H&R Block loss narrows on cost cuts, shares rise

BANGALORE (Reuters) - H&R Block Inc (HRB.N) posted a narrower-than-expected quarterly loss as the No. 1 U.S. tax preparer cut costs in the face of stiff competition from Intuit Inc (INTU.O) and said it expects to sell about 150 more offices before the next tax season.

The company's in-person and online tax-preparation services, H&R Block at Home software, competes with Intuit's TurboTax, which is gaining market share from H&R and No.2 player Jackson Hewitt JTX.N as more people move to "do-it-yourself" models.

The company said it was selling certain tax offices as it believes they can be better operated by franchisees.

H&R said it expects a slight decline in tax filing for fiscal 2011 due to the sustained high level of unemployment.

Shares of H&R Block were up 7 percent after the bell Thursday. They have shed 16 percent of their value since August 5, when the U.S. Internal Revenue Service eliminated a rule which allowed tax refund loans that tax prepares use to attract customers.

The company sold 127 offices in the first quarter and expects to realize the related gains in the fourth quarter, said Chief Executive Allen Bennett, who replaced Russ Smyth after his sudden exit in July.

Kansas City, Missouri-based H&R Block has seen a series of resignations at the top in the past six months. In July, Thomas Bloch, former CEO and son of co-founder Henry Bloch, quit citing disagreements over the company's business strategy with Chairman Richard Breeden.

LOSS NARROWS

For the May-July quarter, the company incurred a loss of $130.7 million, or 41 cents a share, compared with $133.6 million, or 40 cents a share, a year back.

Revenue dropped marginally to $274.5 million, from $275.5 million last year.

Excluding a severance charge, net loss from continuing operations was $114.8 million, or 36 cents a share. Analysts were expecting a loss of 41 cents a share, according to Thomson Reuters I/B/E/S.

Total expenses fell 5 percent, excluding the severance charge and related payroll taxes.

In May, the company said it would cut 400 jobs following a disappointing tax season.

Tax prepares generally make most of their profits in fiscal third and fourth quarters, when the U.S. tax filing season hits its peak.

(Reporting by Abhinav Sharma in Bangalore; Editing by Don Sebastian)