December 9, 2009 / 12:55 PM / 10 years ago

UPDATE 2-Jackson Hewitt Q2 loss narrower than view, shares jump

* Q2 adj loss/shr $0.66 vs estimate $0.74

* Cost cuts aid Q2 * To opearte in more Wal-Mart stores than prior view

* Ties up with walmart.com for online presence

* Stock jumps as much as 20 pct (Recasts; Adds conference call details, analyst comments, updates stock movement)

By Anurag Kotoky

BANGALORE, Dec 9 (Reuters) - Jackson Hewitt Tax Service Inc JTX.N, the no. 2 U.S. tax preparer, posted a narrower-than-expected quarterly loss, aided by lower costs, and said it has tied up with walmart.com to enhance its online presence.

Shares of the company, which also said it will operate in more Wal-Mart Stores Inc (WMT.N) locations than previously estimated, jumped as much as 20 percent, making them the top percentage gainer on the New York Stock Exchange.

“We remain on the sidelines ahead of an uncertain tax season for Jackson Hewitt, though the company is tracking better than low expectations on what it can control and should see some boost to its depressed shares in initial trading,” Oppenheimer analyst Scott Schneeberger said in a note to clients.

Jackson Hewitt has cut headcount in the company owned office segment and closed about 200 unprofitable locations since the last tax season, a company executive said on a conference call with analysts.

The company, which competes with bigger rival H&R Block Inc (HRB.N), plans to launch an online product ahead of the tax season and enter the lucrative market dominated by Intuit Inc’s (INTU.O) TurboTax.

Lack of an online product, at a time when customers are increasingly moving to “do-it-yourself” models, has hurt Jackson Hewitt heavily in the past.

The company plans to rectify that by launching the new digital product, which however is not expected to add to revenue significantly in the short term. For the second quarter, the company posted a net loss of $19.5 million, or 68 cents a share, compared with a loss of $22.2 million, or 78 cents a share, a year ago.

On an adjusted basis, the company posted a loss of 66 cents a share. Revenue fell 22 percent to $4 million.

Analysts were looking for a loss of 74 cents a share, before items, on revenue of $5 million, according to Thomson Reuters I/B/E/S.

Tax preparers often lose money in its fiscal first and second quarters, which fall outside the main U.S. tax filing season. Jackson Hewitt’s second-quarter revenue usually is just about 2 percent of its annual revenue.

Total expenses for the period fell to $32.2 million, compared with $38.1 million in the year-ago period.

Jackson Hewitt said it expects to operate in 1,800 to 1,900 Wal-Mart stores for the 2010 tax season, compared with its previous forecast of 1,500 to 1,750 stores.

Compared to significantly muted expectations from the company’s Wal-Mart venture, the raise in locations would be received favorably, analyst Schneeberger said.

H&R Block, the largest U.S. tax preparer, also posted a narrower-than-expected second-quarter loss on Tuesday. [ID:nBNG478039]

Shares of the Parsippany, New Jersey-based company, which have lost more than 75 percent of their value in the past 1 year, were up 17 percent at $4.85 in late morning trade Wednesday on the New York Stock Exchange. They rose as much as $4.96 earlier in the session. (Reporting by Anurag Kotoky in Bangalore; Editing by Vinu Pilakkott, Unnikrishnan Nair)

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