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. Except when noted, our discussion of our financial results and our expectations are before restructuring and other charges. And as noted, our discussion of the fourth quarter will also be before sales shifts attributable to our Strategic Modernization Initiative. You can find a reconciliation between GAAP and non-GAAP figures in our press release and on the Investor Relations section of our website. Now I'll turn the call over to Fabrizio.Fabrizio Freda Thank you, Dennis. Good morning, everyone. We have now successfully completed 3 years of our long-term strategy, which has driven our momentum and produced superb results. Our business model continued to deliver strong sustainable sales growth that was highly profitable. I'm extremely pleased that in fiscal year 2012, for the second consecutive year, our company achieved double-digit sales gains and record profits despite difficult economic condition in some key markets. The company's 10% sales increase was about twice the rate of global prestige beauty, which means we gained share and further strengthened our position as industry leader. We also made significant progress against our strategic objectives. We continue to focus on fewer but more impactful products and an increasing number geared to local consumers in specific markets. We improved our pull-push activities, with innovative advertising that bring new consumers to our brands and at point-of-sales offered best-in-class, high-class services, both in person and online. Moreover, we did all this while reducing costs and rolling out SAP to more business units. Before I discuss the full year, let me touch on some key areas in the fourth quarter. We were encouraged that our business in important markets remained strong despite macroeconomic concerns. Local currency sales in the U.S. and Western Europe generated solid growth, while China and travel retail climbed strong double-digits. These results demonstrate strong demand for our products. As we have done in previous 4 quarters, we increased advertising spending over last year to build momentum in future quarters.
In fiscal 2012, our operating margin reached a record 14.2%, up 120 basis points. Our excellent performance give us the confidence to raise our operating margin goals yet again. And today, we are announcing a new target of 15.5% to 16% by the end of fiscal 2015. I am proud of the many financial milestones we achieved this year, which includes the following. Sales grew 10%, to $9.7 billion, driven by stronger business in every category and every region. We believe about 2% of the growth came from higher prices. We gained share in our distribution in many large markets, including China, France, Germany, Italy and Spain and also in the important travel retail channel. We believe we also gained share in the online channel globally. These share gains were driven by the skin care and makeup categories.By being financially disciplined, we leveraged our higher sales into even greater profit growth. Gross margin rose 140 basis points, to 79.5%, helping to drive operating margin improvement. Net earnings were $901 million and diluted earnings per share grew 23%, to $2.27, the highest in the company history. We generated $1.1 billion cash flow from operations, which enabled us to raise the dividends 40%, repurchase shares and invest in capital projects. The company also created greater stockholder value. Our total stockholder return was nearly 10% higher than our peer group. To keep the stock price appealing to a broad range of stockholders, we split the stock 2-for-1. Virtually our entire portfolio contributed to these terrific results. Combined sales from our top 3 brands grew double-digits. Estée Lauder's robust growth was driven by its surging skin care business, which increased sharply in every region. Clinique enjoyed a strong performance in makeup, thanks to product innovations, including foundations that offer great skin care benefits, as well as Chubby Sticks lip balms. In the first for the brand, Clinique advertised its top makeup products on television, which raised its profile, attracted new consumers and lifted sales. Our M-A-C brand now holds the top spot in prestige makeup in more than 10 countries, including the U.S., the U.K., Canada and Mexico. We strategically expanded M-A-C's distribution by opening about 125 doors in 5 new countries, 42 international cities and 5 foreign e-commerce sites.
Our high-end brands and luxury fragrances, which include La Mer, Bobbi Brown, Jo Malone, and Tom Ford, enjoyed terrific double-digit sales growth worldwide. Affluent consumers stayed loyal to our aspirational brands and our personal High-Touch services helps generate repeat business. La Mer, as an example, appeals to a broad range of consumers. It became the fastest-growing skin care brand in Europe. And we believe it generated more than 1/3 of its business from Chinese consumers around the world, who covet its luxurious skin care offerings.Looking at our business by geography. Our momentum in North America continued. Sales rose high single-digit, following a record performance the previous year. U.S. prestige beauty outpaced mass brands, due in part to our initiative with prestige retailers. Our company's must-have products in High-Touch service helped drive traffic in the U.S. prestige department store and specialty stores, where our brands gained share in skin care and converted shoppers from mass. Internationally, sales rose 12%. Latin America robust double-digit pace continued for the third consecutive year and was broad-based across countries, brands and categories. Our business in Brazil, one of the fastest-growing emerging markets, soared nearly 50% in local currency. M-A-C became the #1 prestige beauty brand in Brazil. At year end, it had 26 freestanding stores, including 6 new ones, and they are its main channel of distribution. As a company, we are the #1 prestige player in Mexico, our largest Latin America market. Business in Europe was solid despite struggling economies in the eurozone. In fact, 3 of our most mature markets, France, Germany and Italy, showed double-digit increases, due partially to the success of more pool advertising. Our brands continued to resonate in the U.K., which had mid-single-digit growth and outperformed prestige beauty. The emerging markets in the Middle East and Africa had exceptional double-digit growth for the year. We continue to expand many of our brands throughout the region. Read the rest of this transcript for free on seekingalpha.com