"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.