Hello. On today's call are Fabrizio Freda, President and Chief Executive Officer and Tracey Travis, Executive Vice President and Chief Financial Officer.

Since many of our remarks today contain forward-looking statements, let me refer you to our press release and our reports filed with the SEC, where you'll find factors that could cause actual results to differ materially from these forward-looking statements. To facilitate the discussion of our underlying business, the commentary on our financial results and expectations is before restructuring and other charges and adjustments disclosed in our press release.

All net sales growth numbers are in constant currency and all organic results exclude the impacts of acquisitions. You can find reconciliations between GAAP and non-GAAP figures in our press release and on the Investors section of our website.

As a reminder, references to online sales include sales we make directly to our consumers through Brand.com site and through third-party platforms. It also includes estimated sales of our products through our retailer’s websites.

During the Q&A session, we ask that you please limit yourself to one question so we can respond to all of you within the time scheduled for this call. And now I'll turn the call over to Fabrizio.

Thank you, Rainey and hello everyone. Let me first with that each of you are in good health and that your families are well.

Our hearts continue to be with those impacted by COVID-19 and our focus remains first and foremost on the health and safety of our employees, their families and our consumers. To our employees, you have lifted us up from caring for the physical and emotional wellbeing of colleagues to make in-hand sanitizer, seeking opportunities to support charities around the world, generously contributing to LCK [ph] employee relief fund and so much more.

In December the company made an addition donation to the employees' fund and we continue to make progress on our citizenship and social impact commitments. Our employee's agility and creativity empower the company to deliver the exceptional results we announced today.

For the second quarter in fiscal year 2021, sales rose 3% a 12 point positive swing from the decline of 9% in the first quarter. Impressively time brands grew led by the double-digit growth from Estée Lauder and La Mer as well as great performance from Jo Malone London.

Le Labo and Frédéric Malle also rose double-digits. We focus our investment decisions on engines of growth while employing strict cost discipline in other areas delivering strong double-digit adjusted diluted earnings per share growth.

In the quarter we faced increasing complexity from the pandemic, yet still delivered the results that exceeded our record second quarter of fiscal year 2020 when sales grew, the strongest in 20 years in our seasonally largest quarter. Our multiple engines of growth strategy continued to prove its value, enabling us to pivot with a GDP in this challenging moment.

We successfully activated efforts behind the growth engines of skincare, fragrance, Asia-Pacific, travel retail in Asia and global online. Our skincare category performance extraordinarily.

It's accelerating growth reflected the strong locally relevant innovation, successful year strategies, compelling ingredient narrative and deeper consumer relationships enabled by sophisticated data and analytics. Growth of our high repeat Hero products was broad based across sub categories from cleanses to watery lotion, serum, eye care and moisturizers.

Our skin care business has continued to grow from strength to strength, bolstered by the teaser mind of the ritual of skincare as an expression of healthcare. From entry prestige to luxury, our brands excelled in skincare.

Many brands contributed demonstrating the breadth of our performance. Dr.

Jart provided incremental sales from our double-digit organic growth, we did appealing brand positioning. The Estée Lauder brand once again delivered double-digit growth across several of these Hero franchises in skincare.

It's new advanced narrative serum was a powerful force, thanks to its new formula, a luxurious, more sustainable glass bottle. The serum delivered a healthy fit to Advanced Night Repair eye and these two Hero products benefited from their synergies and desirable sets.

The brands revitalizing supreme franchise accelerated significantly, gaining momentum with its Hero moisturizer. La Mer leadership in luxury skincare group as consumers demand for its iconic products with powerful proven secrecy sort.

Here two serum was a vibrant sub category. It's new debt concentrate was a big contributor to growth, amplifying trends of Hero like Van De La Mer and the treatment lotion.

The new Genaissance de La Mer concentrated night balm performed exceptionally well, driving the brand's ultra luxury franchise to new highs. Clinique returned to growth lifted by skincare as it's Hero franchises that are focused on how to solve skincare problems like acme and dark spot, even better clinical interrupter is now firmly established as a core performance of the brand and continues to deliver significant growth.

It was complimented by an acceleration in the brand's three-step product and acne solution lines. Our luxury and our seasonal fragrances captivated consumer desires for Tone for Beauty, Joe Malone London, Le Labo, Frédéric Malle and Kilian Paris innovations in iconic products were both highly sold.

These brands all delivered stellar online sales growth along with improving brick-and-mortar sales in certain markets. Joe Malone London and Le Labo home products continue to flourish as consumer crave the sense to alleviate the sanctuary of their homes.

