UNITED STATES SECURITIES AND EXCHANGE COMMISSION PRIVATE
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q/A

             Quarterly Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                                    CPI CORP.

                     For the Quarter Ended November 9, 2002

                         Commission File Number 1-10204

              DELAWARE                        43-1256674
(State or Other Jurisdiction of          (I.R.S. Employer
 Incorporation or Organization)           Identification No.)

            1706 Washington Avenue, St. Louis, Missouri   63103-1790
            (Address of Principal Executive Offices)      (Zip Code)

                                 (314) 231-1575
                         (Registrant's Telephone Number)

      Indicate by check mark whether the registrant has (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes |X| No |_|

      Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date:

      As of December 10, 2002 there were 8,044,203 shares of the Registrant's
common stock outstanding.

<PAGE>

TABLE OF CONTENTS

              (PAGE NUMBERS REFER TO PAPER DOCUMENT ONLY)

                                                                        PAGE(S)
                                                                        -------
PART 1.   FINANCIAL INFORMATION


Item 1.   Financial Statements
          - Interim Condensed Consolidated Balance
             Sheets as of November 9, 2002 and
             February 2, 2002                                               4-5

          - Interim Condensed Consolidated Statements of
             Operations - For the 16 and 40 Weeks Ended
             November 9, 2002 and November 10, 2001                         6-7

          - Interim Condensed Consolidated Statements
             of Changes in Stockholders' Equity and
             Comprehensive Income - For the 40 Weeks
             Ended November 9, 2002                                           8

          - Interim Condensed Consolidated Statements
             of Cash Flows - For the 40 Weeks Ended
             November 9, 2002 and November 10, 2001                        9-10

          - Notes to the Interim Condensed Consolidated
             Financial Statements                                         11-21

Item 2.   - Management's Discussions and Analysis,
             Financial Condition and Results of
             Operations                                                   22-33

Item 3.   Quantitative and Qualitative Disclosures About
           Market Risk                                                       34

Item 4.   Controls and Procedures                                            34

PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K                                   35

Signature                                                                    36

Certifications                                                            37-40

Index to Exhibits                                                            41


                                       2
<PAGE>

EXPLANATORY NOTE

CPI Corp. is filing this Form 10-Q/A for the quarter ended November 9, 2002 to
reflect the restatement of its audited consolidated financial statements for the
fiscal year ended February 2, 2002 and unaudited consolidated financial
statements for the sixteen and forty weeks ended November 9, 2002 and November
10, 2001. The restatement resulted from the Company changing its policy for
recognizing revenues to be consistent with Securities and Exchange Commission
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
See the consolidated financial statements and Note 1 thereto included herein for
a description of the restatement. This Form 10-Q/A does not attempt to modify or
update any other disclosures set forth in the original filing, except as
required to reflect the effects of the restatement. Additionally, this Form
10-Q/A does not purport to provide a general update or discussion of any other
developments at the Company subsequent to the original filing. The filing of
this Form 10-Q/A shall not be deemed an admission that the original filing, when
made, included any untrue statement of material fact or omitted to state a
material fact necessary to make a statement not misleading.


                                       3
<PAGE>

PART 1
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CPI CORP. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS - ASSETS
(in thousands of dollars)

                                                       (RESTATED)    (RESTATED)
                                                       November 9,   February 2,
                                                          2002          2002
                                                       (UNAUDITED)
                                                       -----------   -----------
Current assets:
 Cash and cash equivalents                             $   25,343    $   46,555
 Receivables, less allowance of
 $25 and $254, respectively                                16,848         5,421
 Inventories                                               16,484        12,920
 Prepaid expenses and other current
  assets                                                   11,608         6,795
 Refundable income taxes                                   11,305         9,123
 Deferred tax assets                                        4,386         1,990
                                                       ----------    ----------
     Total current assets                                  85,974        82,804
                                                       ----------    ----------
Net property and equipment                                 51,493        63,708

Assets of business transferred under
 contractual arrangements:
   Preferred security                                      10,221        10,069
   Loan receivable                                          4,710         1,518
Assets of supplemental retirement
 plan:
   Cash surrender value of life
    insurance policies (net of
    borrowings of $1,595, as of
    November 9, 2002)                                       9,196         9,455
   Long-term investments held in Rabbi
    Trust                                                   4,846         4,951
Other assets, net of amortization of 1,359                  9,099         9,056
                                                       ----------    ----------
     Total assets                                      $  175,539    $  181,561
                                                       ==========    ==========

See accompanying notes to consolidated financial statements.


                                       4
<PAGE>

CPI CORP. INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS -
LIABILITIES AND STOCKHOLDERS' EQUITY
(in thousands of dollars except share and per share amounts)

                                                       (RESTATED)    (RESTATED)
                                                       November 9,   February 2,
                                                          2002          2002
                                                       (UNAUDITED)
                                                       -----------   -----------
Current liabilities:
 Current maturities of long-term debt                  $    8,580    $    8,580
 Accounts payable                                          14,380         9,741
 Accrued employment costs                                  11,101        13,538
 Deferred revenue                                          36,743        26,953
 Sales taxes payable                                        2,744         2,816
 Accrued advertising expense                                3,927         1,384
 Accrued expenses and other liabilities                     4,391         3,289
                                                       ----------    ----------
   Total current liabilities                               81,866        66,301
                                                       ----------    ----------
Long-term debt                                             34,103        42,639
Other liabilities                                           9,047        10,686
Long-term deferred revenue                                  4,575         5,891
Stockholders' equity:
 Preferred stock, no par value,
  1,000,000 shares authorized; no
  shares outstanding                                           --            --
 Preferred stock, Series A, no par
  value, 200,000 shares authorized;
  no shares outstanding                                        --            --
 Common stock, $0.40 par value,
  50,000,000 shares authorized;
  18,282,506 and 18,201,743 shares
  issued at November 9, 2002 and
  February 2, 2002, respectively                            7,313         7,281
  Additional paid-in capital                               51,137        49,845
  Retained earnings                                       220,386       231,980
  Accumulated other comprehensive
   income                                                  (5,223)       (5,386)
                                                       ----------    ----------
                                                          273,613       283,720

Treasury stock at cost, 10,238,303
 shares at both November 9, 2002 and
 February 2, 2002                                        (227,642)     (227,642)
Unamortized deferred compensation-
 restricted stock                                             (23)          (34)
                                                       ----------    ----------
Total stockholders' equity                                 45,948        56,044
                                                       ----------    ----------
Total liabilities and stockholders'
 equity                                                $  175,539    $  181,561
                                                       ==========    ==========

See accompanying notes to consolidated financial statements.


                                       5
<PAGE>

CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) Sixteen weeks ended November 9, 2002 and November 10, 2001
(in thousands of dollars except share and per share amounts)

                                                       (RESTATED)    (RESTATED)
                                                         Sixteen Weeks Ended
                                                       ------------------------
                                                         Nov. 9,      Nov. 10,
                                                          2002          2001
                                                       ----------    ----------
Net sales                                              $   81,111    $   86,357
Costs and expenses:
  Cost of sales (exclusive of
   depreciation and amortization
   expense shown below)                                    10,691        11,042
  Selling, general and
   administrative expenses                                 71,554        72,246
  Depreciation and amortization                             5,865         7,247
  Other charges and
   impairments                                              4,816           480
                                                       ----------    ----------
                                                           92,926        91,015
                                                       ----------    ----------
Loss from operations                                      (11,815)       (4,658)
Interest expense                                            1,023         1,228
Interest income                                               501           619
Other income (expense), net                                    37          (372)
                                                       ----------    ----------
Loss before income tax
 benefit                                                  (12,300)       (5,639)
Income tax benefit                                         (4,800)       (2,046)
                                                       ----------    ----------
Net loss                                               $   (7,500)   $   (3,593)
                                                       ==========    ==========
Net loss per share-diluted                             $     (.93)   $     (.45)
                                                       ==========    ==========
Net loss per share-basic                               $     (.93)   $     (.45)
                                                       ==========    ==========
Dividends per share                                    $     0.14    $     0.14
                                                       ==========    ==========
Weighted average number of common
 and common equivalent shares
 outstanding - diluted                                  8,044,203     7,912,532
                                                       ==========    ==========
Weighted average number of common
 and common equivalent shares
 outstanding - basic                                    8,044,203     7,912,532
                                                       ==========    ==========

See accompanying notes to consolidated financial statements.


