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H&R Block, coming off a 50 percent jump in its profits thanks in part to changes in corporate taxes, has decided to close 400 tax offices that weren't generating enough business.
CEO Jeff Jones announced the closings Tuesday afternoon after the company reported its financial results for the tax season that ended in April.
Jones also said the Kansas City-based tax preparation company is shifting its strategic focus away from a "one season at a time" approach that relied too heavily on promotions and in which the company had "stopped telling our story."
H&R Block now will pursue growth in customer totals and revenues by investing more in technology and improving its tax offices' consistent quality. Culling poorer performing offices is part of that process.
"The big opportunity for us is in new clients," Jones said during a conference call with investment analysts.
No job losses are expected from closing the tax offices, but the company will spend $15 million to $20 million to cancel leases. The offices have been poorer performing sites for some time and generally are within 5 miles of a stronger office.
"We're still working the list of which ones and how many," Jones said during an interview with The Star.
H&R Block traditionally culls its offices, but the 400 expected closings is larger than normal. The company will work to get clients who used those offices to use nearby Block offices next year. Tax professionals at the closing sites will move to other Block offices.
As for the shift to a growth strategy, Jones had said in December ahead of the recent tax season that he favored increasing H&R Block's customer counts over increasing prices as a way to reach the best financial results for the company. That strategy worked during the recent tax season.
Next year, the company's financial results will feel the impact of its plans to spend more heavily on information technology and other improvements that Jones called "essential work" during the conference call. The results, he said, would play out over time as improving Block's ability to retain customers and attract new ones.
Financially, profits at H&R Block jumped by 50 percent for the tax season that ended in April, when compared with a year earlier. The $613 million profit came on revenues of $3.15 billion, which were 4.1 percent higher than a year earlier.
A chief reason for the surge was the company's own sharply lower tax bill. H&R Block reported a 6.5 percent effective tax rate. That reflected not only the corporate tax rate changes but also Block's fiscal year, which stretches from May 1 to April 30 rather than following the January-to-December tax year.