William Lauder: I think you should assume that. Our business is soft in the US and it will put pressure on our margin but we try to manage our business globally and we try to manage our business to meet our financial obligations and commitments to you the investment community. We are using our strength in international to not only fund investments in international but to also offset some of the difficulties that we have in the US.

Richard Kunes: When we talk about softer businesses we look at the productivity of our makeup artist, beauty advisor, consultant and we will adjust that staff versus that productivity. If traffic is down we naturally adjust the staff to that so we maintain a selling cost. It is not business as normal; we are adjusting our staffing based on the environment.

Alice Longley (Buckingham Research): By adjusting the staffing at retail are you basically supporting fewer people or supporting them less?

Richard Kunes: We will not fill openings as quickly if we do not have the productivity from the existing counters. Each of our beauty advisors, each of our brands, has a certain benchmark and whether it is $200,000 per person or $150,000 per person, we expect to get that from every employee at the counter. We adjust that up and down based on the business.

Amy Chasen (Goldman Sachs): In the third quarter you expect your US business to slow materially given some of these excess inventory levels, but when you look at the second half of the year do you expect that to be substantially slower than the first half?

William Lauder: For the second half of the year our sales in the US will be the slowest growing region. I do not think you will see the softness in the fourth quarter that we are going to see in the third quarter. The third quarter is being impacted by what was sold in the second quarter which did not totally sell through. The reorders are softer but it is not disastrous for us. Everything other than US department stores in the Americas region grew by 25% in the second quarter and that trend we expect to continue.

Amy Chasen (Goldman Sachs): It sounds like in the third quarter your US sales are going to be down, but you are saying that the fourth quarter growth will not be as bad as the third quarter growth. Does that mean that for the fourth quarter you expect sales to be up?

William Lauder: Our third quarter’s sales growth rate will be down, but our sales will not be down in the third quarter versus prior years. Our fourth quarter growth rate will be more in line with the first and second quarter.

William Schmitz (Deutsche Bank): Where the margin leverage is coming from?

Richard Kunes: In the first quarter we exceeded what our guidance because we had not spent all of the money that we anticipated and in particular in some of the international markets and so we said that that spending would carry over into our third quarter and in the guidance that we gave for the second quarter we knew about the $40 million shift from the first quarter to the second quarter so that was all sort of built in. We are investing heavily internationally, our business is doing terrific, and some of those investments are markets where the profitability is still developing. China and to some extent Russia, where we are making heavy investments but they do not generate the same profitability level but it drives share growth, it drives sales and it positions us well for the future.

William Schmitz (Deutsche Bank): Accounts receivable only increased about 9.5% year over year but sales were up 16%, does that mean that sales slowed down toward the back end of the quarter?

Richard Kunes: They did to some extent in the US, that would be a true statement, but other than that it is a pattern of our collections and our DSOs did go down by a couple of days and that is just a mix of business. There is no particular item that stands out as to why we did a better job collecting our receivables in this quarter than the same quarter of last year. The only thing where your statement holds true to some extent is in the Americas where we started to see that slowdown of reordering towards the end of our second quarter and now it will carry over into the third quarter.

Connie Maneaty (BMO Capital Markets): You had positive currency from Canada and Latin America. Could you explain the decline in Americas operating profit because there is almost a 26 point spread between sales growth of 9% and the profit decline of 17%?

Richard Kunes: There was some carry of expenses although most of it was internationally related, there was some carry over from quarter one into quarter two in the Americas. We also spent heavily in particular in this quarter on IT related spending including or SMI initiative. There was about $7 million of incremental expense in the second quarter versus history. The third thing was that there was some amortization of intangible assets related to some recent acquisition that impacted our second quarter to some extent more so than it will normally happen because we did some adjustments to our first quarter results. They were not substantial but it just increased the number in the second quarter so those are the three major items that are out there.

Connie Maneaty (BMO Capital Markets): With inventory days continuing to go up do you envision at some point having to take an inventory write down?

Richard Kunes: No, if at the end of the first quarter our inventory days were up 19 days year over year and at the end of this quarter they are up nine days year over year so we are beginning to get our inventory back in line. We do not anticipate anything unusual. We did mention that there was about a 20 basis point impact or a ten basis point impact due to obsolescence and that is a charge for reserve in case there are any issues with the inventory. From an accounting perspective we are not seeing anything from a major adjustment or write off due to inventory.

Connie Maneaty (BMO Capital Markets): Is that ten to 20 basis point impact due to obsolescence, is that a new feature in cost of goods and should we be putting it in our models going forward?

Richard Kunes: No, it is just a reflection. There is always provision for obsolescence that goes into any of our financial results. It is just incrementally higher because of our higher inventory position in this particular quarter.

Lauren Lieberman (Lehman Brothers): Could you talk about the UK market?

William Lauder: Our business in the UK continues to be robust and healthy. It is our largest business outside of the US. We have the second greatest share, our share in North America is greater, but our UK business is healthy and good. The comp growth in the second quarter in the UK was 8% which is healthy relative to our growth in North America but for the UK market that was the first time in about three or four quarter for them where they did not grow on a double-digit rate. Everything that you read about the overall health of the economy in the UK would indicate that they will follow a pattern like the US; however we have tended to see in our business that that does not follow lock step with the US. I would expect that there will be some continued softness in the UK. We are not seeing that yet and they launched their internet business in the fall of this year and was extraordinary strong relative to the size of the total market and we were impressed and we continue to see strong demand for a number of our brands across the country.