H&R BLOCK To Close 200 Company Locations, Cut 350 Jobs
H&R Block, Inc. has announced a “broad strategic realignment,” that includes the elimination of approximately 350 full-time positions throughout its Kansas City headquarters and nationwide field organization, streamline its seasonal workforce and close approximately 200 underperforming company-owned offices.
As part of the realignment, Amy McAnarney has been appointed President of Retail Client Services and “will be squarely focused on driving service delivery of tax and financial services to the company’s 14.9 million U.S. retail clients throughout its nationwide network of more than 10,000 company-owned and franchise offices.”
Recently, McAnarney served as Senior Vice President of Operations Support and Franchise Development where she was accountable for strategy deployment, client experience development, operations support, and the strategy and development of the company’s franchisee network.
How will this “broad strategic realignment” affect H&R Block franchise owners and employees of H&R Block franchisees? Share an opinion below.
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H&R Block Announces Strategic Realignment of Organization; Preliminary Fiscal 2012 Financial Results
KANSAS CITY, MO, Apr 25, 2012 (MARKETWIRE via COMTEX) — H&R Block, Inc.
- Strategic realignment expected to realize net annualized savings of $85 to $100 million by end of fiscal year 2013
- Company to record fourth quarter pretax charge for lease termination, severance and related costs of approximately $30 million, or $0.06 per share
- Company expects fiscal 2012 total revenues of approximately $2.9 billion and GAAP diluted earnings per share from continuing operations of $1.09 to $1.15
H&R Block, Inc. today announced a broad strategic realignment to create a more cohesive end-to-end client experience, to drive better efficiency and accountability throughout the organization, and to align its resources to balance long-term client and revenue growth. Overall, the company expects to realize net annualized savings of $85 to $100 million by the end of fiscal year 2013 as a result of the strategic realignment.
"Following the completion of my first tax season and a strategic review of our organization, we believe this realignment is an important next step in becoming a nimbler, more profitable, and more client-centric company," said Bill Cobb, H&R Block’s President and Chief Executive Officer. "We have settled on a new organizational structure and identified more efficient ways to operate. We believe these actions will allow us to compete more effectively, more quickly respond to our clients’ needs, and invest in our future as we intensify efforts in our core businesses."
As part of the measure, the company is offering a voluntary separation program to eligible employees throughout the organization. The company will review each application for voluntary separation on an individual basis. In the event the company does not achieve the targeted number of separations from the voluntary program, involuntary separations will follow. Overall, the company plans to eliminate approximately 350 full-time positions throughout its Kansas City headquarters and nationwide field organization. The company also will streamline its seasonal workforce and close approximately 200 underperforming company-owned offices.
"We believe offering a voluntary separation program is an important option to reduce our cost structure," added Cobb. "Changes such as these are always difficult and we appreciate the hard work and dedication of all our associates. However, these steps are necessary so we can create a stronger company, invest in our future, and produce greater value for our clients and shareholders."
U.S. Client Services
The company also announced an organizational realignment, including the formation of U.S. Client Services. The four executives leading this unit will all directly report to Cobb.
"It became clear during our strategic review and benchmarking that the model of having separate retail and digital leadership is no longer viable," said Cobb. "Consistent with many other consumer-facing companies who serve clients effectively through both retail and digital offerings, we have taken steps that will enable us to drive a more cohesive end-to-end client experience, and go to market in a seamless fashion for the 22.2 million clients we serve in the U.S. The four executives who will lead U.S. Client Services all have a proven track record of generating strong results, and their leadership, energy and commitment to our clients will serve us well as we continue our work to position the company for long-term revenue and earnings growth."
-- In-line with its philosophy of serving clients anywhere, anyway, and
anyhow they choose to be served, the company will integrate the
strategy, planning and development of all forms of U.S. tax services
under the leadership of Jason Houseworth, who was named President of
U.S Tax Services. Over the past two years, Houseworth has led the
company's digital tax operations to cumulative client growth of 26
percent and an estimated 150 basis points of cumulative share gains in
the digital online category. Houseworth joined H&R Block in 2008
and is credited with founding the company's Client Innovation Lab.
-- Susan Ehrlich, President of Financial Services, will continue to lead
the company's efforts to grow its H&R Block Emerald Prepaid
MasterCard(R) and all other forms of financial services offered to
its retail and digital tax clients. She also will continue to have
direct oversight of H&R Block Bank. Ehrlich joined H&R Block
in 2011 after a 20 year career in key leadership roles to develop and
deliver payment and credit solutions for JP Morgan Chase, Sears
Financial Services, WaMu Card Services (Providian Financial), and
Citibank. Ehrlich has been recognized the past three years by American
Banker magazine as one of the 25 Most Powerful Women in Finance.
