H&R Block Traditional Tax-Preparation Business

H&R Block Inc.'s (HRB) fiscal third-quarter earnings rose 6.9% on prior-year losses from discontinued operations as the largest tax preparer in the U.S. suffered from handling 7.1% fewer returns.

"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," said President and Chief Executive Russ Smyth. "We expect to outperform our competitors regardless of the external factors like unemployment rates, but we have not done so to-date."

The company, citing industry wide sources, said returns to the Internal Revenue Service were down up to 5% through Feb. 28 from a year earlier. The decline is expected to be half that by the time April 15 arrives. As of Feb. 28, H&R Block said same-office returns fell 6.8% in retail operations and were down 9.4% overall. The company last month warned tax-return preparation was coming up short of what it was a year earlier.

H&R Block and other traditional tax-prep companies such as Jackson Hewitt Tax Service Inc. (JTX) have struggled since consumers began moving to filing taxes online. The company has recently been looking to focus more on its traditional tax-prep business, exiting its brokerage and loan-origination businesses. For the quarter ended Jan. 31, H&R Block posted a profit of $50.6 million, or 15 cents a share, compared with $47.4 million, or 14 cents a share, a year earlier. Earnings from continuing operations fell to 16 cents from 20 cents as revenue decreased 5.9% to $934.9 million.

Analysts surveyed by Thomson Reuters predicted 14 cents in earnings on $950 million in revenue.

Shares in H&R Block were up 3 cents after-hours at $16.77. The stock is down 10% from a year earlier.