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H&R Block Misses Estimates as Incentives Cut Revenue

Wednesday, 07 March 2012 05:24 PM

H&R Block Inc., the biggest U.S. tax preparer, posted a fiscal third-quarter loss and missed analysts’ estimates for a profit as promotions to lure customers reduced revenue.

Net loss from continuing operations for the three months ended Jan. 31 was $3.57 million, or 1 cent a share, compared with a loss of $11 million, or 4 cents, in the same period a year earlier, the Kansas City, Missouri-based company said Wednesday in a statement. The average estimate of nine analysts surveyed by Bloomberg, adjusted for certain items, was for a profit of 7 cents a share.

Chief Executive Officer William C. Cobb, 55, has increased spending on marketing and offered free services as he sought to recapture market share from competitors such as TurboTax maker Intuit Inc. H&R Block spent $121 million on advertising last year, the most among tax preparers and a 7 percent increase from 2010, according to Nielsen Holdings NV data, which exclude Internet and business-to-business marketing.

“We continue to work to position the company for long-term growth in revenue and earnings,” Cobb said in the statement.

H&R Block fell 12 cents to $15.87 at 4:01 p.m. in New York trading. The shares have dropped 2.8 percent this year.

The tax preparer grappled with the loss of revenue from refund-anticipation loans for the second year, after U.S. regulators prompted HSBC Holdings Plc to stop offering the loans, called RALs, in December 2010. RALs are secured by a customer’s expected tax refund, with annualized interest rates that may run as high as 124 percent at some firms.

H&R Block, in response to the loss of revenue from RALs, has promoted similar refund-anticipation checks and offered them free to some clients through Feb. 4, contributing to a $30.3 million decline in quarterly RAC revenue, according to the statement.

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Wednesday, 07 March 2012 05:24 PM
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