-- Amy McAnarney has been appointed President of Retail Client Services
and will be squarely focused on driving service delivery of tax and
financial services to the company's 14.9 million U.S. retail clients
throughout its nationwide network of more than 10,000 company-owned
and franchise offices. She has held numerous executive positions since
joining H&R Block in 1997, including Vice President of Finance and
Vice President of Tax Strategy. Most recently, McAnarney served as
Senior Vice President of Operations Support and Franchise Development
where she was accountable for strategy deployment, client experience
development, operations support, and the strategy and development of
the company's franchisee network. She also founded The Tax
Institute(TM) at H&R Block, which quickly developed into a
leading source for objective insights into tax law, policy and
research.
-- Robert Turtledove, Chief Marketing Officer, will continue to drive the
company's client acquisition, retention and growth across U.S. Client
Services by leading the company's brand, online, field, research and
social marketing strategies. Turtledove joined H&R Block in 2009
after more than 25 years of experience in consumer, brand, retail,
digital and international marketing with some of the world's most
iconic brands such as Pepsi, Pizza Hut, Frito Lay and Unilever.
Phil Mazzini, President of Retail Tax Services, has resigned from the company effective April 30, 2012.
"I am very sorry that Phil has decided to move on, but I understand his desire to take on new challenges. He did a great job leading the growth of our U.S. Retail Tax business over the past two years and we wish him all the best in the future," said Cobb.
Chief Financial Officer
The company also announced it has retained Crist|Kolder Associates to lead the search for a new Chief Financial Officer. The company’s current CFO, Jeff Brown, will remain with the company and continue to serve as CFO during the search for a successor. Once a successor is found, Brown will transition to Chief Accounting and Risk Officer, where he will oversee all aspects of the company’s accounting function and coordinate its enterprise risk management approach.
"I would really like to thank Jeff for stepping into the CFO role 18 months ago during a period of significant change," said Cobb. "Jeff’s profound knowledge and insight into the business has been a valuable resource to H&R Block over the past 10 years. I am very pleased that we are able to continue leveraging his extensive leadership and accounting experience going forward."
Preliminary Fiscal 2012 Financial Results
H&R Block plans to report its fourth quarter and fiscal 2012 results on Tuesday, June 26 after the NYSE market close. The company expects to incur a pretax charge for lease termination, severance and related costs of approximately $30 million, or $0.06 per share, which will be recorded in the fiscal fourth quarter ending April 30. The company expects fiscal 2012 total revenues of approximately $2.9 billion and GAAP diluted earnings from continuing operations of $1.09 to $1.15 per share.
"Over the past year, we have sharpened our strategy, taken steps to resolve outstanding litigation, and shed non-core assets, which detracted focus away from our core businesses and negatively impacted our margins," said Cobb. "These actions, along with today’s realignment resulted in a number of charges in fiscal 2012. We believe we’ve essentially cleared the decks this year to better position us for long-term earnings growth, margin expansion and improved shareholder returns."
About H&R Block
H&R Block, Inc. has prepared more than 575 million tax returns worldwide since 1955, making it the country’s largest tax services provider. In fiscal 2011, H&R Block had annual revenues of nearly $3 billion and prepared more than 24.5 million tax returns worldwide, including Canada and Australia. Tax return preparation services are provided in company-owned and franchise retail tax offices by approximately 100,000 professional tax preparers, and through H&R Block At Home(TM) digital products. H&R Block Bank provides affordable banking products and services. For more information, visit the H&R Block Online Press Center.
SOURCE: H & R Block
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Now I’m John Hewitt…. Whatever you prove how silly you are.
Looks like Liberty Tax is doing well but HR Block was down in return count.
Liberty Tax Service Announces Fiscal Year 2014 Results: GAAP Diluted Earnings per Share Up 21%
VIRGINIA BEACH, VA–(Marketwired – Jun 18, 2014) – JTH Holding, Inc. (NASDAQ: TAX)
Systemwide revenue up 10.5%, to $421.2 million.
GAAP diluted earnings per share up 21% to $1.51.
Non-GAAP adjusted net income up 8% to $21.0 million.
JTH Holding, Inc. (NASDAQ: TAX), the parent company of Liberty Tax Service, today reported its financial results for fiscal year 2014. Total customers served in the U.S. and Canada including online grew 6% to 2.4 million. Tax returns prepared in offices in the U.S. grew 5%, exceeding the IRS reported growth rate of .7%. The Company’s average net fee increased 6%. The increase in average net fee and the number of returns processed coupled with more customers utilizing financial products drove increased revenue. Operating expenses grew slightly slower than revenue. Diluted earnings per share increased 21% to $1.51. On an adjusted non-GAAP basis, diluted earnings per share increased 4% to $1.45.