Our global online channel delivered outstanding double-digit sales growth, significantly accelerated from the previous quarter and driven by every region. Growth was robust across the board as brand.com third party platforms, pure play and retail.com all contributed meaningfully.

Our go to market strategies for each of these were tremendously successful, particularly during Black Friday, Fiber Week and [indiscernible] 1111 Global Shopping festival, driving strong consumer acquisition and retention. We continue to enhance our brand sites with high catch services.

These strategies -- these strategic investments are elevating the consumer experience from convenience buying to enriched shopping, completely useful tools, targeted recommendation and expert advice. Across our brands, we are uniquely combining technology and data with our talented youth advisor on a global scale.

Digital is proving to be incredibly powerful, driving over twice the engagement as well as higher conversion and retention rates. In the quarter, we added digital try [ph] to more sites around the world.

The number of sessions nearly doubled from the pre quarter, reflecting both the expansion to additional sites as well as big uptick in activity on brand site that had previously launched it. Digital chat is also proving to be very impactful.

In North America conversion of live chat session is nearly four times higher than average conversion in the market. Digital chat usage accelerated during the holiday season as our skilled beauty advisor offered useful insights and customized education to consumers, driving much higher basket site than average.

Our brands are increasingly offsetting other engaging digital services and the experienced. Two examples are found on Clinique.com.

Clinique Reality, the brand skin agnostic tool extracts the consumer in a highly personalized manner, driving notably strong conversion rates and Clinique Skin School addresses the growing demand for credible education in an entertaining format with a new focus on real-time interactions. Skin School brilliantly integrates live chat and trend-based programming with a brand expert consultant.

We continue to pursue high touch innovation online as evidenced by the Estée Lauder brand new AI driven product recommendations based on real-time consumer behavior and past preferences that we're piloting in North America. We anticipate that these dynamic merchandising holds great promise and are excited to scale in this year for Estée Lauder as well for other brands.

We are welcoming new consumers on our brand sites, but also successfully driving repeat enable in part by our loyalty programs. In the first half of fiscal year 2021, the number of loyalty programs members who both rose strong double-digits driven by travel digit growth of international loyalty program members.

In so many ways, we are building deeper relationship with our consumers. Our brands delivered excellent results for [indiscernible] 1111 Global shopping Festival leveraging the latest live streaming technology and capabilities to generate product discovery.

For 1111 the Estée Lauder brand moved into the number one rank in beauty. La Mer notched number one rank in luxury beauty.

Mac was the number one prestige make up brand and Jo Malone London was the leader in fragrance. We have long believed in the compelling growth prospects of online and had been investing in it for more than two decades.

At the onset of COVID-19, we nearly doubled our rate of online investment, including accelerating our consumer facing investment like digital, social selling, Omni channel or loyalty programs. We're also increasing our investment in our digital infrastructure and fulfillment network to meet the much higher traffic and demand.

In addition to these capital investments, we continue to optimize our advertising investment in digital channels as well as invest in our great online talent domestically in our headquarters in New York and in our local markets around the world. I'm on the regions, Asia-Pacific delivered the strongest sequential improvement with sales growth accelerating from 7% to 27%.

Mainland China prospered while Korea and several smaller markets contributed organically. In Mainland China momentum in brick-and-mortar carried into the quarter with sales again growing double-digit.

Online accelerated significantly, elevated by a remarkable 1111 event. Nearly every brand grew as across Le brands we reached more consumers, thanks to locally relevant innovation Hero products, rich storytelling and successful influencer activations, as well as the dedication and creativity of the local team in China.

Travel retail grew single-digit organically driven by strong results in Asia, particularly in Heinen as we fulfilled the desires of the travelling Chinese consumers with a deal merchandizing. Traffic to Heinen continued to rebound and duty free annual partial limit had increased threefold there in July, providing a favorable benefit in the quarter as consumers saw to spend to the new annual limit before year-end.

Conversion was also a strong driver, owing prepaid, which newly offered live streaming. Across channels, demand from Chinese consumers accelerated, especially in skincare and fragrance.

The long-term growth opportunity we foresee in the dynamic Asia-Pacific region rebounded. Over the last fixed demands despite the challenges of the pandemic we made three significant investment commitments as we strive to best meet the desires of Chinese and Asian consumers.

In late 2019, we acquired the Korean based skincare brand Dr. Jart, while in nearly 2020, we committed to build an end to end innovation center in Shanghai.

Today I'm pleased to confer we're building a state of art manufacturing facility near Tokyo. We're on track to open our Shanghai innovation center in spring 2022.

This will increase our local capabilities in product design and formulation. We're also strengthening our consumer insight and trend analytics in this vibrant market.

We broke ground in our new manufacturing facility near Tokyo, which is to be operational in late 2022. It will enable us to better meet demand and increase speed to market in the region.