                                       6
<PAGE>

CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Forty weeks ended November 9, 2002 and November 10, 2001
(in thousands of dollars except share and per share amounts)

                                                       (RESTATED)    (RESTATED)
                                                          Forty Weeks Ended
                                                       ------------------------
                                                         Nov. 9,      Nov. 10,
                                                          2002          2001
                                                       ----------    ----------

Net sales                                              $  198,802    $  208,824
Costs and expenses:
  Cost of sales (exclusive of
   depreciation and amortization
   expense shown below)                                    27,450        26,864
Selling, general and
   administrative expenses                                162,933       166,649
 Depreciation and amortization                             15,996        18,300
 Other charges and
  impairments                                               4,816         2,213
                                                       ----------    ----------
                                                          211,195       214,026
                                                       ----------    ----------
Loss from operations                                      (12,393)       (5,202)
Interest expense                                            2,793         3,304
Interest income                                             1,608         1,313
Other income (expense), net                                    79          (319)
                                                       ----------    ----------
Loss before income tax benefit                            (13,499)       (7,512)
Income tax benefit                                         (5,277)       (2,700)
                                                       ----------    ----------
Net loss                                               $   (8,222)   $   (4,812)
                                                       ==========    ==========
Net loss per share - diluted                           $    (1.02)   $    (0.62)
                                                       ==========    ==========
Net loss per share - basic                             $    (1.02)   $    (0.62)
                                                       ==========    ==========
Dividends per share                                    $     0.42    $     0.42
                                                       ==========    ==========
Weighted average number of common
 and common equivalent shares
 outstanding - diluted                                  8,038,874     7,809,179
                                                       ==========    ==========
Weighted average number of common
 and common equivalent shares
 outstanding - basic                                    8,038,874     7,809,179
                                                       ==========    ==========

See accompanying notes to consolidated financial statements.


                                       7
<PAGE>

CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY AND COMPREHENSIVE INCOME (UNAUDITED) (in thousands of dollars except
share and per share amounts)
Forty weeks ended November 9, 2002

<TABLE>
<CAPTION>
                                                                     Accum                    Deferred
                                             Add'l                   other        Treasury     comp'n
                                Common      paid-in     Retained     comp'h        stock      restr'td
                                 stock      capital     earnings     income       at cost       stock        Total
                               ---------   ---------   ---------    ---------    ---------    ---------    ---------
<S>                            <C>         <C>         <C>          <C>          <C>          <C>          <C>
Balance at Feb. 2, 2002,
 as restated                   $   7,281   $  49,845   $ 231,980    $  (5,386)   $(227,642)   $     (34)   $  56,044
                               ---------   ---------   ---------    ---------    ---------    ---------    ---------
Issuance of common stock
  in conjunction with
  employee benefit plans
  and option exercises
  (80,763 shares)                     32       1,292          --           --           --           --        1,324
Comprehensive income:
  Net loss, as restated               --          --      (8,222)          --           --           --
  Foreign currency
     translation, as restated-        --          --          --          163           --
  Comprehensive income,
   as restated                        --          --          --           --           --           --       (8,059)
Dividends ($0.42 per
  common share)                       --          --      (3,372)          --           --           --       (3,372)
Amortization of deferred
  compensation -
  restricted stock                    --          --          --           --           --           11           11
                               ---------   ---------   ---------    ---------    ---------    ---------    ---------
Balance at Nov. 9, 2002,
 as restated                   $   7,313   $  51,137   $ 220,386    $  (5,223)   $(227,642)   $     (23)   $  45,948
                               =========   =========   =========    =========    =========    =========    =========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       8
<PAGE>

CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (in thousands of dollars)
Forty weeks ended November 9, 2002 and November 10, 2001

RECONCILIATION OF NET EARNINGS (LOSS) TO CASH FLOWS PROVIDED BY (USED
IN) OPERATING ACTIVITIES

                                                       (RESTATED)    (RESTATED)
                                                            40 Weeks Ended
                                                       ------------------------
                                                         Nov. 9,      Nov. 10,
                                                          2002          2001
                                                       ----------    ----------
Net loss                                               $   (8,222)   $   (4,812)

Adjustments for items not requiring cash:
  Depreciation and amortization                            15,996        18,300
  Deferred income taxes                                    (3,332)        3,455
  Deferred revenue                                          7,431         8,354
  Post-closing adjustment on preferred
   security                                                   147            --
  Accrued interest on preferred security                     (652)         (305)
  Impairment loss                                           4,436            --
  Other                                                    (3,138)        1,336

Increase (decrease) in current assets:
  Receivables and inventories                             (14,991)      (10,226)
  Refundable income taxes                                  (2,182)      (11,832)
  Prepaid expenses and other current assets                (2,374)       (2,427)

Increase (decrease) in current liabilities:
  Accounts payable, accrued expenses and
    other liabilities                                       5,775         8,644
  Income taxes                                                 --        (1,067)
                                                       ----------    ----------
Cash flows provided by (used in)operating
  activities                                           $   (1,106)   $    9,420
                                                       ==========    ==========

See accompanying notes to consolidated financial statements.


                                       9
<PAGE>

CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (in thousands of dollars)
Forty weeks ended November 9, 2002 and November 10, 2001

                                                            40 Weeks Ended
                                                       ------------------------
                                                         Nov. 9,      Nov. 10,
                                                          2002          2001
                                                       ----------    ----------
Cash flows provided by (used in)
 operating activities                                  $   (1,106)   $    9,420
                                                       ----------    ----------
Cash flows (used in) provided by
 financing activities:
  Repayment of long-term debt                              (8,580)       (8,580)
  Proceeds from borrowing against cash
  surrender value of life insurance                         1,595            --
 Issuance of common stock in
   conjunction with employee benefit
   plans and option exercises                               1,324         5,066
  Cash dividends                                           (3,372)       (3,255)
  Issuance of treasury stock                                   --            62
  Purchase of treasury stock                                   --            (4)
                                                       ----------    ----------
Cash flows used in financing activities                    (9,033)       (6,711)
                                                       ----------    ----------
Cash flows (used in) provided by
 investing activities:
  Additions to property and equipment, net                 (8,054)      (14,701)
  Change in loan receivable                                (3,192)       (5,171)
  Purchase of investment securities in
   Rabbi Trust                                             (2,544)       (1,909)
  Proceeds from sale of investment
   securities in Rabbi Trust                                2,649         3,654
                                                       ----------    ----------
  Cash flows used in investing
   activities                                             (11,141)      (18,127)
                                                       ----------    ----------
Effect of exchange rate changes on
 cash and cash equivalents                                     68          (303)
                                                       ----------    ----------
Net decrease in cash and cash
 equivalents                                              (21,212)      (15,721)
Cash and cash equivalents at
 beginning of period                                       46,555        38,820
                                                       ----------    ----------
Cash and cash equivalents at end of
 period                                                $   25,343    $   23,099
                                                       ==========    ==========
Supplemental cash flow information:

  Interest paid                                        $    1,920    $    2,302
                                                       ==========    ==========
  Income taxes paid                                    $      778    $    6,794
                                                       ==========    ==========

See accompanying notes to consolidated financial statements.


                                       10
<PAGE>

CPI CORP. NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 1

BASIS OF PRESENTATION AND RESTATEMENT OF FINANCIAL STATEMENTS

Our consolidated balance sheet at February 2, 2002 was obtained from our audited
balance sheet, as restated, as of that date. In the opinion of management, the
accompanying unaudited condensed consolidated financial statements contain all
adjustments necessary for a fair presentation of CPI Corp.'s ("the Company's")
financial position as of November 9, 2002 and February 2, 2002 and the results
of its operations for the sixteen and forty weeks ended November 9, 2002 and
November 10, 2001 and changes in its cash flows for the forty weeks ended
November 9, 2002 and November 10, 2001. Certain prior year amounts have been
reclassified to conform to the first quarter 2002 presentation. Our accounting
policies and certain other disclosures are set forth in the notes to our audited
consolidated financial statements as of and for the year ended February 2, 2002,
or in the case of restated amounts, as indicated within this Form 10-Q/A.

Effective for fiscal year 2000, the Company changed its policy for recognizing
both portrait studio revenues and fees received under its customer loyalty
program to be consistent with the SEC Staff Accounting Bulletin No. 101 ("SAB
101"), "Revenue Recognition in Financial Statements". As a result, certain
information in the accompanying consolidated financial statements has been
restated.

