NOTE: “…many middle-income households could have an easier time filing their returns because of the nearly doubled standard deduction. Just 18 million filers will itemize their deductions for their 2018 taxes, down from 46.5 million in 2017, according to the congressional Joint Committee on Taxation. Many who take the standard deduction still seek tax-preparation assistance, but their needs may be less extensive than those who must track charitable contributions and other payments.”
Wall Street Journal
By Aisha Al-Muslim
June 13, 2018
H&R Block Inc. plans to close about 400 U.S. offices as the tax-services provider responds to the effects of a simplified tax code and a shift in customer behavior toward digital tools.
The closures make up 4% of H&R Block’s nearly 10,000 company-owned and franchise locations in the U.S. The Kansas City, Mo., company said the move isn’t expected to result in job losses and associates are expected to shift to other locations, a company spokeswoman said Wednesday.
The closures are part of a broader strategy to better position the company to retain customers and attract new ones.
“We aren’t as relevant as we need to be to today’s consumer,” H&R Block Chief Executive Jeff Jones said during a conference call with analysts Tuesday afternoon. “By differentiating ourselves and demonstrating why we are the best choice for consumers, we will position H&R Block as a modern brand with momentum.”
As firms like Intuit Inc., maker of the popular TurboTax products, and personal-finance portal Credit Karma Inc. gain customers, H&R Block thinks it can succeed as a cross-channel player, where users can easily move between filing returns online or getting in-person assistance. As part of the new strategy, the company plans to invest more in the ability to seamlessly go between the two channels. For the fiscal year ended April 30, U.S. assisted-returns business declined 0.6% and online returns rose 10.3% as consumers turn to do-it-yourself returns.
“We continue to be the only tax company that can serve clients however they want to be served,” Mr. Jones said on the call.
The company is also making changes to its pricing for tax preparation to improve its assisted-returns business in order to address the impact of the recent tax legislation on the company, executives said.
TurboTax, Credit Karma and H&R Block all offer free tax filings to Americans with simple returns. To compete and attract new customers, H&R Block has been offering some filers no-interest loans against their tax refunds.
Before the tax bill was passed, President Donald Trump singled out the company and said the legislation was designed to “make life very simple” for taxpayers.
“The only people that aren’t going to like this is H&R Block, they’re not going to be very happy,” Mr. Trump said in November. “That’s probably one of the only companies in the country that’s not going to be thrilled.”
For the largest corporations and many high-income households, the law that largely took effect for the 2018 tax year won’t be much simpler. But many middle-income households could have an easier time filing their returns because of the nearly doubled standard deduction. Just 18 million filers will itemize their deductions for their 2018 taxes, down from 46.5 million in 2017, according to the congressional Joint Committee on Taxation. Many who take the standard deduction still seek tax-preparation assistance, but their needs may be less extensive than those who must track charitable contributions and other payments.
As a result of the expected price changes, H&R Block said it anticipates revenue for fiscal 2019 of $3.05 billion to $3.1 billion, projecting the metric to decline as much as 3.5% from the year ended April 30. Analysts polled by Thomson Reuters were expecting $3.14 billion.
H&R Block shares were down more than 18% Wednesday. The stock is on track for its largest single-day percentage decline in about 30 years.
The stock dropped despite the tax preparation company’s beat on fourth-quarter earnings and revenue. Profit for the quarter jumped 46% to $1.14 billion due to the company’s own lower corporate taxes as a result of the recently passed tax legislation. H&R Block reported a 6.3% effective tax rate. It expects a tax rate of 23% to 25% for fiscal 2019 and beyond.
For the quarter, total revenue rose about 2.8% to $2.39 billion. In fiscal 2018, H&R Block had revenue of $3.16 billion, a 4% increase, and more than 23.3 million tax returns prepared world-wide.