The facility will house advanced technologies and engineering achievement, with high standards of sustainability and safety and will be designed to promote flexible and leading-edge working environment. Across our engines, innovation contributed significantly in the second quarter ahead of our aggressive goals driven by focus on fewer bigger and better Hero innovations.

We have an enticing pipeline of new product launches for the remainder of our fiscal year. Already our are two in skincare, the Estée Lauder brand launched supreme bright.

It addresses the trend of bright in Asia and is also highly relevant for consumers of old skin tones around the world with it's even better skin tone, dark spot benefits meeting top needs of the multiethnic consumers. Clinique introduced monster sewage search one handed hour with an exclusive deal that provides hydration that goes 10 layers deep into skin surface and also lasts 100 hours even after you wash your face.

In the Clinique launched even better clinical serum foundation a weightless liquid foundation with 24 hours ware, a good for skin ingredients to have visibly improving skin instantly and over time. Our strategic focus and investment in our ESG goals remain of utmost importance for us in our key stakeholders and we continue to advance our work in the quarter.

Let me share a few examples in sustainable ingredients in packaging and inclusion and diversity for the many areas of our recent progress. We're pleased to have joined CDPs 2020 Climate A list having been awarded the highest score of A.

In January Aveda proudly announced that its products are bigger as a mission driven brand this was a natural step for Aveda, a brand that continuously works to reduce its environmentally but while also responding to the fast-growing consumer trends. Our brands are employing more innovative and sustainable packaging as they launch new products while also improving the packaging of existing products, the two new Clinique products, which I just described two such example of innovation launching in more sustainable package.

To continue to invest in, in advance our diverse talent, we created a sponsorship program for equitable advance and professional development of our black talent from every chair leadership development program will ensure that our black employees have the support and focus of senior executives and equitable access to leadership training, mentorship and career development opportunities. In closing we delivered excellent performance amid the pandemic, leveraging the strength of our multiple engines of growth strategy, Hero products and robust innovation.

We did this while leading our values as we increasingly embedded ESG in everything we do, focusing on safety and wellbeing of our employees, making progress on our environment goals, enacting on our racial equity commitments. We also invested in technology and data for new capabilities to support accelerating growth drivers.

These accomplishments and actions give us confidence that we are well-positioned to continue to drive recovery and return to our long-term growth targets after the period of recovery. I'm incredibly grateful to our employees whose grace and fortitude are making us a better company throughout this very difficult moment.

While the road ahead will still be challenging together we can be optimistic that brighter days are coming. I wish each one of you good health.

And now, I'll turn the call over to Tracy.

Thank you, Fabrizio and I certainly echo your comments regarding our wonderful employees. As a reminder, my commentary today is adjusted for the items that Renee mentioned at the beginning of the call and net sales growth numbers are in constant currency.

Our net sales rose 3% in the second quarter. The COVID-19 pandemic continue to pressure traffic in our brick-and-mortar distribution, but sales declines in stores were entirely offset by strong growth across our online channels and in travel retail in Asia.

The December 2019 acquisition of Dr. Jar added approximately three point to net sales growth.

Sales performed above our expectations in large part reflecting the outstanding execution during the annual team 1111 Shopping festival as well as the many activations our brands deployed during key shopping events like Brett Black Friday and Fiber Week. In addition to the acceleration and growth we saw in skincare, fragrance sales were strong in the quarter and home fragrance continued to resonate during the pandemic.

Our gross margin increased 10 basis points compared to last year's second quarter. Favorable channel mix was driven by the growth in our online sales and also reflects lower costs for testers in our brick-and-mortar distribution.

From a category perspective, the acceleration of sales in skincare also benefited gross margin. The positive mix was partially offset by higher obsolescence and a negative currency impact.

Operating expenses improved by 160 basis points as a percent of sales, reflecting both the strength of our sales leverage during key shopping moments and our cost containment measures. Many of our COVID related cost containment measures remained in place during the quarter and contributed to our improved profitability along with the benefits of our leading beauty forward initiative.

Lower selling cost and other in-store promotion cost also reflected the mix shift of our business from brick-and-mortar to online as well as some remaining government subsidies in certain countries. Given the challenged environment, we continue to experience periodic tour closures.

Partially offsetting the cost favorability was higher investment behind our strategic priorities, including China, online and digital technology as well as the inclusion of Dr. Jart expenses this year.

As a result, our operating margin rose 170 basis points to 24.3%, a significant accomplishment during this important holiday quarter considering the record results achieved in the year ago period. Our effective tax rate for the quarter came in at 15.9%.