Portrait studio revenues are now recognized upon delivery of the portraits to
the customer. Costs incurred relating to portraits processed, or in-process, are
inventoried and expensed when the related sales revenue is recognized.
Previously, portrait studio revenues were recognized at the time the customer
approved the photographic proofs and made a firm commitment for a portrait
order, at the conclusion of the photographic session. At that same time, all
remaining costs to be incurred in the processing and delivery of the portraits
were accrued. The effect of the change is to defer the recognition of portrait
studio revenues approximately three weeks from the date of the portrait session
to allow for processing and delivery of the related portraits. The cumulative
effect of the change in accounting principle on years prior to fiscal 2000
resulted in an after-tax adjustment to earnings of $3.4 million, which has been
reflected in the results of operations for the year ended February 3, 2001.

The Company changed its method of recognizing customer loyalty program fees
(Smile Savers Plan (r) fees) to defer the entire amount of the fee received and
amortize it into revenues on a straight-line basis over the twenty-four month
period of the customer's


                                       11
<PAGE>

program. Previously, the Company allocated an amount of the fee equal to
published sitting fees to the initial sitting and recognized that amount upfront
at the time of the initial sitting. The remainder of the Smile Savers Plan (r)
fee not recognized at the time of the initial sitting under the plan was
deferred and recognized as revenue on a straight-line basis over the remaining
twenty-four month period of the plan. The cumulative effect of this change in
accounting principle on years prior to fiscal 2000 resulted in an after-tax
adjustment to earnings of $6.8 million, which has been reflected in the results
of operations for the year ended February 3, 2001. The Company recognized
pre-tax revenues of $1.2 million in the third quarter of fiscal 2001 and $4.3
million in the forty weeks ended November 10, 2001 that were included in the
cumulative effect adjustment.

Additionally, in the first quarter of 2001, the Company reclassified certain
management repositioning costs totaling $1.7 million originally recorded as a
component of Other Expenses, below Income from Operations, to a separate line
entitled "Other Charges and Impairments", a component of operating income.

The following tables reflect the specific line item impact of the aforementioned
restatements, including related changes to the Company's allowance for doubtful
accounts, foreign currency translation adjustments and income taxes, by
comparing applicable restated amounts with those amounts originally reported.
The restatements had no net impact on our cash flows from operations, investing
or financing activities.


                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                             SIXTEEN WEEKS ENDED FISCAL 2002
                                                 --------------------------------------------------------
                                                        Nov.9, 2002                  Nov.10, 2001
                                                  Restated       Orig Rept      Restated       Orig Rept
                                                 -----------    -----------    -----------    -----------
<S>                                              <C>            <C>            <C>            <C>
STATEMENT OF OPERATIONS DATA:
Net sales                                        $    81,111    $    90,190    $    86,357    $    96,872
Cost and expenses:
 Cost of sales (exclusive of
  depreciation expense shown below)                   10,691         12,132         11,042         12,774
 Selling, general and administrative expense          71,554         74,406         72,246         75,749
 Other charges and impairments                         4,816          4,436            480             --
Income (loss) from operations                        (11,815)        (6,649)        (4,658)         1,102
Earnings (loss) before income tax
 expense                                             (12,300)        (7,134)        (5,639)           121
Income tax benefit                                    (4,800)        (2,782)        (2,046)           (32)
Net earnings (loss)                                   (7,500)        (4,352)        (3,593)           153
                                                 ===========    ===========    ===========    ===========

Net earnings (loss) per share - diluted          $     (0.93)   $     (0.54)   $     (0.45)   $      0.02
                                                 ===========    ===========    ===========    ===========
Weighted average number of common
 and common equivalent shares
 outstanding - diluted                             8,044,203      8,044,203      7,912,532      7,982,501
                                                 ===========    ===========    ===========    ===========
</TABLE>


                                       13
<PAGE>

<TABLE>
<CAPTION>
                                                              FORTY WEEKS ENDED FISCAL 2002
                                                 --------------------------------------------------------
                                                        Nov.9, 2002                  Nov.10, 2001
                                                  Restated       Orig Rept      Restated       Orig Rept
                                                 -----------    -----------    -----------    -----------
<S>                                              <C>            <C>            <C>            <C>

STATEMENT OF OPERATIONS DATA:
Net sales                                        $   198,802    $   208,746    $   208,824    $   220,970
Cost and expenses:
 Cost of sales (exclusive of
  depreciation expense shown below)                   27,450         29,136         26,864         29,411
 Selling, general and administrative expense         162,933        165,972        166,649        170,754
 Other charges and impairments                         4,816          4,436          2,213             --
Income (loss) from operations                        (12,393)        (6,794)        (5,202)         2,505
Other income (expense), net                               79             79           (319)        (2,052)
Loss before income tax
 benefit                                             (13,499)        (7,900)        (7,512)        (1,538)
Income tax benefit                                    (5,277)        (3,081)        (2,700)          (613)
Net loss                                              (8,222)        (4,819)        (4,812)          (925)
                                                 ===========    ===========    ===========    ===========

Net loss per share - diluted                     $     (1.02)   $     (0.60)   $     (0.62)   $     (0.12)
                                                 ===========    ===========    ===========    ===========
Weighted average number of common
 and common equivalent shares
 outstanding - diluted                             8,038,874      8,038,874      7,809,179      7,809,179
                                                 ===========    ===========    ===========    ===========
</TABLE>


                                       14
<PAGE>

<TABLE>
<CAPTION>
                                                                      FISCAL 2002
                                                 --------------------------------------------------------
                                                        Nov.9, 2002                  Feb 02, 2002
                                                  Restated       Orig Rept      Restated       Orig Rept
                                                 -----------    -----------    -----------    -----------
<S>                                              <C>            <C>            <C>            <C>
BALANCE SHEET DATA:
ASSETS:
 Receivables, less allowance                     $    16,848    $    20,968    $     5,421    $     8,417
 Inventories                                          16,484         10,656         12,920          9,510
 Prepaid expenses and other current
  assets                                              11,608          7,668          6,795          4,257
 Deferred tax assets                                   4,386             --          1,990             --
 Total current assets                                 85,974         75,940         82,804         77,862
 Other assets, net                                     9,099          5,655          9,056          5,239
 Total Assets                                    $   175,539    $   162,061    $   181,561    $   172,802
                                                 ===========    ===========    ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY:
 Deferred revenue                                     36,743          9,860         26,953          9,529
 Accrued expenses and other
  liabilities                                          4,391          5,949          3,289          4,134
 Total current liabilities                            81,866         56,541         66,301         49,722
 Long-term deferred revenue                            4,575          3,002          5,891          3,677
 Retained earnings                                   220,386        233,824        231,980        242,015
 Accumulated other comprehensive
  loss                                                (5,223)        (5,241)        (5,386)        (5,387)
 Total stockholders' equity                           45,948         59,368         56,044         66,078
 Total liabilities and stockholders'
  equity                                         $   175,539    $   162,061    $   181,561    $   172,802
                                                 ===========    ===========    ===========    ===========
</TABLE>


                                       15
<PAGE>

Note 2

      The Company has operations in two business segments: Portrait Studios and
Technology Development. (See Note 6) The Portrait Studios segment functions as
the exclusive operator of Sears Portrait Studios with 1,031 locations in the
United States, Canada and Puerto Rico as of November 9, 2002. The Technology
Development segment operates an internet-based, mail order photofinishing
business under the name searsphoto.com and offers software programs primarily
for the retail service industry use, software consulting and custom software
development under the name Centrics Technology, Inc.

