certain exceptions, it will (i) not, directly
or indirectly, offer, sell or deliver shares of Class A Common Stock
(a) in the United States (including the States and the District of
Columbia), its territories, its possessions and other areas subject to
its jurisdiction (the "United States") or to any U.S. persons, which
term shall mean, for purposes of this paragraph: (x) any individual
who is a resident of the United States or (y) any corporation,
partnership or other entity organized in or under the laws of the
United States or any political subdivision thereof and whose office
most directly involved with the purchase is located in the United
States, or (b) to any person who it believes intends to reoffer,
resell or deliver the shares in the United States or to any U.S.
person, and (ii) cause any dealer to whom it may sell such shares at
any concession to agree to observe a similar restriction. Each of the
U.S. Underwriters named herein has agreed or will agree pursuant to
the Agreement Between that, as a part of the distribution of the
shares offered as a part of the U.S. Offering, and subject to certain
exceptions, it will offer, sell or deliver the shares of Class A
Common Stock, directly or indirectly, only in the United States and to
U.S. persons.

The Company has granted the International Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase
up to an aggregate of 169,950 additional shares of Class A Common
Stock solely to cover over-allotments, if any. If the International
Underwriters exercise their over-allotment option, the International
Underwriters have severally agreed, subject to certain conditions, to
purchase approximately the same percentage thereof that the number of
shares to be purchased by each of them, as shown in the foregoing
table, bears to the 1,133,000 shares of Class A Common Stock offered
hereby. The Company has granted the U.S. Underwriters a similar
option exercisable for up to an aggregate of 679,800 additional shares
of Class A Common Stock.

The Company, the Selling Stockholders, the other Lauder Family
Members who are stockholders of the Company (other than The Lauder
Foundation) and Morgan Guaranty have agreed that, during the period
beginning from the date of this Prospectus and continuing and
including the date 90 days after the date of the Prospectus, they will
not offer, sell, contract to sell or otherwise dispose of any shares
of Class A Common Stock or any security convertible into or
exchangeable for shares of Class A Common Stock without the prior
written consent of Goldman, Sachs & Co., except as otherwise provided
in the Underwriting Agreement and the U.S. Underwriting Agreement and
except for transfers among Lauder Family Members.

Each International Underwriter has also agreed that (a) it has
not offered or sold and prior to the date six months after the date of
issue of the shares of Class A Common Stock will not offer or sell any
shares of Class A Common Stock to persons in the United Kingdom except
to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances
which have not resulted and will not result in an offer to the public
in the United Kingdom within the meaning of the Public Offers of
Securities Regulations of 1995, (b) it has complied, and will comply,
with all applicable provisions of the Financial Services Act of 1986
of Great Britain with respect to anything done by it in relation to
the shares of Class A Common Stock in, from or otherwise involving the
United Kingdom, and (c) it has only issued or passed on, and will only
issue or pass on, in the United Kingdom any document received by it in
connection with the issuance of the shares of Class A Common Stock to
a person who is of a kind described in Article 11(3) of the Financial
Services Act of 1986 (Investment Advertisements) (Exemptions) Order
1995 of Great Britain or is a person to whom the document may
otherwise lawfully be issued or passed on.

<PAGE>

[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]

Buyers of shares of Class A Common Stock offered hereby may be
required to pay stamp taxes and other charges in accordance with the
laws and practice of the country of purchase in addition to the
initial public offering price set forth on the cover page hereof.

The Company and the Selling Stockholders have agreed to indemnify
the several Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933.

Certain of the Underwriters and their affiliates have provided,
are currently providing, and expect to provide in the future,
commercial and investment banking services to the Company and its
subsidiaries and certain Lauder Family Members for which such
Underwriters or their affiliates have received and will receive fees
and commissions. Morgan Guaranty, an affiliate of J.P. Morgan
Securities Inc. and J.P. Morgan Securities Ltd., is a lender to the
Company and certain Lauder Family Members.

<PAGE>

_______________

TABLE OF CONTENTS
PAGE
----

Available Information . . . . . . . . . 2
Incorporation of Certain Documents
by Reference . . . . . . . . . . . . . 2
Prospectus Summary . . . . . . . . . . 4
Price Range of Common Stock and
Dividends . . . . . . . . . . . . . . 7
Use of Proceeds . . . . . . . . . . . . 7
Selected Consolidated
Financial Information. . . . . . . . . 8
Management's Discussion and
Analysis of Financial Condition and
Results of Operations. . . . . . . . . 9
Business. . . . . . . . . . . . . . . . 17
Directors and Executive Officers. . . . 23
Selling Stockholders. . . . . . . . . . 27
Description of Capital Stock. . . . . . 27
Certain United States Tax Consequences
to Non-United States Holders . . . . . 31
Underwriting. . . . . . . . . . . . . . 33
Legal Matters . . . . . . . . . . . . . 35
Experts . . . . . . . . . . . . . . . . 35

5,665,000 SHARES

THE ESTEE LAUDER
COMPANIES INC.

CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)

------------------
[Logo]

------------------

GOLDMAN SACHS INTERNATIONAL

DILLON, READ & CO. INC.

MERRILL LYNCH INTERNATIONAL

J.P. MORGAN SECURITIES LTD.

REPRESENTATIVES OF THE
UNDERWRITERS

================================================================================

<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the expenses expected to be
incurred by the Registrant in connection with the Offerings described
in this Registration Statement, other than the underwriting discount.
All amounts, except the SEC registration fees, the National
Association of Securities Dealers, Inc. ("NASD") filing fee and the
New York Stock Exchange additional listing fee, are estimated.

