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Hasbro's 4Q results to show tough holiday

NEW YORK (AP) -- Toy maker Hasbro Inc. is expected to show muted spending for toys during the critical holiday selling period when it reports fourth-quarter results after the regular markets close on Thursday.

WHAT TO WATCH FOR: Hasbro, whose brands include Monopoly and Nerf, said on Jan. 25 that its fourth-quarter revenue failed to meet expectations because of weaker-than-expected demand over the holidays. It plans to cut about 10 percent of its workforce and consolidate facilities to reduce expenses. Analysts will want to know more details specifically about which toys did well and which didn't and whether business has improved in recent weeks.

While Hasbro said consumer demand was softer than it expected over the holidays, the season was expected to be tough. This was in part because retailers were ordering inventory more cautiously.

In addition, stores such as Wal-Mart, Kmart and Toys R Us beefed up their layaway and reservation services to encourage shoppers to buy toys early in the season, which meant items may have been scarce later on. Analysts will want to know how the aggressive layaway programs impacted the holiday spending patterns.

CEO Brian Goldner said in a statement that Hasbro created a plan during its fourth quarter to deliver $100 million in annual cost savings by 2015.

In the Jan. 25 announcement, the company said that it expects charges of about $37 million in 2012 and an additional $20 million to $30 million in estimated charges in 2013 related to its cost-cutting efforts.

Hasbro also said it anticipates fourth-quarter revenue of about $1.28 billion. At the time, analysts polled by FactSet predicted revenue of $1.4 billion. Unfavorable foreign currency exchange rates lowered results by $8 million.

For 2012, Hasbro expects adjusted earnings between $2.89 and $2.91 per share on revenue of approximately $4.09 billion. Unfavorable foreign currency exchange rates lowered revenue by $99 million.

At the time, Wall Street forecast annual earnings of $2.84 per share on revenue of $4.2 billion.

Hasbro isn't the only one who grappled with the blues in toyland during the winter holidays. Mattel Inc., the nation's largest toy manufacturer, also found the period challenging.

Mattel, the maker of Matchbox and Barbie, announced fourth-quarter results last week that fell short of expectations for the key holiday quarter. A litigation charge also weighed on results and net income fell 17 percent.

Toy makers are facing a slowdown in developed markets such as the U.S. and Europe as mobile devices and electronics steal attention from toys and consumers hold back on spending due to the uncertain economy.

In 2012, overall U.S. toy sales declined slightly to $16.5 billion from $16.6 billion, according to research firm the NPD Group.

WHY IT MATTERS: Toys, unlike food and shelter, are not necessities, so how well they are selling indicates how confident consumers feel about the state of the economy and their finances.

WHAT'S EXPECTED: Analysts expect earnings of $1.19 per share on revenue of $1.32 billion for the fourth fiscal quarter.

LAST YEAR'S QUARTER: Hasbro earned $1.06 per share on revenue of $1.33 billion.