SELECTED INDUSTRY SEGMENT INFORMATION (in thousands of dollars)

                                                       (RESTATED)    (RESTATED)
                                                         Sixteen Weeks Ended
                                                       ------------------------
                                                         Nov. 9,      Nov. 10,
                                                          2002          2001
                                                       ----------    ----------
NET SALES:
  Portrait Studios                                     $   80,913    $   86,196
  Technology Development                                    1,205           933
  Intersegment sales                                       (1,007)         (772)
                                                       ----------    ----------
                                                       $   81,111    $   86,357
                                                       ==========    ==========
LOSS FROM OPERATIONS:
 Portrait Studios                                      $   (5,823)   $     (423)
 Technology Development                                      (927)         (487)
 Corporate expense                                         (5,065)       (3,748)
                                                       ----------    ----------
                                                       $  (11,815)   $   (4,658)
                                                       ==========    ==========


                                       16
<PAGE>

SELECTED INDUSTRY SEGMENT INFORMATION (in thousands of dollars)

                                                       (RESTATED)    (RESTATED)
                                                           Forty Weeks Ended
                                                       ------------------------
                                                         Nov. 9,      Nov. 10,
                                                          2002          2001
                                                       ----------    ----------
NET SALES:
  Portrait Studios                                     $  197,853    $  208,588
  Technology Development                                    3,377         2,377
  Intersegment sales                                       (2,428)       (2,141)
                                                       ----------    ----------
                                                       $  198,802    $  208,824
                                                       ==========    ==========
INCOME (LOSS) FROM OPERATIONS:
 Portrait Studios                                      $      826    $    7,214
 Technology Development                                    (1,371)       (1,178)
 Corporate expense                                        (11,848)      (11,238)
                                                       ----------    ----------
                                                       $  (12,393)   $   (5,202)
                                                       ==========    ==========
SEGMENT ASSETS:
 Portrait Studios                                      $   99,007    $  105,328
 Technology Development                                     1,302         1,316
 Corporate cash and cash
  equivalents                                              25,343        23,099
 Corporate other                                           49,887        56,234
                                                       ----------    ----------
                                                       $  175,539    $  185,977
                                                       ==========    ==========


                                       17
<PAGE>

GEOGRAPHIC FINANCIAL INFORMATION

                                                       (RESTATED)    (RESTATED)
                                                         Sixteen Weeks Ended
                                                       ------------------------
                                                         Nov. 9,      Nov. 10,
                                                          2002          2001
                                                       ----------    ----------
NET SALES:
 United States                                         $   75,610    $   80,368
 Canada                                                     5,501         5,989
                                                       ----------    ----------
                                                       $   81,111    $   86,357
                                                       ==========    ==========

                                                           Forty Weeks Ended
                                                       ------------------------
                                                         Nov. 9,      Nov. 10,
                                                          2002          2001
                                                       ----------    ----------
NET SALES:
 United States                                         $  185,451    $  194,818
 Canada                                                    13,351        14,006
                                                       ----------    ----------
                                                       $  198,802    $  208,824
                                                       ==========    ==========
LONG-LIVED ASSETS:
 United States                                         $   84,422    $   98,895
 Canada                                                     5,143         5,205
                                                       ----------    ----------
                                                       $   89,565    $  104,100
                                                       ==========    ==========

Note 3

      On February 3, 2002, the Company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). Under SFAS
142, goodwill amortization ceases upon adoption of the new standard. The new
rules also require an initial goodwill impairment assessment in the year of
adoption and an annual impairment test thereafter. In addition, interim testing
of goodwill is now required if an event or circumstance indicates that an
impairment loss has been incurred. During the first quarter ended April 27,
2002, the Company performed the first of the required impairment tests of
goodwill. No impairment loss resulted from the initial goodwill impairment test.
As of February 2, 2002 and November 9, 2002, the carrying value of goodwill was
$513,000 and related to acquisitions by the Portrait Studio division prior to
June 30, 2001. For the periods prior to fiscal year 2002, the adoption of SFAS
142 has no pro forma effect on the loss per share reported for the sixteen weeks
ended November 10, 2001 and a $.01 increase in earnings per share reported for
the 40 weeks ended November 10, 2001.


                                       18
<PAGE>

Note 4

      In July 2001, the Company announced it had provided TRU Retail, Inc., the
predecessor legal entity of Prints Plus, Inc. ("Prints Plus") with a $6.4
million revolving line of credit. The Company further announced the completion
of the sale of its Wall Decor segment for $16.0 million. The sales price
reflected the receipt of $11.0 million in a Preferred Security of Prints Plus,
approximately $4.0 million in cash, other consideration netting to $1.0 million
and the assumption of certain liabilities including the ongoing guarantee of
certain operating real estate leases. The sales price was subject to final
post-closing adjustments.

      Subsequently, in January 2002 and May 2002, the balance of the Preferred
Security decreased due to the optional redemption of $1.0 million and $353,000,
respectively, of the security by Prints Plus, and, in the first quarter of 2002,
by a final post-closing adjustment of $147,000 to the security reflecting a
decrease in the final sales price. These events, when offset by the accrued
interest income of $721,000 that is also reflected in the value of the Preferred
Security, resulted in a balance on November 9, 2002 of $10.2 million.

      Borrowings under the revolving line of credit extended to Prints Plus were
$4.7 million and $5.2 million as of November 9, 2002 and November 10, 2001,
respectively. Interest income earned on this revolving line of credit for the
third quarter 2002 and 2001 was $64,000 and $84,000, respectively.

      Due to the Company's continuing financial interest in Prints Plus, the
Company is required to follow a modified equity method of accounting, which
requires cumulative losses, if any, incurred by Prints Plus during its fiscal
year be reflected in the Company's financials as a valuation allowance and
corresponding charge to income. As a result of Prints Plus' operating
performance and compliance with the covenants of the Preferred Security and
revolving line of credit, no valuation allowance was recorded as of November 9,
2002.

      Further, if Prints Plus defaults on certain operating real estate leases,
the Company has guaranteed monthly lease payments over the remaining life of
these leases. As of November 9, 2002, the maximum future obligation to the
Company would be $16.0 million before any negotiation with landlords or
subleasing. Based on scheduled lease payments, the maximum future obligations
will decrease an additional $908,000 by the end of fiscal 2002, then annually by
approximately $5.2 million to $4.8 million during the next two years. To
recognize the risk associated with these leases and based on the Company's past
experience with renegotiating lease obligations, a $1.0 million reserve was
established in 2001. At November 9, 2002, the Company had made no further
allowances for defaults under these operating leases as, in the opinion of
management, Prints Plus is meeting the performance standards established under
the operating leases.


                                       19
<PAGE>

Note 5

      As discussed in the Company's Annual Report on Form 10-K/A, the Company
has a $60.0 million Senior Note Agreement and $30.0 million Revolving Facility.
In April 2002 and November 2002, the Company amended its Revolving Facility to
adjust the minimum consolidated earnings before income taxes, depreciation and
amortization ("EBITDA") covenant. In the November 2002 amendment, the Company
also reduced the line to $15 million since the Company has minimal borrowing
needs other than to support $7.2 million in outstanding letters of credit as of
November 9, 2002. As of November 9, 2002, the Company was in compliance with all
covenants under both the amended Revolving Facility and the Senior Note
Agreement, and expects to be in compliance with the covenants under the Senior
Note Agreement for the remainder of this year.

      However, given the sales shortfall incurred in the first three quarters
compared to the prior year periods, the Company may not achieve the EBITDA
covenant related solely to its Revolving Facility for the fourth quarter of this
fiscal year. Other than supporting outstanding letters of credit in the
principal amount of $7.2 million as of November 9, 2002, the Company has no
outstanding borrowings under the Revolving Facility, nor does it currently
expect to need to draw on the facility prior to its expiration in June 2003. The
Company anticipates that it will reach an agreement before the end of the fourth
quarter with the lending institutions offering the Revolving Facility whereby
either the above mentioned covenant will be amended or the facility will be
eliminated and replaced.

Note 6

      During the third quarter of fiscal 2002, management completed its
previously announced review of the infrastructure and platform from which it
delivers technology development and support services. The objectives of the
review were to 1) improve focus on and support for the Company's core
portraiture business, 2) improve organizational functionality and systems
flexibility, and 3) eliminate duplicative cost structures.

      To achieve the aforementioned objectives, the Company is in the process of
transferring the technology development activities, previously performed by its
subsidiary Centrics Technology, Inc. ("Centrics"), back into a newly reorganized
and right-sized corporate technology function. In addition, the Company will no
longer pursue the sale of consulting and software development to third parties.
As a result of these decisions, the Company is currently negotiating with
management of Centrics for the acquisition of the stock of Centrics by its
management group. If an agreement is reached, the Company anticipates the
transaction will close prior to the end of its current fiscal year. If an
agreement is not reached, all of the aforementioned transfer and reorganization
activities will still be completed by the end of the


                                       20
<PAGE>

Company's current fiscal year.

