H&R Block quietly rolls toward tax season but vows to make fundamental changes

H&R Block hopes its coming tax season will halt recent customer losses.
H&R Block hopes its coming tax season will halt recent customer losses. File photo

Expect big changes but less talk from H&R Block executives as tax season rolls into view.

The Kansas City-based company took a shellacking during last tax season and faces great pressure to turn things around. Its shares have lost about 40 percent of their value in the last 12 months.

“We can’t afford to have another season where we’re down almost a million clients,” CEO Bill Cobb had said last August as the company was reporting its painful 21 percent drop in profits.

He vowed then that H&R Block’s marketing this tax season would be “fundamentally different.” Everything would be “on the table,” he’d said.

At the time, Cobb also canceled the company’s traditional investor day preview of the tax season, which otherwise would have been held this week.

“The most important thing that would come out of that meeting every year was the (company’s) plans for the upcoming tax season,” said analyst Alexander Paris at Barrington Research, a regular at Block’s event. “There wasn’t much guidance on that until the investor day.”

Cobb had said he wanted his team focused on getting H&R Block’s tax strategy right, rather than preparing speeches, slide shows and videos for the event, which was held last year at the New York Stock Exchange.

This year, investors will have to settle for a standard quarterly conference call on Wednesday afternoon. Block will hold the call after releasing its financial results for the seasonally slow months of August, September and October.

Such calls typically last an hour, including time for questions.

It’s a sharp contrast from the investor day event. Last year, Cobb and five lieutenants held court for more than two hours of presentations — then they took questions for 40 minutes.

Plus, the CEO and others were around for informal conversation, making the investor day all the more valuable to attend.

“You could walk up and have a chat with them,” said Mark Palmer, an analyst at BTIG Research. “It’s a pretty packed house.”

Attendees say they could make a day of the event, starting with breakfast before the presentations and wrapping up with lunch. H&R Block made sure there was a Block official at each table to answer questions.

It is unclear how much Cobb and other executives will talk about the coming season during the conference call Wednesday. But analysts will be asking for details.

So far, Block has offered a few insights.

On Friday, the tax preparation giant said it is offering free online filing for 1040EZ and 1040A filers, including their state tax returns, which a Credit Suisse analyst called “an important step” in gaining customers again.

Block also is bringing back refund loans to customers.

The loans are part of a “strategy to increase (Block’s) relevancy with early season clients and to arrest client decline,” the company said in a late October filing with the Securities and Exchange Commission. It said two banks were providing funding capacity for up to $1.45 billion in refund advance loans to customers.

Analyst Michael Millman, who has attended many Block investor days, said investors are in a “show me” mood. He wants to see more than those refund loans.

“Hopefully, they’ll have more things in their briefcase,” Millman said.

Mark Davis: 816-234-4372, @mdkcstar