The lower tax rate for the quarter was primarily due to the recognition of a onetime retroactive benefit related to recently finalized guilty US tax rate regulation. We now expect our effective tax rate for the year to be approximately 20% reflecting this development.

Diluted EPS of $2.61 increased 24% compared to the prior year. EPS was higher than expected due primarily to the combination of strong performance during the key shopping moments in the quarter and the lower tax rate while maintaining strict cost management.

This performance is truly a testament to our team's ability to navigate the business through the difficult macroenvironment. Our plans under the post-COVID business acceleration program are progressing.

Through the past six months, we've taken charges of $46 million primarily to close underperforming freestanding retail stores in our EMEA region and an employee-related cost as we align resources to support our online business and our digital capabilities. As the program continues in the second half we expect to continue to rationalize our retail footprint primarily in Western market.

Additionally, we took an $81 million impairment charge for our glam glove brand reflecting the COVID-related disruption of the brand growth plans and lower than expected growth from its planned geographic expansion. During the first half of our fiscal year, we generated $1.98 billion in net cash flows from operating activities, which was substantially above the prior year, due primarily to improvements in working capital management.

Accounts payable increased reflecting timing-related items that also support our second-half growth plans and accounts receivable reflected the rapid growth in our direct to consumer business and a five-day improvement in DSO. We invested $250 million in capital expenditures to support key investment areas like additional production capacity and technology.

Conversely we spent far less on counters and stores due to lower traffic and brick-and-mortar doors. We ended December with $5.5 billion in cash and cash equivalents just above our total debt.

With the strength of our cash position, our free cash flow generation and our confidence in our business drivers as we recover, we expect to reinstate share repurchases and maintain our dividend during the second half of our fiscal year. So now let's turn to our outlook, we are obviously encouraged by the sequential improvement we saw in every region as we continue to manage through the effects of the pandemic.

While cases of COVID-19 and the variance of surging again in some markets, resulting in renewed door closures, restrictions and lockdowns, we are optimistic that once the vaccines reach enough of the global population, the restrictions on travel and social activities will ease. Nonetheless we've not assume a second wave.

Therefore, the more accelerated global recovery we originally anticipated in our second half has clearly been delayed. So while we are pleased with our performance in the first half, the prolonged uncertainty with respect to the pace and timing of the recovery makes it still difficult to provide sales and EPS guidance for the full year.

We do continue to expect sequential, quarterly sales growth improvement as comparisons to the prior year ease and the global recovery unfolds. The inclusion of six months of incremental sales from the acquisition of Dr.

Jart, which benefited our growth in the first half adds two percentage points to sales growth for the full fiscal year. As you know, several of our retail customers are liquidating or reducing their store footprints.

Notably Lord & Taylor, Staged Stores and [indiscernible] are liquidating and Macy's, Nordstrom [ph] have announced store reductions. Additionally, we expect to close certain freestanding stores in North America and EMEA now that the holidays are behind us.

In aggregate, the law sales represent between 1% and 2% of our total full-year sales and we do expect to recapture a portion of those sales in other locations in online. While we will continue to execute our cost savings programs, it is important to recognize that some of the temporary cost measures we took last year will be returning in the coming months.

The principal areas of returning cost includes some additional advertising, promotion and point-of-sale employee cost, which were all meaningfully reduced during the time that retail doors were closed last year, as well as the restoration of certain temporary pay reductions we took. Travel and retail consulting costs are expected to ramp up more slowly.

Costs will also increase as offices reopen and our facility to continue to implement enhanced safety protocols. We will incur incremental spending for our new Asian manufacturing plant and innovation center and as we continue to see signs of consumer's willingness to resume their normal activities including return to stores, we plan to invest incrementally as we normally did pre-pandemic in our fourth quarter to strongly support our launch programs and begin to reaccelerate our makeup business in the upcoming fiscal year.

Looking at the near term, for the third quarter we expect sales to rise between 10% and 11% in constant currency. We have a terrific lineup of product offerings and activations for the Lunar New Year and we expect continued strong online sales.

You may recall that we had an exceptional January last year. We have lacked the purchase of Dr.

Jart at the beginning of our third quarter and the brand is now part of our organic growth. Currently, is expected to be accretive by approximately three percentage points.

Third quarter EPS is expected to be between $1.10 and $1.20 reflecting the sales outlook and a careful balance between cost containment measures and investment in key growth areas such as online and technology and currency is expected to add $0.03 to EPS. We remain optimistic that the pandemic will be controlled and out of home activities will resume under a new normal.

