H&R Block closing 400 locations and lowers outlook

H&R Block closing 400 locations and lowers outlook

H&R Block is dropping hard Wednesday in pre-market trading.

The new tax code could hurt the company's pricing, thus the 2019 guidance. Management said it expects 2019 revenue of $US3.05 billion ($3.8 billion) to $US3.1 billion.

The problem comes down to this: Reform simplified the process of tallying up a tax return for average filers, so much so that many of them are now signaling that they will no longer need H&R Block's hand-holding.

But both analysts agreed that the real issue which would "spook investors", as Silber put it, was H&R Block's plan to accelerate investments in technology, which along with office consolidations could squeeze margins by 380-580 basis points in the coming year.

H&R Block, the tax preparation firm with almost 10,000 locations nationwide, announced on Tuesday that it would close 400 locations amid a disappointing financial outlook for the rest of 2018. The number of U.S. tax returns H&R Block prepared increased by 2.5 per cent last year compared to the prior year, but its pricing is contingent upon the complexity of the filing.

H&R Block continues to attract new clients to its physical locations with millennials age 35 and under, accounting for half its new clients. Now, filings will be more straightforward and prices could be driven downward.

H & R Block Inc (NYSE:HRB) reported its latest quarterly earnings results late in the day Tuesday, sending its shares plummeting despite the fact that its profit increased compared to its year-ago totals.

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