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Will Jackson Hewitt Execute?

Adam Rust's picture

Posted January 3, 2011

Expectations for the upcoming tax season at Jackson Hewitt have suddenly turned optimistic, but it remains to be seen if they will be able to realize the opportunities presented to them.

Last year, H&R Block expected that low-income households would flock to their stores. They had refund anticipation loans, but many competing Jackson Hewitt stores did not. The OCC directed Pacific Capital to cease to

provide refund anticipation loans just before Christmas 2009. Pacific Capital had a contract to provide RALs to Jackson Hewitt. JTX was able to get back on its feet quickly. They secured a commitment from Republic Bank that providing RAL funds to about half of their shops. Block felt that it had a golden opportunity.

It didn't pan out. Block missed its volume goals. Company wide, Block prepared 14.2 million returns in 2010, compared to 15.2 returns in 2009. RAL participation fees increased about $7 million, but 2010's revenue on RALs was still about $44 million lower than in 2008.

Left to ponder their problems, Block executives surmised that those LMI households were as loyal to their tax preparers as are the rest of us. People like feeling known and they like being able to trust the person that does their taxes. There was some optimism in that assessment, though. Block predicted that filers that were unable to get a RAL at Jackson Hewitt in 2010 would vote with their feet next time. The lack of a RAL, they reasoned, would redirect traffic during the subsequent tax season.

Block's story should be a cautionary tale for anyone that believes that Jackson Hewitt and Liberty will crush Block in the next two months.