Can H&R Block Rebuild Its Economic Moat

On first blush, H&R Block (NYSE:HRB) should have a great business. They are a well-known name in tax preparation, and taxes are not only inevitable but increasingly complex. With about 12,000 offices spread across the country and a credible at-home product offering, this should be a great business. 

Unfortunately, things are just not that simple. Intuit (Nasdaq:INTU) continues to grab share in the do-it-yourself market, as have other free (or very low-priced) online offerings. If that wasn't enough, a change to IRS policies has thrown a sizable monkey wrench into the lucrative refund anticipation loan business. Put together, those have put H&R Block, as well as rival preparer Jackson Hewitt (NYSE:JTX) under pressure. Making matters worse, H&R Block's past attempts to diversify beyond tax preparation not only failed, but could still manage to come back and haunt the company a little longer.  

An Okay Quarter, But Who Cares?
H&R Block reported a stable fiscal second quarter, but it was not all that significant. H&R Block runs one of the relatively few highly-seasonal businesses still left, and the fiscal second quarter is not part of the busy season. Nevertheless, revenue fell about 1% from last year, while the company's operating loss improved by about $35 million (to a loss of $179 million), mostly on lower SG&A expenses.  

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