<S> <C>
SEC registration fee . . . . . . . . . . . . $ 98,215
NASD filing fee . . . . . . . . . . . . . . . 30,500
New York Stock Exchange additional
listing fee . . . . . . . . . . . . . . . . *
Printing, engraving and postage fees . . . . *
Legal fees and expenses . . . . . . . . . . . *
Accounting fees and expenses . . . . . . . . *
Miscellaneous . . . . . . . . . . . . . . . . *
------------

Total . . . . . . . . . . . . . . . . . $ *
============
</TABLE>

The Selling Stockholders have agreed to bear their proportionate
share of the expenses.

-------------
* To be provided by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Generally, Section 145 of the General Corporation Law of the
State of Delaware (the "GCL") permits a corporation to indemnify
certain persons made a party to an action, by reason of the fact that
such person is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation or
enterprise. To the extent that person has been successful in any such
matter, that person shall be indemnified against expenses actually and
reasonably incurred by him. In the case of an action by or in the
right of the corporation, no indemnification may be made in respect of
any matter as to which that person was adjudged liable unless and only
to the extent that the Delaware Court of Chancery or the court in
which the action was brought determines that despite the adjudication
of liability that person is fairly and reasonably entitled to
indemnity for proper expenses.

The Company's By-laws provide for indemnification of its
directors and officers to the fullest extent permitted by law.

Section 102(b)(7) of the GCL enables a Delaware corporation to
include a provision in its certificate of incorporation limiting a
director's liability to the corporation or its stockholders for
monetary damages for breaches of fiduciary duty as a director. The
Company has adopted a provision in its Certificate of Incorporation
that provides for such limitation to the full extent permitted under
Delaware law.

II-1

<PAGE>

The directors and officers of the Company are covered by
insurance policies indemnifying against certain liabilities, including
certain liabilities arising under the Securities Act which might be
incurred by them in such capacities and against which they may not be
indemnified by the Company.

ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES

(a) Exhibits:

Exhibits identified in parentheses below are on file with the SEC
and are incorporated herein by reference to such previous filings.
All other exhibits are provided as part of this electronic
transmission.

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------

1.1 Form of Underwriting Agreement.**

(3.1) Restated Certificate of Incorporation (filed as
Exhibit 3.1 to Amendment No. 3 to the Company's
Registration Statement on Form S-1 (No. 33-97180)
on November 13, 1995 (the "S-1")).

(3.2) Form of Amended and Restated By-Laws (filed as
Exhibit 3.2 to the S-1).

5.1 Opinion of Weil, Gotshal & Manges LLP with respect
to legality of the Class A Common Stock.**

23.1 Consent of Arthur Andersen LLP.

23.2 Consent of Weil, Gotshal & Manges LLP (included in
the opinion filed as Exhibit 5.1).**

24.1 Power of Attorney (included on the signature page
to this part II).
-------------
**To be filed by amendment

II-2
<PAGE>

ITEM 17. UNDERTAKINGS

The Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (and
where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-3 and has duly
caused the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in New York, New York, on this
27th day of January, 1997.

THE ESTEE LAUDER COMPANIES INC.

By: /s/ Robert J. Bigler
-----------------------------------
Name: Robert J. Bigler
Title: Senior Vice President and
Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Leonard A. Lauder, Ronald S.
Lauder and Robert J. Bigler, or any of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and
all capacities, to sign any and all amendments (including post-
effective amendments) to this Registration Statement, and to sign any
related Registration Statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-
fact and agents, full power and authority to do and perform each and
every act and thing required and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them or their substitute or substitutes,
could lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons
in the capacities and on the dates indicated.

Signature Title Date
--------- ----- ----

/s/ Leonard A. Lauder Chief Executive January 27, 1997
---------------------- Officer and
Director
(principal
executive
officer)

/s/ Ronald S. Lauder Director January 27, 1997
----------------------
Ronald S. Lauder

/s/ William P. Lauder Director January 27, 1997
----------------------
William P. Lauder

/s/ Fred H. Langhammer Director January 27, 1997
-----------------------
Fred H. Langhammer

/s/ Marshall Rose Director January 27, 1997
-----------------------
Marshall Rose

II-4
<PAGE>

Signature Title Date
--------- ----- ----

/s/ P. Roy Vagelos Director January 27, 1997
--------------------
P. Roy Vagelos

Director January __, 1997
--------------------
Faye Wattleton

/s/ Robert J. Bigler Senior Vice January 27, 1997
-------------------- President and
Robert J. Bigler Chief Financial
Officer
(principal
financial and
accounting
officer)

II-5

<PAGE>

EXHIBITS

The following is a complete list of Exhibits filed as part of
this Registration Statement, which are incorporated herein:

EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------

1.1 Form of Underwriting Agreement.**

3.1 Restated Certificate of Incorporation (filed as
Exhibit 3.1 to Amendment No. 3 to the Company's
Registration Statement on Form S-1 (No. 33-97180)
on November 13, 1995 (the "S-1")).

3.2 Form of Amended and Restated By-Laws (filed as
Exhibit 3.2 to the S-1).

5.1 Opinion of Weil, Gotshal & Manges LLP with respect
to legality of the Class A Common Stock.**

23.1 Consent of Arthur Andersen LLP.

23.2 Consent of Weil, Gotshal & Manges LLP (included in
the opinion filed as Exhibit 5.1).**

24.1 Power of Attorney (included on the signature page
to part II).
-------------
**To be filed by amendment

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement under the
Securities Act of 1933 of our reports dated August 13, 1996 included
in the Form 10-K of The Estee Lauder Companies Inc. for the year ended
June 30, 1996 and to all references to our Firm included in this
Registration Statement.

/s/ ARTHUR ANDERSEN LLP
Arthur Andersen LLP

New York, N.Y.
January 27, 1997