Jackson Hewitt Tax Service reported the best results it has seen in over five years this tax season, in contrast with competing tax prep chains H&R Block and Liberty Tax.
Total revenues increased 7.4 percent compared to the prior year at Jackson Hewitt, while same-store sales increased 4.3 percent. Total returns were up nearly 3 percent with same-store assisted returns increasing 0.5 percent, driven by new customer growth and improved customer retention. These results contrasted with a flat in-person tax preparation industry as a whole, according to Internal Revenue Service statistics through April 17, and disappointing results from some of Jackson Hewitt’s rivals (see Fewer Returns for Large Tax Prep Chains).
Unlike H&R Block and Liberty, the company does not disclose exact dollar figures. Jackson Hewitt went private after going bankrupt in 2011 and is now owned by the private equity firm H.I.G. Capital. A new CEO, David Prokupek, was appointed last year to run Jackson Hewitt. Prokupek told Accounting Today that Jackson Hewitt’s 6,300 stores earned a little over half a billion dollars in system-wide sales this past year, but he did not provide precise numbers.
“Our total revenues are up a little over 7 percent,” he said. “Our same-store sales were up roughly a little north of 4 percent. Our same-store returns were up just about half a percent, all of which I think is in stark contrast to the industry, which was largely flat. I think we had a good year. We clearly gained market share this year, and I think it’s the first of many more good years to come for Jackson Hewitt.”
The company upgraded its online tax prep software, which grew nearly 400 percent. In addition, Jackson Hewitt expanded its footprint, adding 34 new franchise groups and nearly 250 new locations in Walmart stores nationwide. The franchise base has added nearly 800 franchisees, according to Prokupek, while 20 percent of Jackson Hewitt’s 6,300 stores are corporately owned.
“It was my first season here, so it’s good to get one under the belt,” he said. “We changed a lot of things this year. The first big thing is we re-launched the brand and introduced a Working Hard for the Hardest Working’ campaign. Across the board, whether in TV, radio or print, it really resonated well with consumers. That was a big win this year.”
Jackson Hewitt’s partnership with Walmart also paid off with a presence in nearly 3,000 Walmart stores.
“We ran a national promotion where we gave consumers a $50 Walmart gift card for getting their taxes done with Jackson Hewitt,” said Prokupek. “That promotion worked really well, and it let folks get affordable tax returns done as well as a chance to treat themselves at Walmart with a gift card. That was a big part of helping get some new traffic in this year. We had a new refund advance program where we allowed folks to get access to their refunds earlier, up to $500 in January for no interest and no fees, so that was very successful for us as well.”
Jackson Hewitt also re-committed to a higher level of customer service last tax season in tandem with Walmart. “We partnered with Walmart as well on their new Direct2Cash program so we were able to let people get their tax refunds in cash at Walmart,” said Prokupek. “Instead of having to spend 1 or 2 percent of their money on a refund check at a check casher, they were able to pick up their refunds at Walmart. So we had a variety of things that we did this year, all of which layered up to a really good tax season.”
Jackson Hewitt plans to add approximately 50 new franchise groups along with additional locations in Walmart stores across the country next year for the 2016 tax season. In addition, the company plans to roll out new low- and no-cost products to help Americans manage their taxes and finances year-round.
The company saw a mixed impact from the Affordable Care Act this past tax season, according to Prokupek. “We did see a lot of activity around it,” he said. “Certainly there’s a lot of confusion with consumers around it. We have our own health care X-ray tool that helps clients figure out how much they owe and what they need to do. The thing that we saw was there were more penalties associated with it than consumers thought, and as a result people waited longer to file. The other thing we’re seeing is that because of some of the new forms, the IRS has been a little bit slower to process refunds around that, so consumers are still figuring out how it impacts them. I think next year as the penalties go up, probably almost twice as much next year as for this year, it will become an even bigger issue for the industry.”
Jackson Hewitt also renewed its partnership with GetInsured, a private health insurance exchange that helped clients learn about and enroll in a health insurance plan that fit their budget.
Hundreds of thousands of taxpayers who received coverage through the health insurance marketplaces had to delay filing their tax returns this past season because of errors in the forms provided to them by the marketplaces (see 800,000 Taxpayers Received Wrong Tax Info from Health Insurance Marketplace). Prokupek acknowledged that was a problem for many Jackson Hewitt customers as well.
“The refunds are the biggest check of the year for most of our clients and many Americans, so having to wait even an extra day can be upsetting to them,” he said. “We helped a lot of people out and people knew that we were experts, so it added to our good year.”
Prokupek said Jackson Hewitt didn’t plan for health care reform to be as big a driver of its business this tax season as some of its competitors did. “We saw it as just part of doing the normal amount of taxes,” he said. “The same people who filed taxes with us last year were going to need to do it again this year, and they might need help with health care, but we certainly didn’t add a lot of extra people and expenses to ramp up. We just viewed it as part of the normal tax business, but overall it was a really good balanced year in our storefronts, online and in the mobile business.”
Jackson Hewitt re-launched its online business this year with new features and benefits for consumers, and revenues from it grew nearly fourfold this year. “Obviously it’s a smaller business,” said Prokupek. “But we were fortunate on the tax fraud side, although unfortunately it’s something that’s endemic to the industry at this point and we’re all working to minimize it.”
Jackson Hewitt also had to increase its customer service staffing, in part because of taxpayer service reductions at the Internal Revenue Service due to budget cuts.
“This year was particularly challenging for staffing at the IRS,” said Prokupek. “At Jackson Hewitt we made tremendous investments. We significantly increased our folks in our call centers around the world to be able to answer the volume of calls, so our call volume was up significantly this year.”
The IRS also had to delay many tax refunds, and Jackson Hewitt had to answer calls about that too. “I think the IRS has acknowledged that they are paying refunds a little slower this year due to some of the tax fraud as well as health care and other issues,” said Prokupek. “So we’ve had to staff up to be able to provide a level of customer service to help people know what’s happening with their refund and their return, and answer their questions, which is a big part of why they come to Jackson Hewitt.”
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