With a solid first half behind us, we've proven we can deliver in the context of a difficult macroenvironment while continuing to support our employees, our social and environmental commitment and invest in the capabilities needed to sustain our growth over the long term. The resiliency of our business during this time and the passion and dedication of our teams, reinforce our confidence in our strategy and the continuation of our ability to deliver long-term sustainable growth.

And that concludes our prepared remarks. We'll be happy to take your questions at this time.

So I wanted to focus on topline, clearly very strong performance in skincare and e-commerce during COVID. Can you talk about the sustainability of that strength in each of those areas as we move to a post-COVID environment as well as what some of your key strategies might be to maintain momentum post-COVID and then on the makeup side, that's obviously been a laggard area for obvious reasons.

How quickly do you think category growth recovers in makeup post-COVID and what's your outlook there, thanks?

Okay. So first of all, the key drivers for us let's go one by one, skincare very sustainable.

The consumers always were more and more enthusiastic for skincare. We have an amazing pipeline innovation for the future years and the strengths of Asia and particularly of China is internal mix one of the biggest builder of skincare because the penetration of skincare, the penetration of beauty for skincare in Asia is very, very high.

So we assume the skincare strengths will continue after COVID. The other driver is China and the potential of China as we explained very well at our Investor Day is for the long-term.

The Chinese -- the demographic arrived the potential of the smaller cities of tier three and tier four cities will continue to grow. The power of online and offline distribution will continue to be very strong.

In TR imagine that the TR growth today, the TR results are mainly driven by Asia and particularly by the domestic travel acceleration within China. So in the future, the domestic travel acceleration within China will continue, but the international travel will be reinstated and so this will be a father acceleration in the long-term when COVID will abate.

So all our key drivers are really here for the long-term and most importantly as you know, our drivers tend to be accretive in profitability. So they will clear resources over time.

The lager is a brick-and-mortar particularly in the West. Now this obviously in the short term is an issue because there is a lack of traffic and the lack of traffic has created issues of productivity but also on this one, we are working for rebuilding this for the long-term and so what is a drag today, a big drag on what is about one third of our business is still in brick-and-mortar in the West and so you should imagine that the traffic post COVID will come back that there are all the retailer closures that Tracy summarized, which are happening that will reduce the amount of stores which not be sustainable in the long term and our business acceleration program, which is really putting that right sizing if you want all the channel for us rebuilding productivity over time.

And so the combination of traffic closures and business acceleration program is our answer to in the long term after COVID been able to make also brick-and-mortar a gain and engines of growth, which will be profitable in building the company for the long-term. So we are very positive in summary on the continuous trends post COVID of our drivers, new accelerated drivers and we are working to make also what is a drag in the short-term rebuilt as a positive long-term channel which is the brick-and-mortar in the West.

Internal makeup was the last part of your question, makeup is very much driven by user locations. So user location meaning to going to the office, going out for dinner, having etcetera.

So clearly the makeup category growth will be associated with the post recovery and we will be ready for that. Our point of view is that when the user location will go back into the lives of people, the recovery will be fast and steep and so we are ready for that.

Now if when do we assume this will happen frankly, the answer is difficult to answer the same way Tracey explained is difficult to answer, when vaccination all the rest will have a full impact, but we believe that from what we see in the market just casting the full of 2021, we could see beginning of certain usage location to the established because of this makeup growth with follow back in our opinion starting from that moment particularly.

I was curious if we could talk a little bit about e-commerce development in Western Europe in particular because I think with certain hidden if you will in the numbers you work through contributions from travel retail and so on is that Western Europe while still down of course is down I think a lot less than has been the case thus far through the pandemic. You mentioned the Cyber Week kind of shopping dynamic in Western Europe, but my sense is that that is a channel that had been somewhat less developed.

Historically, so I'd love to hear more about how that build up and thinking about kind of stickiness of that behavior going ahead particularly in a quarter to whether aren't big shopping events that are typical for that market thanks.

So first of all the online business has done very well this quarter plus 60% globally and is interesting we are growing double or triple digit in every brand, every region, every channel, a meaningful channel brand.com, retail.com, third party platform pure plays and so Western Europe is the same. Western Europe is growing depending by market double-digit or triple digit in online and obviously the holiday season has been because of the lockdown as you know in Western Europe particularly COVID was pretty high in November, December.

Because of this, the brick-and-mortar were closed in countries like the UK as an example, December was a super difficult month and so it was no regular Christmas holidays in brick-and-mortar and obviously UK was not the only place and so because of this we were able to pivot to online in an historical way. I think our teams have done an amazing work in taking care of our consumer online when they were because of proven behavior for COVID now going into the brick-and-mortar and what we've seen that this works in many, many cases meaning again the consumer's certain categories we're working because of repeat meaning the consumer didn’t do without their preferred Le Mer cream or their preferred advanced whatever and so we got a lot of the selling via the online channel.

