Jackson Hewitt Tax Service CEO: FY08 tax returns in year-over-year decline
Jackson Hewitt Tax Service Inc. (NYSE: JTX) CEO Michael Yerington said the tax preparer expects a fiscal year tax return decline of about 5% to 6%.
“We recognize this is not an acceptable outcome,” Yerington said.
For the remainder of the fiscal year, Yerington said Jackson Hewitt will manage its discretionary spending aggressively.
Yerington said he has made changes to pursue an “aggressive growth strategy” in the five months since he took the helm as CEO. The chief executive said he reshuffled the senior management team, enhanced the call center responsiveness and reviewed the company’s infrastructure for growth.
“The changes that I’m implementing are intended to drive significant, not incremental, growth in the coming years,” Yerington said. “We’ve been telling investors we only penetrate 40% of the addressable market for far too long. While I won’t publicly disclose our growth objectives at this time, I will say that we plan to aggressively increase that 40% metric rather than merely target a couple of percentage points of growth.”
The chief executive said the growth, if successful, should provide a “significant” increase in economic growth for shareholders. He noted that if the company’s market share grew to 45%, it could generate $36 million in annual incremental revenue. To drive higher growth, the company is offering incentives to franchisees and hiring branding and consulting firms.
“I am not a patient person, nor will I accept the growth that Jackson Hewitt has experienced over the past couple of years,” Yerington said. “We are in the process of implementing the changes to the organization and the infrastructure that will serve as a basis to drive aggressive growth in the business and we now need to execute.”
Before Tuesday’s opening, the Parsippany, N.J.-based company posted third-quarter net income of $18.2 million, or $0.61 per share, down 34% from $27.5 million, or $0.83 per share, a year earlier. Analysts expected earnings of $0.96 per share.
Quarterly revenue declined 15% to $97.6 million, from $114.4 million during the same period of 2006. Wall Street analysts projected, on average, revenue of $118.4 million. Jackson Hewitt said a slow start for the tax services industry caused a shift in consumer traffic from the third to the fourth fiscal quarter due to later filings.
“We believe that the industry could experience unusually strong growth in the late season as a result of the government’s economic stimulus rebates that require a 2007 tax return to be filed,” Yerington said.
In afternoon trading, JTX shares are plunging 29.32%, or $5.95, at $14.34. Over the last 52 weeks, shares have ranged from $13.96 to $34.48.
