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Liberty Returns Drop 16.4 Percent

John Hewitt, Liberty Tax ServiceA slow start to the tax season, combined with the publicity regarding franchisees accused of fraud hurt results for Liberty Tax Service for its third quarter ended January 31. The number of returns dropped by 16.5 percent over the corresponding period in 2016 for the season through February 28.

"We are obviously disappointed with a slow start to the tax season," CEO John Hewitt said during this week's earnings webcast. "We need to step back and take a hard look at how we look at how we do things."

Liberty stores had prepared 915,000 tax returns through the reported period, compared to 1,094,000, a year ago. The Internal Revenue Service reported that total returns had dropped by 10 percent through February 24 while H&R beat the average with a drop of 7 percent through the same period. 

There were 3,823 stores operated by Liberty in the United States this fiscal year , a drop of 9.5 percent from 4,225 for the same period in 2016. Permanent offices were down by 250 while seasonal and processing center locations fell by 152. Hewitt termed the results an "aberrant year" and that the company "has put the worst behind us."

Hewitt noted Liberty had "pruned several large franchisees". It also resold many stores that it had reacquired.

Bad press also hurt sale of new franchise territories. Eighty five new territories were sold through January 31, down 53.84 percent from 184 in last year's corresponding period. The problems also took a toll on expansion of the company's SiemprePlus stores, which are aimed at the Hispanic community. Some of the troubled franchises had operated Siempre stores. Despite the closure of those locations, there were 159 Siempre locations, up from 144 a year earlier.

For the third quarter, Liberty reported $2.5 million in net income, off 48.2 percent from $4.7 million in the prior year. Revenue for the most recently reported period was $48.4 million, down 9.7 percent from $53.6 million.

Bob Scott
Bob Scott has provided information to the tax and accounting community since 1991, first as technology editor of Accounting Today, and from 1997 through 2009 as editor of its sister publication, Accounting Technology. He is known throughout the industry for his depth of knowledge and for his high journalistic standards.  Scott has made frequent appearances as a speaker, moderator and panelist and events serving tax and accounting professionals. He  has a strong background in computer journalism as an editor with two former trade publications, Computer+Software News and MIS Week and spent several years with weekly and daily newspapers in Morris County New Jersey prior to that.  A graduate of Indiana University with a degree in journalism, Bob is a native of Madison, Ind
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