But also we are able to stick to their gifting habits and we created gifting opportunities and delivering all those for gifting etcetera. So it was a lot of activity and invention in this area.

Now this online in general, I believe the online will continue to be very strong also in the long-term and this acceleration will continue also post COVID and one of the reason for that which is particularly true in Western Europe is that the new online focus created growth online, more than created new consumers including more mature consumers. Online particularly in Europe was really dedicated to millennial or younger consumers while during COVID, more mature consumers came online and they're lacking it and they're becoming loyal and so they will also post COVID have a bigger percentage of their shopping online than before.

On top of this, if you think that we are adding high touch services online, so what were the services that in before were available in brick-and-mortar now gradually but they're also available online and we've been able to scale the speed online. Just to give you a number to understand our ability to scale new ideas is today digital try [ph] is already available in 90% of our brand.com sales internal coverage.

Now imagine that that it was not even close to that six months ago and so the consumer responded to that and this is driving also in Western Europe a lot of online and probably sustainable and more loyalty online across different group of consumers. So online had a big role in Western Europe in quarter two and will continue to have a bigger and growing role over time in the next years.

Question is around the landscape where in North America we've seen some pretty unique partnerships recently with [indiscernible]. Are you expecting to participate in these partnerships?

I know historically math hasn’t been that appealing but maybe with ultra target structure what's coming your brand expense? And then I guess secondly if you think about the post behavior of consumer retailer post pandemic, how comfortable are you with the entirety of this brand portfolio today if that ever makes sense?

Thank you.

So I didn’t understand the second question.

Are there any brands thinking of the makeup portfolio in particular that you would ever consider investing on the other side of the pandemic. I am just curious on your comfort with the entirety of the portfolio today?

So the first answer is yes, we are working with our partners and discussing the ultra target and the calls opportunities as you said as part of your question. This will depend on which brands in our portfolio these two opportunities may fit different brands in our portfolio and so we are evaluating these with our partners and we are considering participation by brand to these activities and this could be a driver of future acceleration of the COVID in North America as well, importantly to underline these two opportunities are both brick-and-mortar and online and so obviously it will be very important also to been able to manage the online part of that opportunity.

In term of the portfolio of brands, we continuously look at our portfolio. We look at our portfolio for efficiency and we open with Dundee's already in the past to rationalization decisions in our portfolio meaning closing brands that for a good reason do not -- cannot sustain the long-term investments and we continue looking into acquisitions an opportunity for reinforcing our portfolio in areas where we have strategic opportunities or strategic apps.

So this is a continuous process and during COVID this is continuing.

So Fabrizio I had a question just on your China business, I was curious what you're seeing right now in the makeup category in China?

Yeah the makeup category in China is stronger than makeup in the other regions because as I say responded to broader social locations and the user locations, but it's still decline, so is not different than the rest of the world China meaning skincare is very, very strong, fragrance is accelerating and makeup is large even in China however, on a completely different proportion because when you see -- when you think of this nature just gave before that makeup is completely correlate to the location of user in China because of the good control of COVID and because of the occasions like business offices are open, people are shopping more regularly, brick-and-mortar shopping is more present in most of the cities. Because of these more occasions makeup is in better shape but still is the lag between the categories and mostly in China I'd say from our consumer understanding is because of mask waving meaning China is better controlling COVID but also better controlling COVID because there is very disciplined mask wearing and mask wearing also is the reason for less use of makeup.

So stronger than the rest of the world but still not as strong as it will be after COVID and post COVID where we assume there will be or expect that will be a strong recovery on makeup also in China.

Fabrizio, I wanted to go back on the online discussions, you guys have done a great job with analytics and understanding consumer behavior and given how much migration has occurred on one, I'm just curious what your data and research and analytics are saying about the stickiness. For instance, you talk about the very mature consumers and developed markets migrating online, how strictly do you think that behavior will be I think that will be an important discussion going forward given the margin differential between online and some of the other channels, thank you.

It's a very good question and again our point of view this will be very sticky because the people shopping online and obviously some of them are shopping online because the brick-and-mortar were closed for showing the case of luxury, but they're lacking it and we see all the statistics, all the data telling us they are enjoying the skills. For example, our loyalty programs are working better and better and we have more loyalty program as we discussed and they're getting expanded and the level of loyalty is going up and the re-pastures rate meaning they're coming, that is going up.

Then we see conversions very strong and traffic increasing and there are ways where the conversion will be driven will be maintained after. The most important of the investment we're doing in order to maintain conversion also after COVID is the high touch services transfer online.

