H&R Block Inc. named Alan M. Bennett as its new president and CEO after its previous chief executive, Russ Smyth, resigned to take another CEO post. The executive shuffle comes as the nation’s largest tax preparer struggles with the growing popularity of do-it-yourself online filing.
The company said Smyth resigned in order to take the CEO job at a privately held Chicago-based company, which it did not name. A longtime McDonald’s Corp. executive, Smyth was chosen for the post two years ago because of his experience in franchise operations and brand building.
Bennett served as Block’s interim CEO in 2007 and 2008. He has been on the company’s board of directors since 2008.
During his tenure as CEO, Block closed its subprime mortgage origination business, sold its mortgage servicing operations and its financial advisory business and acquired a major tax franchise in the southwestern United States.
He also cut costs as the company realigned from a holding company structure to an operating company.
“Alan’s previous tenure as interim CEO was extremely successful, and demonstrated his executive and leadership skills,” said Richard Breeden, Block’s chairman.
In a regulatory filing, the company initially said Smyth will leave his posts, and the company’s board, on Aug. 29, unless the board chooses an earlier date.
Smyth, 53, is the second major executive to leave the company in as many weeks. General Counsel Brian Woram resigned as of Friday for what Block called “a new leadership opportunity.”
Block also remains without a permanent chief financial officer. Former CFO Becky Shulman stepped down on April 30, and a replacement has not yet been named.
Smyth struggled to turn around Block’s declining performance, as taxpayers have migrated to online preparation, the company’s weakest segment. It lost a large number of customers in the early part of tax season with marketing missteps.
“The strategy he pursued initially was good, but the execution wasn’t there,” said Morningstar analyst Vishnu Lekraj.
Last month, the Kansas City, Mo., company posted fiscal year net income of $479.2 million, or $1.43 per share, down 1.3 percent from $485.7 million, or $1.45 per share, in the prior fiscal year. Revenue fell 5.1 percent to $3.87 billion, from $4.08 billion.
The results were better than Wall Street expected, but reflected a 3.9 percent drop-off in returns prepared in offices open at least a year.
While discussing the results, Smyth said much of the decline was due to high unemployment among the company’s core client base. He also acknowledged that a decision to shift marketing efforts away from refund anticipation loans, or “Rapid Refunds,” led to a significant drop off in that highly profitable business line.
“We can’t afford to lose 900,000 clients in the first part of the season,” Smyth told The Associated Press during an interview regarding the results.
Lekraj agreed there was a strategic misstep in the marketing of refund loans, but he said the migration to do-it-yourself digital tax preparation is the bigger issue for Block.
“It’s not a surprise to see them struggle to try to deal with a changing market in terms of technological change and the tastes and preferences of customers,” the analyst said.
Block’s digital returns for the year rose 0.4 percent, with software-based filing falling 5 percent, offset by 4.3 percent growth in online returns.
Meanwhile competitor Intuit Inc. posted 11 percent growth in total returns prepared, led by 18 percent growth for its online product.
“It seems like every major player that has a brick-and-mortar type of operation has struggled to compete against this product,” Lekraj said.
During Smyth’s tenure, the company sold off its brokerage business, shuttered its Option One Mortgage business, which suffered huge losses in the subprime mortgage meltdown before he took over, and shuffled several other senior executives.
In recent months, he also has been overseeing a restructuring that has seen about 400 underperforming tax offices closed and roughly the same number of positions eliminated throughout the organization.
H&R Block shares fell 12 cents to $15.37 in aftermarket trading, after closing the regular session Wednesday up 19 cents at $15.49. The stock has traded between $14.91 and $23.23 in the past 52 weeks.
