H&R Block Inc posted a wider-than-expected quarterly loss on Friday, hurt by higher expenses in tax services segment, and said it expects tax returns filed to fall about 1 to 2 percent in the coming tax season.

Shares of the largest U.S. tax preparer fell 3 percent.

The Kansas City, Missouri-based company said it would close about 300 traditional offices prior to the tax season and added it has no plans to open a significant number of new stores this year.

I think the employment rates are driving lower returns... Only when you see an improvement in the job picture, you will see an improvement in tax returns filed, Northcoast Res analyst Kartik Mehta said.

U.S. job losses were the smallest in a year last month but the unemployment rate unexpectedly jumped to a 26-year high, according to data on Friday that showed the labor market limping toward health.

H&R Block is working on the specifics of its pricing strategy, and would offer some targeted price value schemes for the client segment most affected by the global economic meltdown, a company official said on a conference call with analysts.

The things that they talked about sound good but it all comes down to execution, Stephens Inc analyst David Burtzlaff said by phone.

The company did not execute its plans to attract more clients last year and lost market share, hence there are still some concerns given past performance, the analyst said.

H&R Block provides tax return preparation services in person, and online through its TaxCut software.

TaxCut competes with bigger tax software rival Intuit Inc's TurboTax, which held 79 percent of the retail unit market share for personal computer software in last year's tax season.

H&R Block chairman Richard Breeden, who once chaired the U.S. Securities and Exchange Commission, has refocused the company on tax preparation after taking charge in 2007, shedding a money-losing subprime mortgage unit and a securities brokerage and reducing mortgage exposure at its H&R Block Bank unit.

On Thursday, smaller rival Jackson Hewitt Tax Service Inc said it could be forced to revisit pricing as its bank partners look to restructure certain refund programs, and posted a seasonal quarterly loss.


For the first quarter ended July 31, the company incurred a net loss of $133.6 million, or 40 cents a share, compared with a net loss of $132.7 million or 41 cents a share, a year ago.

Revenue from continuing operations grew 1.3 percent to $275.5 million.

Improved pre-season results from business services and lower corporate expenses were partially offset by an expected larger loss in tax services, the company said in a statement.

Net loss from continuing operations was $130.6 million, or 39 cents a share, compared with a loss of $128.4 million, or 39 cents a share last year.

Analysts were expecting the company to report a loss of 37 cents a share, according to Reuters Estimates.

Loss from tax services was at $172 million, up from $163.7 million last year.

For fiscal 2010, the company maintained its view on earnings from continuing operations to be in the range of $1.60 and $1.80 per share.

Shares of the company were down about 2 percent at $16.73 in midday trade Friday on the New York Stock Exchange. They touched a low of $16.53 earlier.

(Editing by Jarshad Kakkrakandy, Ratul Ray Chaudhuri)