So the chart with the consultants, digital try on, the live streaming opportunities, the use of our particularly the brand.com in this case also has media platform because we see that the time that the consumers are spending on online is increasing dramatically because when the digital try-on service, the possibility to consult, they spend more time and this time is time of disposure to our equity messages. So this is media value, this is really media value meaning we have more than half billion consumers coming on our site and more in this moment and then imagine that they stay nine minutes and they say if we're to buy media to speak to half a billion consumers for nine minutes this will be a huge cost while building place is another benefit of our selling operations.

So there is a lot of value in these high touch services. What they will do is they will increase differentiation of our sites from us.

They will increase traffic because people are coming not only to buy product for the services and will maintain or possibly farther increase conversion after COVID and then finally will increase the value of our online as media value and so this is a very positive view for the long-term. Obviously we believe that there is a lot of consumer that will continue to shop also in brick-and-mortar after COVID and there is no one consumer there is only online, only brick-and-mortar.

I believe the consumer would love the omnichannel speed particularly after COVID they will be anxious to get a gain to brick-and-mortar experience, so they will come back and that's why we are building around these realities this expectation, imagine better omnichannel platform where the consumer will be able to choose the percentage of time or the speed in online and how much they want in brick-and-mortar and that will navigate and on the two channels in new ways. I believe that companies that will have brands that will have a good omnichannel model in the future will have a competitive advantage.

First just a clarification, Tracey I believe you said that you were adding additional production capacity, so just curious what categories, what regions you were looking at for that and then my question is really around the margin progression especially given this quarter. So I think that's the highest quarterly operating margin you’ve achieved, there is a couple of companies.

So realizing of course that there is a lot of more and more expenditures that are coming right now, but as you think about second half long-term, are there things you burn over the course of almost 12 months now on areas you can come back -- cut back on spend more permanently or are there areas where you have to just push even harder and as you think about specifically for Q3 what's planned in Q3 because while you're looking for margin expansion, it looks like it would only imply about similar to what you achieved in fiscal Q2 despite COVID obviously now entering the base. Thank you.

So regarding our production capacity as you’ve seen from our results over the last couple of quarters, clearly where we have been in need and have been investing in terms of production capacity is in skincare and we have invested in North America, we've invested in Europe and as you heard us announce this morning in our prepared remarks, we are also investing in a new facility in Asia to support primarily skincare and there will be some makeup primarily foundation as we're thinking right now in Asia. So very much having capacity closer to where our strong demand growth is will be a real benefit to us and we're looking, were certainly looking forward to that.

As it relates to the margin, I would as I said in my prepared remarks Olivia, we had done an excellent job of controlling cost last year once the pandemic hit. Many of those cost controls were temporary controls.

When you think about the management salary reductions, some of the rent abatements that we got, given the fact that our stores were closed, some of the furloughing benefit and some of the other back on we controlled headcount, TV, etcetera. So selling terms of the learning going forward, clearly there are some areas of I'd say more discretionary cost as we emerge out of the pandemic that we will continue to control, but the long-term sustainable cost controls really come from our cost saving programs.

That's where the permanence, more sustainable cost take up comes from. So that's the reason why you're seeing if you think about what we said last year in terms of our cost programs and the significant amount of management that we did in the third and the fourth quarter to control costs given the fact that all of our brick-and-mortar doors over the course ended up closing that some of those costs certainly will be back in the second half in the third and the fourth quarter.

But we will continue to manage costs in a disciplined way as we have up to this point.

So I just wanted to follow up on the operating margin question, I think it's important EMEA strongest margin we've seen, fragrances I think strongest margin we've seen and from just hearing the answer to that question, it sound like there was -- there has been a lot of efforts around cost savings, but certainly the channel dynamic as well with EMEA online doubling and certainly you’ve seen strengthen in skincare in Asia and so I'm just wondering how much the margin improvement actually might be more sustainable over time from channel mix standpoint?

Absolutely, we have tailwind as it relates to margin given both our category mix growth as well as our channel mix growth. We do have obviously a fairly large footprint of brick-and-mortar that right now given where traffic is, is a bit of a drag on our margin performance and obviously we're addressing that and we will see once the pandemic is behind us and traffic returns, how fast it returns and in the meantime obviously we're taking some actions but we are very comfortable that we have margin progression ahead of us once the pandemic is behind on in a more sustainable way, especially given the tailwinds that we have to your point Chris.

I do want to follow that Tracey, at the Analyst Day, you walked us through a margin that was well into the high teens on what you knew on the business there as we look around at some of the businesses that I'd say are probably the closest in comparison to yours, we see some with some of the two on the operating margin. Obviously you’ve made structural changes that a few of the other analysts have run through, but you're going to end up in a bigger travel business, bigger digital business, bigger China business closing some stores that were a drag.