      Under either the sale or transfer of activities scenarios, the Company
expects to incur certain fourth quarter charges to earnings when the ultimate
outcome is known. Under either the sale or transfer of activities scenarios, the
Company anticipates incurring a charge for employee severance ranging from
approximately $450,000 to $550,000. Under the sale scenario, the Company would
record a loss on sale ranging from approximately $150,000 to $200,000
representing the excess of the net book value of assets transferred over
liabilities assumed, without giving effect to the contingent consideration to be
received in the form of royalties on future sales of consulting services and/or
software by the buyer. Under the transfer scenario, the Company would also incur
a charge for anticipated settlement of the existing Centrics office lease of
approximately $284,000 representing the remaining lease payments under the lease
and assuming no sub-lease rentals or negotiated settlements.

      Through the elimination of the currently existing duplicative cost
structures and the reorganization and right-sizing of the newly formed corporate
technology group, the Company anticipates annualized payroll costs savings
beginning in fiscal 2003 of approximately $4.0 million.

      As part of the ongoing transfer and reorganization activities, certain
strategic technology decisions were made in the third quarter of fiscal 2002
that either reduce or eliminate the future utility of certain historic
capitalized technology development costs necessitating a write-down or write-off
of these costs, thus resulting in a pre-tax, non-cash, charge of $4.2 million.
The impacted development activities include a proprietary digital camera
development project ($2.9 million), a digital manufacturing system ($445,000)
and, a portion of the store automation system platform ($863,000). In the case
of both the digital camera project and the digital manufacturing system, the
Company has made the decision to prospectively utilize commercially-available
cameras and digital manufacturing software. The Company's change in technology
direction and its decision to no longer pursue the sale of technology services
to third parties resulted in the need to write-off a portion of its store
automation system capitalized software code.

Note 7

      The projected accumulated benefit obligation of the Company's defined
benefit pension plan as of December 31, 2002 (the measurement date) exceeds the
fair value of the plan's assets as of September 30, 2002 by approximately $10.4
million. Should a shortfall exist at year-end, the Company would be required to
record a charge to accumulated other comprehensive income in stockholders'
equity, consisting of the amount of any shortfall plus the amount of the prepaid
pension asset (approximately $5.2 million, net of tax, at September 30, 2002).


                                       21
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      THE STATEMENTS CONTAINED IN THIS REPORT, AND IN PARTICULAR IN THE
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" SECTION THAT ARE NOT HISTORICAL FACTS ARE FORWARD-LOOKING STATEMENTS
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION ACT OF 1995, AND INVOLVE
RISKS AND UNCERTAINTIES. MANAGEMENT WISHES TO CAUTION THE READER THAT THESE
FORWARD-LOOKING STATEMENTS, SUCH AS THE COMPANY'S OUTLOOK FOR PORTRAIT STUDIOS
AND OTHER STRATEGIC INITIATIVES, FUTURE CASH REQUIREMENTS, COMPLIANCE WITH DEBT
COVENANTS, VALUATION ALLOWANCES, AND CAPITAL EXPENDITURES, ARE ONLY PREDICTIONS
OR EXPECTATIONS; ACTUAL EVENTS OR RESULTS MAY DIFFER MATERIALLY AS A RESULT OF
RISKS FACING THE COMPANY. SUCH RISKS INCLUDE, BUT ARE NOT LIMITED TO: CUSTOMER
DEMAND FOR THE COMPANY'S PRODUCTS AND SERVICES, THE OVERALL LEVEL OF ECONOMIC
ACTIVITY IN THE COMPANY'S MAJOR MARKETS, COMPETITORS' ACTIONS, MANUFACTURING
INTERRUPTIONS, DEPENDENCE ON CERTAIN SUPPLIERS, CHANGES IN THE COMPANY'S
RELATIONSHIP WITH SEARS AND THE CONDITION AND STRATEGIC PLANNING OF SEARS,
FLUCTUATIONS IN OPERATING RESULTS, THE CONDITION OF PRINTS PLUS, INC., THE
ATTRACTION AND RETENTION OF QUALIFIED PERSONNEL AND OTHER RISKS AS MAY BE
DESCRIBED IN THE COMPANY'S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION,
INCLUDING ITS FORM 10-K/A FOR THE YEAR ENDED FEBRUARY 2, 2002.

      The Company's fiscal year ends the first Saturday of February.
Accordingly, fiscal year 2001 ended February 2, 2002 and consisted of 52 weeks.
The third fiscal quarters of 2002 and 2001, which consisted of sixteen weeks,
and the first three quarters of 2002 and 2001, which consisted of forty weeks,
ended November 9, 2002 and November 10, 2001, respectively. Throughout
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION," reference to 2001 will mean the fiscal year ended February 2, 2002
and reference to third quarter 2002 and third quarter 2001 or first three
quarters 2002 and first three quarters 2001 will mean the third fiscal quarter
or the first three quarters fiscal of 2002 and 2001, respectively.

All comparisons and references in this Form 10-Q/A to results for fiscal years
2002 and 2001 are to the restated results. See Note 1 to the consolidated
financial statements contained in Item 1.

      The Company has operations in two business segments: Portrait Studios and
Technology Development. (See Item 1. Financial Statements, Note 6.) The Portrait
Studios segment functions as the exclusive operator of Sears Portrait Studios
with 1,031 locations in the United States, Canada and Puerto Rico as of November
9, 2002. The Technology Development segment operates an internet-based, mail
order photofinishing business under the name searsphoto.com and offers software
programs primarily for the retail service industry


                                       22
<PAGE>

use, software consulting and custom software development under the
name Centrics Technology, Inc.

RESULTS OF OPERATIONS

SIXTEEN WEEKS ENDED NOVEMBER 9, 2002 COMPARED TO SIXTEEN WEEKS ENDED NOVEMBER
10, 2001

Net Sales and Loss From Operations

      The following table sets forth certain operating information for each
period and should be viewed in conjunction with the consolidated financial
statements and notes included in Item 1 of this Form 10-Q/A.

                                        (RESTATED)    (RESTATED)
                                          Sixteen Weeks Ended
                                        ------------------------        Change
                                          Nov. 9,       Nov. 10,       Increase
                                           2002           2001        (Decrease)
                                        ----------    ----------      ----------
                                        (in thousands of dollars
                                       except sittings and average
                                       sales per customer sitting)

Net sales:
  Portrait Studios                      $   80,913    $   86,196         (6.1)%
  Technology Development                     1,205           933         29.2 %
  Intersegment sales                        (1,007)         (772)        30.4 %
                                        ----------    ----------
                                        $   81,111    $   86,357         (6.1)%
                                        ==========    ==========
Operating losses:
  Portrait Studio                       $   (5,823)   $     (423)     (1276.6)%
  Technology Development                      (927)         (487)        90.3 %
                                        ----------    ----------
    Total operating loss                    (6,750)         (910)      (641.8)%
                                        ----------    ----------
General corporate expenses                   5,065         3,748         35.1 %
                                        ----------    ----------
Loss from operations                    $  (11,815)   $   (4,658)      (153.6)%
                                        ==========    ==========
Sittings:
   Custom                                  797,102       840,190         (5.1)%
   Package                                 529,567       686,077        (22.8)%
                                        ----------    ----------
                                         1,326,669     1,526,267        (13.1)%
                                        ==========    ==========
Average sales per customer
 sitting:
   Custom                               $    71.59    $    67.74          5.7 %
   Package                              $    44.92    $    42.60          5.4 %
   Overall                              $    60.94    $    56.45          7.9 %


                                       23
<PAGE>

      Net sales for the Portrait Studios segment decreased in third quarter of
2002 from third quarter of 2001, as a decrease in sittings was only partially
offset by an increase in average sales per customer sitting. The decrease in
sittings continues to be a function of significantly reduced sittings related to
the Company's package offers. The decline in package sittings is attributable to
both the impacts of a larger percentage of the Company's customers choosing the
higher value custom offer versus the package offer and the effects of
competitors with lower price package offers. The increase in average sales per
customer sitting is primarily the result of the Company's success in converting
more if its customers to the higher value custom offer and the Company's
decision made during the second quarter to begin selling custom proof sheets
which had previously been provided free of charge as part of the custom offer.

      Included in the above mentioned sales revenues for the third quarter of
2001 is $1.2 million of pre-tax revenues that were included in the cumulative
effect adjustment recorded in fiscal 2000 as discussed in Note 1 to the
Consolidated Financial Statements.

