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John Hewitt, LibertyTaxPublicity about store operators accused of tax return fraud hurt Liberty Tax during the last fiscal year. These problems caused Liberty to acquire more than 100 franchised stores and also dented territory sales, CEO John Hewitt said during this week's webcast for earnings for the second quarter ended October 30.

"We have pruned down to a healthy franchise base," Hewitt said. That leaves the chain with 4,200 stores, compared to about 10,000 for market leading H&R Block.

Besides buying more stores, Liberty has also broadened its compliance efforts. In April, the company created an Executive Task Force to deal with the issues of problem store operators. Late in the summer, the company hired Richard Ernst, the deputy commissioner of New York's Department of Taxation & Finance as part of the effort.

Hewitt reported new territory sales through November dropped to 26 from 99 for the prior year's comparable period. "The impact of last year's negative publicity was larger than expected," he said. He also said many existing franchisees were not comfortable with opening new locations. Moreover, Liberty has ended its relationship with Wal-Mart.

The company experienced growth with its newer SiempreTax stores, designed to reach Spanish-speaking taxpayers. However, Hewitt said there is also a rise in the number of company-owned stores in this operation, compared to about 24 last year, although he did not have exact figures handy.

"We have a consolidation with both Siempre and with Liberty because of our compliance efforts and our pruning the system," Hewitt said.

Like other tax franchisors, Liberty loses money in the fall quarter and this year, results declined with the drop in franchisee sales and in transfer of stores among franchisees hurting revenue.

The loss for the most recently ended period was $9.3 million, three-percent larger than $9.1 million a year ago. Revenue for the quarter was $7.2 million, off 8.1 percent from $7.9 million in last year' corresponding period.

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
Last modified on Thursday, 08 December 2016
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