Recession Takes Bite Out Of Tax Preparers, H&R Block (NYSE: HRB) Reports Fewer Filings

Last year’s recession and surging unemployment levels impacted many U.S. households and businesses.  However, it is just now impacting tax preparers like H&R Block (NYSE: HRB) who have seen filings drop more than 9 percent in the first two months of 2010 compared to a year ago.

The nation’s largest tax preparer reported the decline while releasing its fiscal third quarter results.  For that period, ended Jan. 31, the company did post better profits of $50.6 million or 15 cents a share compared to $47.4 million or 14 cents a share last year.  However, the gains were made on cost reductions.

Revenue for the period was actually 6 percent lower to $934.9 million from $993.4 million a year ago.  The decline was mainly attributed to a 7.1 percent decline in total tax returns prepared in the quarter. 

“While we are disappointed with our early results this tax season, we remain committed to improving our performance as the remainder of the season unfolds. We expect to outperform our competitors regardless of the external factors like unemployment rates, but we have not done so to-date,” said Russ Smyth, President and Chief Executive Officer of H&R Block.

With unemployment hitting double-digits in 2009 for the first time in roughly 25 years, the customer base for H&R Block, along with competitors like Jackson Hewitt, has contracted.

Though unemployment has stabilized recently, holding at 9.7 percent the past two months, a rebound in tax preparer’s customer base may not occur for the 2010 tax filing season as economists expect unemployment to remain at elevated levels for an extended period.