      The operating loss for the Portrait Studios segment in the third quarter
of 2002 compared to the operating earnings recorded in the same time frame in
2001 was significantly impacted by the $4.2 million pre-tax, non-cash charge
related to the write-off or write- down of certain previously capitalized
technology development costs (see further details below).

      Exclusive of the write-offs and write-downs, lower operating expenses
partially offset the lower sales results. The lower operating expenses are due
to reduced cost of sales and commissions attributable to lower sales, reduced
depreciation expense due to certain assets becoming fully depreciated, reduced
credit card fees due to credit card transactions being processed directly by
Sears and other various reductions resulting from the Company's continuing focus
on expense reductions.

      Net sales for the Technology Development segment reflected an increase in
the third quarter of 2002 from the third quarter of 2001. However, after
elimination of intersegment sales, the negative swing in operating results
quarter to quarter is attributable to higher employment costs and the write-off
of certain assets having diminished or no future utility.

      During the third quarter of fiscal 2002, management completed its
previously announced review of the infrastructure and platform from which it
delivers technology development and support services. The objectives of the
review were to 1) improve focus on and support for the Company's core
portraiture business, 2) improve organizational functionality and systems
flexibility, and 3) eliminate duplicative cost structures.

      To achieve the aforementioned objectives, the Company is in the process of
transferring the technology development


                                       24
<PAGE>

activities, previously performed by its subsidiary Centrics Technology, Inc.
("Centrics"), back into a newly reorganized and right-sized corporate technology
function. In addition, the Company will no longer pursue the sale of consulting
and software development to third parties. As a result of these decisions, the
Company is currently negotiating with management of Centrics for the acquisition
of the stock of Centrics by its management group. If an agreement is reached,
the Company anticipates the transaction will close prior to the end of its
current fiscal year. If an agreement is not reached, all of the aforementioned
transfer and reorganization activities will still be completed by the end of the
Company's current fiscal year.

      Under either the sale or transfer of activities scenarios, the Company
expects to incur certain fourth quarter charges to earnings when the ultimate
outcome is known. Under either the sale or transfer of activities scenarios, the
Company anticipates incurring a charge for employee severance ranging from
approximately $450,000 to $550,000. Under the sale scenario, the Company would
record a loss on sale ranging from approximately $150,000 to $200,000,
representing the excess of the net book value of assets transferred over
liabilities assumed, without giving effect to the contingent consideration to be
received in the form of royalties on future sales of consulting services and/or
software by the buyer. Under the transfer scenario, the Company would also incur
a charge for anticipated settlement of the existing Centrics office lease of
approximately $284,000, representing the remaining lease payments under the
lease and assuming no sub-lease rentals or negotiated settlements.

      Through the elimination of the currently existing duplicative cost
structures and the reorganization and right-sizing of the newly formed corporate
technology group, the Company anticipates annualized payroll costs savings
beginning in fiscal 2003 of approximately $4.0 million.

      As part of the ongoing transfer and reorganization activities, certain
strategic technology decisions were made in the third quarter of fiscal 2002
that either reduce or eliminate the future utility of certain historic
capitalized technology development costs necessitating a write-down or write-off
of these costs, thus resulting in a pre-tax, non-cash, charge of $4.2 million.
The impacted development activities include a proprietary digital camera
development project ($2.9 million, including $2.5 million in equipment costs), a
digital manufacturing system ($445,000) and, a portion of the store automation
system platform ($863,000). In the case of both the digital camera project and
the digital manufacturing system, the Company has made the decision to
prospectively utilize commercially-available cameras and digital manufacturing
software. The Company's change in technology direction and its decision to no
longer pursue the sale of technology services to third parties resulted in the
need to write- off a portion of its store automation system capitalized software
code.


                                       25
<PAGE>

      General corporate expenses increased between quarters due to increases in
supplemental retirement benefit plan costs, workers' compensation costs,
professional service fees and severance costs in the third quarter of 2002
compared to 2001.

Other Items Effecting Results of Operations

      The following table sets forth certain operating information for each
period and should be viewed in conjunction with the consolidated financial
statements and notes included in Item 1 of this Form 10-Q/A.

                                          Sixteen Weeks Ended
                                        ------------------------        Change
                                          Nov. 9,      Nov. 10,        Increase
                                           2002          2001         (Decrease)
                                        ----------    ----------      ----------
                                        (in thousands of dollars)

Interest expense:
  Debt                                  $      980    $    1,177         (16.7)%
  Other                                         43            51         (15.7)%
                                        ----------    ----------
    Total interest expense              $    1,023    $    1,228         (16.6)%
                                        ==========    ==========
Interest income:
  Investments                           $      175    $      230         (24.2)%
  Income from Preferred
    Security                                   262           305         (13.8)%
  Revolver                                      64            84         (23.5)%
                                        ----------    ----------
    Total interest income               $      501    $      619         (19.0)%
                                        ==========    ==========
Other income (expense), net:
  Other income                          $       37    $       30          23.3 %
  Investment revaluation                        --          (402)           --
                                        ----------    ----------
     Total other income
      (expense), net                    $       37    $     (372)       (109.9)%
                                        ==========    ==========
Effective income tax rate                    39.0%         26.8%
                                        ==========    ==========

      Interest expense decreased in third quarter of 2002 from the third quarter
of 2001 as a result of the scheduled repayment of long-term debt.

      Interest income was lower in the third quarter of 2002 compared to third
quarter of 2001 due principally to the lower income earned on invested cash as a
result of higher invested balances offset by significantly lower interest rates.

      The Company's effective income tax rate increased from 26.8% in fiscal
2001 to 39% in fiscal 2002. The fiscal 2001 rate was positively impacted by
adjustments to the income tax reserve related to various income tax matters.


                                       26
<PAGE>

RESULTS OF OPERATIONS

FORTY WEEKS ENDED NOVEMBER 9, 2002 COMPARED TO FORTY WEEKS ENDED NOVEMBER 10,
 2001

Net Sales and Income From Operations

      The following table sets forth certain operating information for each
period and should be viewed in conjunction with the consolidated financial
statements and notes included in Item 1 of this Form 10-Q/A.

                                        (RESTATED)    (RESTATED)
                                           Forty Weeks Ended
                                        ------------------------        Change
                                          Nov. 9,       Nov. 10,       Increase
                                           2002           2001        (Decrease)
                                        ----------    ----------      ----------
                                        (in thousands of dollars
                                       except sittings and average
                                       sales per customer sitting)

Net sales:
  Portrait Studios                      $  197,853    $  208,588         (5.1)%
  Technology Development                     3,377         2,377         42.1 %
  Intersegment sales                        (2,428)       (2,141)        13.4 %
                                        ----------    ----------
                                        $  198,802    $  208,824         (4.8)%
                                        ==========    ==========
Operating earnings (losses):
  Portrait Studios                      $      826    $    7,214        (95.9)%
  Technology Development                    (1,371)       (1,178)        16.4 %
                                        ----------    ----------
    Total operating
    earnings (losses)                         (545)        6,036       (109.0)%
                                        ----------    ----------
General corporate
       expenses                             11,848        11,238          5.4 %
                                        ----------    ----------
Loss from operations                    $  (12,393)   $   (5,202)      (138.2)%
                                        ==========    ==========
Sittings:
   Custom                                1,957,903     1,863,784          5.0 %
   Package                               1,312,055     1,720,298        (23.7)%
                                        ----------    ----------
                                         3,269,958     3,584,082         (8.8)%
                                        ==========    ==========
Average sales per customer
 sitting:

   Custom                               $    70.62    $    70.11          0.7 %
   Package                              $    45.33    $    45.22          0.2 %
   Overall                              $    60.47    $    58.17          4.0 %


                                       27
<PAGE>

      Net sales for the Portrait Studios segment decreased in the first three
quarters of 2002 from the first three quarters of 2001, as a decrease in
sittings was only partially offset by an increase in average sales per customer
sitting. The decrease in sittings is attributable to the effects of an early
Easter that historically results in reduced sittings in the first quarter and
significantly reduced sittings related to the Company's package offers. The
decline in package sittings is attributable to both the impacts of a larger
percentage of the Company's customers choosing the higher value custom offer
versus package offer and the effects of competitors with lower price package
offers. The increase in average sales per customer sitting is primarily the
result of the Company's success in converting more of its customers to the
higher value custom offer and the Company's decision made during the second
quarter to begin selling custom proof sheets which had previously been provided
free of charge as part of the custom offer.