“Fiscal 2014 proved to be another year of continued growth for the Company, with revenue growth of 8%, overall growth in tax returns filed of 6% and systemwide revenue growth of 10.5%. We grew faster than the entire industry and continue to gain market share from our competitors,” said John Hewitt, Chairman and CEO. “Our franchisees are excited and motivated for next year and will continue to deliver outstanding service to our customers.”
Revenues increased 8% to $159.7 million
Royalty and advertising revenue up 7%
Tax preparation revenue up 41%
Financial products revenue up 14 %
Growth in assisted tax preparation volume of 4% and an increase in average net fee of 6% drove higher royalties and advertising revenue. Tax preparation revenue was up largely because of the growth in the Company’s online Do It Yourself (“DIY”) business, primarily driven by the acquisition of certain assets of an online provider, and more revenue generated through our Company-owned offices. Financial product revenue increased due to a higher adoption of financial products by customers, and because the Company was able to negotiate more favorable terms with vendors.
Operating Expenses increased 7% to $124.9 million
Selling, general and administrative expenses up 11%
Depreciation, amortization and impairment up 42%
Area Developer expense up 6%
The increase in selling, general and administrative expense was primarily due to supporting increased revenue and restatement-related expenses. The increase in depreciation, amortization and impairment expense was driven by the release of the first phase of the Company’s next generation of tax preparation software (NextGen). The increase in area developer expense is a direct reflection of the increase in royalties.
Balance Sheet and Cash Flow Highlights
Cash and cash equivalents at April 30, 2014 were $46.1 million, up 142% versus prior year.
Cash net of debt at April 30, 2014 was $17.6 million.
Cash flow from operations totaled $43.5 million for fiscal year 2014, up 53% versus prior year.
Diluted weighted average share count rose to 14.9 million shares for the 4th quarter and 14.5 million shares for the year. This increase of approximately 3% versus prior year had the effect of reducing our full year earnings per share by $0.05.
The increase in cash was largely due to improved performance, higher collections on notes and accounts receivable and proceeds from the sale of available-for-sale securities. This increase in cash flow allowed for the outstanding balance on the line of credit to be paid on March 7, 2014, eighteen days earlier than in 2013, and for the repurchase of 800,000 shares of our Class A common stock in June 2014 from an affiliate in a privately negotiated transaction to reduce our share count.
Securities
The Company plans to withdraw the Registration Statement filed on Form S-1 in 2011. Our market cap has increased and we are no longer categorized as a smaller reporting company, making us eligible to file a Form S-3 in October 2014, once we have been current with all SEC filings for a full year. We expect to maintain our flexibility going forward by making the Form S-3 filing at that time.
Bill,
One thing he always points out is that Liberty’s corporate has lent out $60 mill to franchisees as if that is a horrible thing. At least they have such a good credit line that they can extend it to their franchisees to help them grow their business.
You never point out that HR block also is owed $65mill from its franchisees. They must be going out of business soon too by your analysis.
John: What I have learned from being a franchisee is that there is no partnership relationship. Franchising is strictly for the benefit of the franchisor. At one time an individual/company developed a profitable business and then to grow the business they had to come up with the capital. With the advent of franchising they the company was able to shift the cost of expansion on to the franchisee.
For people looking to purchase a tax franchise the question is which of those offered provides me with the most bang for my buck. If we look at HR Block we see a $2,500 refundable deposit and charges a 30% royalty fee but no advertising fee. Liberty Tax service charges a $40,000 franchise fee and 14% royalty fee plus a 5% advertising fee. HR Block has somewhere between 17% to 20% of market share and Liberty has 2-3% market share.
To John’s question: HR Block had 4384 franchisee locations in 2013 with a an average loan balance of $10,789. The average number of returns prepared by location was around 1200 returns. Compared to a liberty which had 2211 locations in 2013 with an average operating loan of $16,000 and an average number of returns of just under 500 returns.
Liberty always refers to their grown but they are now in their 18 season. This year was the first year there was a decline in number of stores and if it wasn’t for the fact they opened 150 more Wal-Mart locations the decline would be more significant. Liberty currently has over 2500 locations available in the US while HR Block has a total of 10. The fact that HR Block has so fee locations benefits Liberty by driving want-to-be HR Block franchises to consider their franchisees. A drastic mistake.
Why would an HR Block franchisee need a loan? Based on all that’s been said we would expect positive cash flow. My instincts say it’s the high rent required for exclusivity in the malls and retail centers. Otherwise I don’t get it on the need for loans.
