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article imageH&R Block closing 400 locations as part of annual review

By Karen Graham     Jun 13, 2018 in Business
Shares of H&R Block fell 19 percent in early trading Wednesday, a day after it gave a sales guidance range of $3.05 billion to $3.1 billion for its fiscal 2019 versus the Wall Street consensus of $3.14 billion.
As of 1:34 p.m.on Wednesday, HRB was down $5.31 to $24.29, according to the Seattle Times.
During a conference call with analysts at the end of the bell on Tuesday, H&R Block CEO Jeff Jones said the decision to close the offices was part of its annual review and that the stores were mostly smaller ones. The tax preparer is also preparing price changes that will reduce its profit margins in the current fiscal year.
A spokeswoman for H&R Block told CNN News the company does not plan on cutting any jobs, adding that all the stores being closed are within a 5-mile radius of each other.
CNBC is reporting that BTIG analyst Mark Palmer wrote in a note to clients Tuesday. "The 4Q18 report that HRB delivered today after the market close saw simplification finally take a bite out of the company's future prospects."
US President Donald Trump plans to dramatically cut taxes for US businesses and individuals  slashin...
US President Donald Trump plans to dramatically cut taxes for US businesses and individuals, slashing the corporate rate from a top rate of 35 percent to 15 percent
Tax laws and DIY tax software
And that comment brings into focus two of the problems H&R Block is facing today. As for the new tax laws - President Donald Trump boasted on the campaign trail that his new tax laws would put H&R Block out of business, they would be so simple.
But strangely enough, the passage of the tax reform bill actually benefitted H&R Block in its first-quarter this year. Its tax rate fell to 6.3 percent from 33.1 percent a year ago.
"We believe that a better value proposition and more clear differentiation leveraging all the assets that make H&R Block the leading tax preparation company give us the opportunity to win back clients," said Jones during the conference call.
The increasing popularity of Do-It-Yourself (DIY) tax software, like TurboTax, TaxAct, and TaxSlayer has been hurting H&R Block, even though they have their own DIT tax software. Jones did say its DIY clients increased by 8 percent this last year.
As a matter of fact, Consumer Reports posted its review of do-it-yourself tax preparation software in March this year. They tested online and mobile offerings for each of the four major tax-prep companies: H&R Block, TaxAct, TaxSlayer, and TurboTax.
And while all four products did a good job of handling simple returns, were easy to navigate and guarantee accurate calculations, Consumer Reports said: "the best choices for someone new to do-it-yourself tax preparation are H&R Block Deluxe and TaxAct Plus."
But with all this good news about DIY software, Jones pointed out that many people, including more and more millennials, still want assistance when doing their taxes. He said half of the company' new customers were under the age of 35.
H&R Block is seeing first hand what a disruptive technology can do to a business. So it looks like the company is going to be targeting new customers. “Our client retention is very strong, but new client growth is not where we want it to be,” Jones said on the conference call.
Wall Street seems to share this verdict. Shares of TurboTax owner Intuit have surged 260 percent over the last five years, while H&R Block stocks fell over 15 percent over the same time period.
More about H&R Block, new tax laws, tax software, shares drop, firstquarter earnings
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