      Included in the above mentioned sales revenues for the forty weeks ended
November 10, 2001 is $4.3 million of pre-tax revenues that were included in the
cumulative effect adjustment recorded in fiscal 2000 as discussed in Note 1 to
the Consolidated Financial Statements.

      Operating earnings for the Portrait Studios segment decreased in the first
three quarters of 2002 from the same timeframe in 2001 primarily due to the $4.2
million non-cash charge related to the write-off or write-down of certain
previously capitalized technology development costs.

      Exclusive of write-off and write-down amounts, lower operating expenses
partially offset the lower sales results. The lower operating expenses resulted
from reduced cost of sales and commissions attributable to lower sales, reduced
advertising expense resulting principally from planned reductions in spring
television and direct mail advertising, reduced depreciation expense due to
certain assets becoming fully depreciated, reduced credit card fees due to
credit card transactions being processed directly by Sears and other various
reductions resulting from the Company's continuing focus on expense reductions.

      Net sales for the Technology Development segment reflected an increase in
the first three quarters of 2002 from the first three quarters of 2001 due to an
increase in intersegment sales and net sales to nonaffiliated companies. After
elimination of intersegment sales, operating losses for the same timeframe
increased reflecting the increase in nonaffiliated sales offset by higher
employment costs, costs relating to supplies and maintenance and the write-down
of certain assets having diminished no future utility.

      General corporate expenses increased $610,000 between the first three
quarters of 2002 compared to the first three quarters of 2001 due to the absence
in 2002 of $1.7 million of executive management


                                       28
<PAGE>

repositioning costs incurred in 2001 offset by 2002 expenses which included
$688,000 associated with the final phase of the Company's strategic planning
initiative and increases in supplemental retirement benefit plan costs and
workers' compensation.

Other Items Effecting Results of Operations

      The following table sets forth certain operating information for each
period and should be viewed in conjunction with the consolidated financial
statements and notes included in Item 1 of this Form 10-Q/A.

                                        (RESTATED)    (RESTATED)
                                           Forty Weeks Ended
                                        ------------------------        Change
                                          Nov. 9,       Nov. 10,       Increase
                                           2002           2001        (Decrease)
                                        ----------    ----------      ----------
                                        (in thousands of dollars)

Interest expense:
  Debt                                  $    2,686    $    3,176       (15.4)%
  Other                                        107           128       (17.1)%
                                        ----------    ----------
    Total interest expense              $    2,793    $    3,304       (15.5)%
                                        ==========    ==========
Interest income:
  Investments                           $      523    $      924       (43.4)%
  Interest on income tax
   refund                                      297            --          --
  Income from Preferred
    Security                                   658           305       116.1%
  Revolver                                     130            84        55.5%
                                        ----------    ----------
    Total interest income               $    1,608    $    1,313        22.6%
                                        ==========    ==========
Other income (expense), net:
  Other income                          $       79    $       83        (4.8)%
  Investment revaluation                        --          (402)
                                        ----------    ----------
    Total other income
      (expense), net                    $       79    $     (319)
                                        ==========    ==========
Effective income tax rate                     39.0%         39.9%
                                        ==========    ==========

      Interest expense decreased in the first three quarters of 2002 from the
first three quarters of 2001 as a result of the scheduled repayment of long-term
debt.

      Interest income was higher in the first three quarters of 2002 compared to
first half of 2001 due to the receipt of interest on a federal income tax refund
and accrued income relating to the Preferred Security and Revolver offsetting
the lower income earned on invested cash. The lower income earned on invested
cash was a result of higher invested balances offset by significantly lower
interest rates.


                                       29
<PAGE>

Discontinued Operations

      In July 2001, the Company announced it had provided TRU Retail, Inc., the
predecessor legal entity of Prints Plus, Inc. ("Prints Plus") with a $6.4
million revolving line of credit. The Company further announced the completion
of the sale of its Wall Decor segment for $16.0 million. The sales price
reflected the receipt of $11.0 million in a Preferred Security of Prints Plus,
approximately $4.0 million in cash, other consideration netting to $1.0 million
and the assumption of certain liabilities including the ongoing guarantee of
certain operating real estate leases. The sales price was subject to final
post-closing adjustments.

      Subsequently, in January 2002 and May 2002, the balance of the Preferred
Security decreased due to the optional redemption of $1.0 million and $353,000,
respectively, of the security by Prints Plus, and, in the first quarter of 2002,
by a final post-closing adjustment of $147,000 to the security reflecting a
decrease in the final sales price. These events, when offset by the accrued
interest income of $721,000 that is also reflected in the value of the Preferred
Security, resulted in a balance on November 9, 2002 of $10.2 million.

      Borrowings under the revolving line of credit extended to Prints Plus were
$4.7 million and $5.2 million as of November 9, 2002 and November 10, 2001,
respectively. Interest income earned on this revolving line of credit for the
third quarter 2002 and 2001 was $64,000 and $84,000, respectively.

      Due to the Company's continuing financial interest in Prints Plus, the
Company is required to follow a modified equity method of accounting, which
requires cumulative losses, if any, incurred by Prints Plus during its fiscal
year be reflected in the Company's financials as a valuation allowance and
corresponding charge to income. As a result of Prints Plus' operating
performance and compliance with the covenants of the Preferred Security and
revolving line of credit, no valuation allowance was recorded as of November 9,
2002.

      Further, if Prints Plus defaults on certain operating real estate leases,
the Company has guaranteed monthly lease payments over the remaining life of
these leases. As of November 9, 2002, the maximum future obligation to the
Company would be $16.0 million before any negotiation with landlords or
subleasing. Based on scheduled lease payments, the maximum future obligations
will decrease an additional $908,000 by the end of fiscal 2002, then annually by
approximately $5.2 million to $4.8 million during the next two years. To
recognize the risk associated with these leases and based on the Company's past
experience with renegotiating lease obligations, a $1.0 million reserve was
established in 2001. At November 9, 2002, the Company had made no further
allowances for defaults under these operating leases as, in the opinion of
management, Prints Plus is meeting the performance standards established under
the operating leases.


                                       30
<PAGE>

      For further detailed information regarding risk, see Item 7. "Management's
Discussion and Analysis of Financial Condition and Results of
Operation-Liquidity, Capital Resources and Financial Condition-Risk and Critical
Accounting Policies," in the Company's Annual Report on Form 10-K/A for fiscal
year ended February 2, 2002.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION

Operating Activities

      Net cash used in operating activities in the first three quarters of 2002
of $1.1 million decreased $10.5 million from the $9.4 million provided by in the
first three quarters of 2001 due to changes in various deferred and refundable
income taxes relating to the net operating loss carrybacks that resulted from
the sale of Prints Plus in second quarter of 2001, a decline in accrued
advertising based on cost reduction initiatives and an increase in outstanding
receivable balances that resulted primarily from normal seasonal growth and from
a change in settlement methods with Sears Roebuck and Company ("Sears") in the
second quarter of 2002. The settlement method change resulted from a recent
amendment to the Company's Sears agreement that now allows the Company's credit
card transactions to be processed directly through Sears, thereby reducing
credit card processing fees paid to third-party vendors but resulting in an
slight increase in the collection period of the receivable from Sears.

Financing Activities

      Net cash used in financing activities in the three quarters of 2002 of
$9.0 million increased $2.3 million from the $6.7 million recorded in the first
three quarters of 2001 due to a decrease in funds provided by the issuance of
common stock in conjunction with employee benefit plans and option exercises in
2001 not being repeated in 2002 offset by proceeds from the borrowing against
the cash surrender value of life insurance.

      As discussed in the Company's Annual Report on Form 10-K/A, the Company
has a $60.0 million Senior Note Agreement and $30.0 million Revolving Facility.
In April 2002 and November 2002, the Company amended its Revolving Facility to
adjust the minimum consolidated earnings before income taxes, depreciation and
amortization ("EBITDA") covenant. In the November 2002 amendment, the Company
also reduced the line to $15 million since the Company has minimal borrowing
needs other than to support $7.2 million in outstanding letters of credit as of
November 9, 2002. As of November 9, 2002, the Company was in compliance with all
covenants under both the amended Revolving Facility and the Senior Note
Agreement, and expects to be in compliance with the covenants under both the
Revolving Facility and the Senior Note Agreement for the remainder of this year.