I can’t imagine anyone on this blog that would take a Liberty Franchise over an HRB Franchise for any reason. HRB is closing 200 under performing stores, so what. That is normal in any business, you weed out the bad and increase where there are better opportunities. If you look at the rise and fall of shopping centers in this country, there are a huge number that just cease to exist for one reason or another. I have two within 3 miles of where I live. HRB has a great reputation, they do a good job of teaching and hiring, they are experienced at both low and high end returns, and are very professional. Liberty on the other hand has a horrible reputation, hire people that have gone through two weeks of tax training, and most have no idea what they are doing. As for why a HRB would need a loan, I can suggest they get substantially better/costlier locations than Liberty, and if they are just starting out, that can be significant.
Frustrated,
I am a Liberty zee.
Obviously if you could obtain a Block instead of a Liberty franchisee for even close to the same $$$ in a reasonable location 999 out of 1000 people woudl hopefully choose Block.
That is simply not a realistic viewpoint though. Virtually NO ZERO virgin territories now exist for Block (and the ones that do prob exist for a reason) This means you are forced to acquire an existing location.
Two negatives about this, if the location is successful (which it may very well be since Block dominates the market) you will pay a pretty penny for it (most likely between 500k upwards of 1mil for an office doing 2000 – 3000 reutrns.)
OR
the office is mostly a flop definitely doing less than 1000 returns probably in the 400-700 range in which case you can prob obtain for only slightly more than the 40k virgin territory price Liberty has. An argument could be made however, that you may still be better off going with Liberty for the same or slightly less price tag and getting 16% lower royalties.
Currently in my state, only 5 offices are for sale (in the entire state) and again I’m sure they meet one of the 2 above scenarios. Of course no virgin territories are for sale thats just silly.
Also, it seems people love to throw these avg returns per office number around, while I’m positive Blocks avg per office numbers are probably at least double Liberty office numbers, One huge reason for the low number from Liberty is the huge influz of kiosks in the past couple seasons. I know for a fact the avg first year kiosk does 45 returns. Yes 45 returns and Liberty has alot of these first or second kisoks. these are counted as offices though so obviously an office that does 45 returns pulls an office that does 800-900 returns down to this 450 avg you speak of.
All in all for the entry price, Liberty is a great value investment. But…..if you have a mil laying around sure buy a successful block instead.
Ed,
Well said. I am sure all 2000 franchisees that are with Liberty including myself looked at HR Block and Jackson Hewitt before choosing Liberty Tax. Some may have even come on this website as I did. After doing their homework all 2000 decided that going the Liberty route made more sense for them.
I for one am happy with my decision and have recommended it to both friends and family as I think it is a good way to make a living.
John,
You know the ole saying “you can lead a horse to water but you can’t make him drink” I definitely feel that applies reading some of the posts on this site. Sometimes I just laugh out loud.
Yes, Liberty has its problems (some items they could probably improve on significantly) but what company/business doesn’t.
They throw all these REQUIRED items Liberty forces you to do when the reality (at least in my experience) is they pretty much leave you alone as long as you don’t rock the boat too bad. I definitely don’t meet my free return goal (while I do see the rationale and reason behind it, I’m definitely not 100% on board with this one)
I will definitely cut my office hrs during the slow season and def don’t overstaff an office and burn payroll. These are some items among many I may do a bit different than Liberty recommends but I make it work.
Honestly, I can make an office operate break even with as little as 250-300 returns and can make decent money with an office doing 500 returns if I am forced to do so. My worse performing office does just under 700 returns so thankfully I am not required to take extreme measures, but I have before when just startign out/building up a new office.
It’s a business people….you run it, either you make it work or you don’t Liberty is merely a tool to help you accomplish what you want. Everyone loves throwing up these avg numbers. While I’m sure no one has any way to verify this (you can look at all registered activve EROs on IRS website and formulate a hypothesis I guess though). My best guess (and it’s prob pretty accurate would be most mom n pops with a storefront do somewhere between 200-400 returns. Most operating out of house do 50-150 reutrns. I’m sure a mom n pop somewhere does well over 1k returns and makes a killing and they would be crazy to change anything although I argue if they ever want to get bigger than that 1 or 2 location they may have a hard time since no branding exists.
This is who Liberty is competing against anyway. Plenty of room for us and Block in this market. I mean no one realistically expects Liberty to be #1 in 2020. IF we are even in the same ballpark, I will be very very rich and hopefully only getting richer every year. I’m sure this buisness doesn’t work for everyone but I can promise ti works for some.
Ed,
Could not agree with you more. It’s very hard to do 100 free returns. The first year I tried my best and did 60 or so. I have not tried since, mainly because it is not enforced, but I can tell you those free returns from first year have paid off as some people I have charged every year since and they have referred more customers. I just don’t really like doing free returns and neither do my preparers.
Same thing with the extended hours, my first year I went by the book thinking they will force me to open those hours. I got nothing by opening at 7am.
This year during peak we opened 9 to 8 and in March we opened 10 to 7. I did open Sundays as i always got one or two customers.