Do you see over the very long term 10 years can this business move into the 20s on margin?

It's again over the very long term, so look I'd say that certainly that is something that we are targeting, given all of our -- again given the tailwind in terms of channel growth and category growth might change obviously makeup might we believe makeup will recover and we're certainly going to support it to recover and the margins will improve on makeup as well. Makeup actually is the category that has the biggest penetration of freestanding stores and brick-and-mortar.

So it is a category that is particularly challenged from a margin standpoint in this particular environment. But certainly Michael, everything that we're doing from a business management standpoint and from a cost management standpoint would get us in that North Star of 20%.

And so to follow that, you’ve seen some really strong growth in time and it's come up a bit in the last two calls. We see something regularly even as recently this week, government is going to allow consumer shipments home versus physical pickup in the past.

So it seems like there is more and more friction coming out of that process and a lot of square footage is going to be added there. Does island change your travel retail business even after global economies reopened and change your outlook on travel and the Chinese domestic consumer?

Yes now as I said before, our travel retail business in the short term is really driven by Asia in general and China domestic in particular within China domestic, China is the star and is driven by the new traffic and by the increased conversion and by the quantities past just because of the regulations that you just explained and by the developmental of retail. So those are all very important long-term strengths of the channel which is developing.

Now when the normal travel will and will never be normal except, but the new normal travel stated after COVID and you are this progress of the domestic travel in China, the international travel in America and Europe within the rest of Asia and the Chinese consumer will go back travelling the world and that's obviously their desire one of the biggest aspiration shoot to the consumer when I look to the consumer opinions and research for the long-term. So when there will be a combination of the stated international travel with stronger domestic travel model that has been developed during this period, this will make still one of the most important long term channels of opportunity -- full of opportunities and again the biggest opportunity remain technically driving conversion.

So the conversion of travelers into bias and the retail, so the possibility of buying also without queuing in a store for a long time where you need to take a plane I think, those two elements are big drivers of the future travel retail independently from the short-term management of the cash. And in term of the China overall business, we do monitor Chinese consumers.

We spoke to it last time. This time our Chinese business between quarter one and quarter two is basically double the level of growth our China mainland business.

Our TR business has also accelerate but not as strong as the China Mainland business which was driven by amazing online events like 1111 during the November period. And so the combination of the development of online within China the sudden brick-and-mortar in China is still double-digit in quarter two was growing double-digit showing the potential of brick-and-mortar when COVID is more managed or will be more manageable and then travel retail continues to do very well and so when look is also to our total Chinese consumer consumption bringing altogether what is domestic travel retail and Mainland China we still see an acceleration in total from quarter one to quarter two and so we believe this is a very, very strong potentially.

We're working to manage it in a way which is still building equity of our brands, still protecting every single one of our partners been able to do good business with us for the long-term and that's our goal and we are working on it.

Maybe just follow-up and one other question, so just on online where does did that settle as a percentage of the category sales post pandemic and how do you think about retention of those incremental consumers on reseller.com versus your own brand.com. I've seen for you all and then just quickly, holistically I am thinking about your guidance on a go forward basis, are big events like 618 and 1111 becoming more important in driving your business meaning that the June quarter might be a little bit bigger than its historical level.

Same thing for the December quarter and to that part can you explain kind of why we saw somewhat weaker September quarter guidance and I think maybe people had expected the time is same for the March quarter today. Thank you.

Let me talk about the key shopping moments, absolutely particularly in the holiday period as you recall last year in the second quarter we had a 16% growth in constant currency, very much driven by key events that that are in the second quarter. The fourth quarter 618 did quite a bit actually less meaningful to the quarter than certainly 1111, but we are seeing concentration in some of those events and certainly that be in terms of our expectation on sales really flowed through to the bottom line in the second quarter.

Brand.com, online is different channels, they are brand.com, retail.com, pure play and third-party platform, which we did find that the chemo model and so these channels have different level of developments by counties and this is the results of consumer preferences and historical development of the channel. So it's not that we're driving.

We're driving all of them and particularly we work with our retail partners very close to drive their retail.com, which is most of the times doing very well, particularly in this period but also for the long-term. So for example in China, retail.com is very limited and white brand.com and most importantly, third-party platform is the most developed while in the US, retail.com is very, very strong and we see a lot of great developments recently in the retail.com of our key partners and this also serves in this moment as a mitigating factor to the brick-and-mortar issues of productivity that we've discussed before.

So we will continue develop each one of these channels and is the consumer deciding where to go and obviously we talked with each one of our retail partners to do the best possible job in every channel.