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## CHIEF EXECUTIVE’S REVIEW 

Dear Fellow Stockholders: 

Our Company performed very well in fiscal 2003 by continuing our 57-year tradition of uninterrupted sales growth and achieving our first $5 billion sales year in our history. We extended this remarkable streak by continuing to do what we do best: building brands, exciting customers with product innovation, evolving our 

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prospects for further growth, inside and outside the United States, are strong. 

distribution around consumer shopping patterns, forging more deeply into markets around the globe, strengthening our position in our four product categories and focusing on our most important relationships. 

While staying true to our core principles and strategies, we grew in many important ways over the last 12 months. Our portfolio of brands grew from 16 to 18 with the acquisitions of Darphin and the Michael Kors fragrance license. Darphin is a Paris-based skin care line that deepens our penetration in skin care, builds our position in Europe and places us in the very important independent pharmacy channel. Similarly, we have great expectations for the Michael Kors fragrances, which are inspired by a wonderfully dynamic designer. We believe the brand’s 

As for our financial results in fiscal year 2003, we generated net sales of $5.12 billion, an 8% increase over last year.Our net earnings were $319.8 million compared with $191.9 million in fiscal 2002 and diluted earnings per common share were $1.26, compared with $.70 in the prior year. Earnings in fiscal 2002 were impacted by a restructuring charge of $76.9 million after-tax, or $.32 per share, and a one-time charge of $20.6 million, or $.08 per share, related to the cumulative effect of a change in accounting principle. Earnings in fiscal year 2003 were impacted by a $13.5 million or $.06 per share after-tax charge relating to the pending settlement of an industry-wide lawsuit involving us and 20 other cosmetic companies and retailers. We determined that a settlement was in our best interest. While we did not do anything wrong, we decided to settle to allow ourselves to focus on our business and not become mired in protracted litigation. 

