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H&R Block makes gaining, keeping clients its new focus

Thursday, September 24, 2009 | 2:37 p.m. CDT; updated 4:41 p.m. CDT, Thursday, September 24, 2009

KANSAS CITY — Tax-preparation giant H&R Block Inc. hopes to attract new clients in the coming year with better service at its offices and advertising that reminds the public of its traditional strengths, CEO Russ Smyth said Thursday.

Smyth, who joined H&R Block in 2008 after 21 years with McDonald's Corp., told shareholders at the annual meeting that the company also will offer reduced prices to selected groups of customers, such as young and lower-income taxpayers, most affected by the tight economy.

H&R Block has been tightening its focus on tax-preparation services as it sheds some of the nontax businesses it entered in the 1990s, including subprime mortgage and investment advisory divisions.

The company is recovering gradually from the losses or expenses it sustained in those ventures and has undertaken significant cost-cutting. For fiscal 2009, which ended April 30, H&R Block earned $485.7 million, or $1.45 per share, compared with a loss of $308.6 million, or 94 cents per share, during the same period a year earlier.

But its surest route to sustained growth of profits is adding clients, Smyth said. The roughly 21 million returns it prepared in the 2009 tax season were down 3.1 percent from the previous year.

The economy is partly to blame, but the economy "just put a magnifying glass" on problems that have been brewing for years, he said.

Offering a "value equation" that measures clients' experience against their expenditures of time and money, Smyth outlined a three-pronged strategy:

— Making H&R Block's retail offices more attractive, professional and inviting, so more clients walk in and fewer walk back out without doing business. Smyth said in June that about 1.8 million customers entered but didn't use H&R Block's retail offices.

— Adjusting fees, which averaged $187.36 a return this year, to account for the needs of "key customer segments" in a recession.

— Capitalizing on the H&R Block brand with a multiple-platform marketing campaign that turns potential customers into paying ones.

"Our marketing message will be more credible and serious in tone, and more consistent in addressing key client priorities," Smyth said.

Shareholders got a glimpse of the marketing message with an in-house video prepared by H&R Block's advertising agency, DDB US. The video shows Americans — potential H&R Block customers — in a variety of settings: with their children, at work, at play.

"I am the one who turns a shoebox full of receipts into many happy returns," the opening voice-over intones, going on to outline the company's traditional values: "I believe the little guy should always have a guardian angel and a fair price. ... I invented tax preparation in 1954, and I haven't stopped reinventing it since. ... I am your champion, right by your side."

Applause broke out as the video ended, and many shareholders suggested it could stand alone as an advertisement.

In a light agenda of official business, shareholders gave advisory approval of the company's pay-for-performance executive compensation policies, including the level of salary increases, bonuses and stock awards.


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