                                       31
<PAGE>

      However, given the sales shortfall incurred in the first three quarters
compared to the prior year periods, the Company may not achieve the EBITDA
covenant related solely to its Revolving Facility for the fourth quarter of this
fiscal year. Other than supporting outstanding letters of credit in the
principal amount of $7.2 million as of November 9, 2002, the Company has no
outstanding borrowings under the Revolving Facility, nor does it currently
expect to need to draw on the facility prior to its expiration in June 2003. The
Company anticipates that it will reach an agreement before the end of the fourth
quarter with the lending institutions offering the Revolving Facility whereby
either the above mentioned covenant will be amended or the facility will be
eliminated and replaced.

Investing Activities

      Net cash used in investing activities in the first three quarters of 2002
of $11.1 million reflects a $7.0 million decrease from the first three quarters
of 2001 due principally to lower levels of capital expenditures.

Cash Flows

      Cash flows from operations and cash and cash equivalents on hand represent
the Company's expected source of funds in fiscal year 2002 for planned capital
expenditures, scheduled principal payments in June of each year on long-term
debt of $8.6 million, normal business operations and dividends to shareholders.
With the exception of letters of credit used to support the Company's
self-insurance program and operating leases, the Company does not use
off-balance sheet arrangements to finance business activities.

Financial Condition

      Assets of the Company decreased 3.3%in the first three quarters of 2002
from year-end 2001 due primarily to a decrease in net property and equipment
resulting from depreciation charges exceeding property and equipment additions,
the write-down or write- off of certain previously capitalized technology
development costs, decreases in cash and cash equivalents resulting from the
second scheduled principal payment in June 2002 of $8.6 million of the Company's
long-term debt and decreases in cash balances driven by normal seasonal cash
needs.

      Liabilities of the Company increased 3.2% primarily as a result the
increase in deferred revenue. Stockholders' equity decreased 18.0% at the end of
the first three quarters of 2002 from year-end 2001 reflecting the year-to-date
2002 net losses and payments of dividends to stockholders, offset by increases
in additional paid-in capital that resulted from issuing shares of stock in
conjunction with employee benefit plans and option exercises.


                                       32
<PAGE>

Strategic Planning Initiatives

      On June 4, 2002, the Company announced that its Board of Directors had
approved management's recommendation for the recently completed strategic
planning process. For additional information on the Company's strategic
initiatives, refer to the Company's Form 8-K filed on June 4, 2002.


                                       33
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      Market risks relating to the Company's operations result primarily from
changes in interest rates and changes in foreign exchange rates. The Company's
outstanding debt obligations carry primarily fixed interest rates; therefore,
the Company's exposure to changes in interest rates is minimal. The Company's
exposure to changes in foreign exchange rates relates to the Canadian
operations, which is minimal, as these operations constitute 6.5% of the
Company's total assets and 6.7% of the Company's total sales.

ITEM 4. CONTROLS AND PROCEDURES

      An evaluation of the Company's disclosure controls and procedures (as
defined in Section 13(a)-14(c) of the Securities Exchange Act of 1934 (the
"Act") was carried out under the supervision and with the participation of the
Company's Chief Executive Officer, Chief Financial Officer and several other
members of the Company's senior management within the 90-day period preceding
the filing date of this quarterly report. The Company's Chief Executive Officer
and Chief Financial Officer concluded that the Company's disclosure controls and
procedures as currently in effect are effective in ensuring that the information
required to be disclosed by the Company in the reports it files or submits under
the Act is (i)accumulated and communicated to the Company's management
(including the Chief Executive Officer and Chief Financial Officer) in a timely
manner, and (ii) recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms.

      In the quarter ended November 9, 2002, the Company did not make any
significant changes in, nor take any corrective actions regarding, its internal
controls or other factors that could significantly affect these controls. In
addition, since the date of this evaluation to the filing date of this Quarterly
Report, there have been no significant changes in the Company's internal
controls or in other factors that could significantly affect internal controls,
including any corrective actions with regard to significant deficiencies and
material weaknesses.


                                       34
<PAGE>

PART II  OTHER INFORMATION

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         a) EXHIBITS

            The following exhibits are being filed as part of this Report:

            Exhibit 10.53 - Fifth Amendment to Sears License Agreement

            Exhibit 10.54 - Sixth Amendment to Sears License Agreement

            Exhibit 10.55 - Third Amendment to Sears License Agreement (Off
                            Mall)

            Exhibit 10.56 - Fourth Amendment to Sears License Agreement (Off
                            Mall)

            Exhibit 10.57 - Fifth Amendment to Sears License Agreement (Off
                            Mall)

            Exhibit 10.58 - Employment Agreement by and between Peggy J. Deal
                            and CPI Corp.

            Exhibit 10.59 - Employment Agreement by and between Thomas Gallahue
                            and CPI Corp.

            Exhibit 11.0 - Computation of Earnings Per Common Share

            Exhibit 99.1 - Certification Pursuant to 18 U.S.C. Section 1350, as
                           Adopted Pursuant to to Section 906 of the
                           Sarbanes-Oxley Act of 2002 by Chief Executive Officer

            Exhibit 99.2 - Certification Pursuant to 18 U.S.C. Section 1350, as
                           Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                           Act of 2002 by Chief Financial Officer

         b) REPORTS ON FORM 8-K

            On August 2, 2002, CPI Corp. filed an 8-K Current Report announcing
            the issuance of a press release dated July 31, 2002 on the election
            of Jim Clifford to CPI Corp.'s Board of Directors.

            On August 8, 2002, CPI Corp. filed an 8-K Current Report announcing
            the issuance of a press release dated August 6, 2002 declaring a
            third quarter cash dividend of 14 cents per share.

            On August 15, 2002, CPI Corp. filed an 8-K Current Report announcing
            the issuance of a press release dated August 15, 2002 reporting the
            second quarter FY 2002 results.


                                       35
<PAGE>

                                    SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                         CPI Corp.
                                       (Registrant)

                             By:  /s/ Gary W. Douglass
                                  ---------------------------
                                   Gary W. Douglass
                                   Authorized Officer and
                                   Principal Financial Officer

Dated:  May 15, 2003


                                       36
<PAGE>

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, J. David Pierson, certify that:

      1. I have reviewed this quarterly report on Form 10-Q/A of CPI Corp.;

      2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

      3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

      4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

            a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

            b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and

            c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

      5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

            a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and


                                       37
<PAGE>

            b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls;

      6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: May 12, 2003

                                By: /s/ J. David Pierson
                                    ---------------------------
                                        J. David Pierson
                                        Chief Executive Officer


                                       38
<PAGE>

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gary W. Douglass, certify that:

      1. I have reviewed this quarterly report on Form 10-Q/A of CPI Corp.;

      2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

      3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

      4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

            a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

            b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and

            c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

      5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

            a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls;


                                       39
<PAGE>

            b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

      6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: May 12, 2003

                                 By:/s/ Gary W. Douglass
                                    ----------------------------
                                        Gary W. Douglass
                                        Chief Financial Officer


                                       40
<PAGE>

                                    CPI CORP.

                                  EXHIBIT INDEX

Exhibit 10.53 - Fifth Amendment to Sears License Agreement                    42

Exhibit 10.54 - Sixth Amendment to Sears License Agreement                    43

Exhibit 10.55 - Third Amendment to Sears License Agreement (Off Mall)         44

Exhibit 10.56 - Fourth Amendment to Sears License Agreement (Off Mall)        45

Exhibit 10.57 - Fifth Amendment to Sears License Agreement (Off Mall)         46

Exhibit 10.58 - Employment Agreement by and between Peggy J. Deal and
                CPI Corp.                                                     47

Exhibit 10.59 - Employment Agreement by and between Thomas Gallahue
                and CPI Corp.                                                 48

Exhibit 11.0  - Computation of Earnings Per Common Share                   49-51

Exhibit 99.1  - Certification Pursuant to 18 U.S.C. Section 1350, as
                Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002 by Chief Executive Officer                        52

Exhibit 99.2 - Certification Pursuant to 18 U.S.C. Section 1350, as
                Adopted Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002 by Chief Financial Officer                        53


                                       41