UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             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 July 20, 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 August 16, 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)

PART 1.   FINANCIAL INFORMATION                                         PAGE(S)
                                                                        -------
Item 1.   Financial Statements
          - Interim Condensed Consolidated Balance
             Sheets as of July 20, 2002 and
             February 2, 2002                                              4-5
          - Interim Condensed Consolidated Statements of
             Operations - For the 12 and 24 Weeks Ended
             July 20, 2002 and July 21, 2001                               6-7
          - Interim Condensed Consolidated Statements
             of Changes in Stockholders' Equity and
             Comprehensive Income  For the 52 Weeks
             Ended February 2, 2002 and for the 24
             Weeks Ended July 20, 2002                                       8
          - Interim Condensed Consolidated Statements
             of Cash Flows - For the 24 Weeks Ended
             July 20, 2002 and July 21, 2001                              9-10
          - Notes to the Interim Condensed Consolidated
             Financial Statements                                        11-21

Item 2.   Management's Discussions and Analysis of
           Results of Operations, Financial Condition
           and Cash Flow                                                 22-32

Item 3.   Quantitative and Qualitative Disclosures About
           Market Risk                                                      33

PART II.  OTHER INFORMATION

Item 4.   Submission of Matters to a Vote to Security
           Holders                                                          34

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

          Signature                                                         36

          Certifications                                                 37-38

          Index to Exhibits                                                 39


                                       2
<PAGE>

EXPLANATORY NOTE

CPI Corp. is filing this Form 10-Q/A for the quarter ended July 20, 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 twelve and twenty-four weeks ended July 20, 2002 and July 21,
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)
                                                        July 20,     February 2,
                                                          2002          2002
                                                       (UNAUDITED)
                                                       ----------    ----------
Current assets:

 Cash and cash equivalents                             $   31,572    $   46,555
 Receivables, less allowance of
  $269 and $254, respectively                               9,841         5,421
 Inventories                                               12,458        12,920
 Prepaid expenses and other current
  assets                                                    7,889         6,795
 Deferred tax assets                                        2,263         1,990
 Refundable income taxes                                    9,667         9,123
                                                       ----------    ----------
     Total current assets                                  73,690        82,804
                                                       ----------    ----------
Net property and equipment                                 58,263        63,708

Assets of business transferred under
 contractual arrangements:

   Preferred security                                       9,959        10,069
   Loan receivable                                          3,117         1,518
Assets of supplemental retirement
 plan:

   Cash surrender value of life
    insurance policies                                     10,304         9,455
   Long-term investments held in Rabbi
    Trust                                                   3,557         4,951
Other assets, net of amortization of $1,359                 9,164         9,056
                                                       ----------    ----------
     Total assets                                      $  168,054    $  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)
                                                        July 20,     February 2,
                                                          2002          2002
                                                       (UNAUDITED)
                                                       ----------    ----------
Current liabilities:

 Current maturities of long-term debt                  $    8,580    $    8,580
 Accounts payable                                          11,774         9,741
 Accrued employment costs                                  10,448        13,538
 Deferred revenue                                          28,893        26,953
 Sales taxes payable                                        1,358         2,816
 Accrued advertising expense                                1,612         1,384
 Accrued expenses and other liabilities                     3,612         3,289
                                                       ----------    ----------
   Total current liabilities                               66,277        66,301
                                                       ----------    ----------
Long-term debt                                             34,084        42,639
Other liabilities                                           8,139        10,686
Long-term deferred revenue                                  4,830         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 July 20, 2002 and
  February 2, 2002, respectively                            7,313         7,281
  Additional paid-in capital                               51,137        49,845
  Retained earnings                                       229,014       231,980
  Accumulated other comprehensive
   income (loss)                                           (5,071)       (5,386)
                                                       ----------    ----------
                                                          282,393       283,720

Treasury stock at cost, 10,238,303
 shares at both July 20, 2002 and
 February 2, 2002                                        (227,642)     (227,642)
Unamortized deferred compensation-
 restricted stock                                             (27)          (34)
                                                       ----------    ----------
Total stockholders' equity                                 54,724        56,044
                                                       ----------    ----------
Total liabilities and stockholders'
 equity                                                $  168,054    $  181,561
                                                       ==========    ==========

See accompanying notes to consolidated financial statements.


                                       5
<PAGE>

CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) Twelve weeks ended July 20, 2002 and July 21, 2001
(in thousands of dollars except share and per share amounts)

                                                          Twelve Weeks Ended
                                                       ------------------------
                                                       (RESTATED)    (RESTATED)
                                                        July 20,      July 21,
                                                          2002          2001
                                                       ----------    ----------
Net sales                                              $   57,688    $   60,291
Costs and expenses:
  Cost of sales (exclusive of
   depreciation and amortization
   expense shown below)                                     8,378         8,072
  Selling, general and
   administrative expenses                                 44,350        46,252
  Depreciation and amortization                             4,844         5,551
                                                       ----------    ----------
                                                           57,572        59,875
                                                       ----------    ----------
Income from operations                                        116           416
Interest expense                                              857         1,007
Interest income                                               694           264
Other income, net                                              24            14
                                                       ----------    ----------
Loss before income tax benefit                                (23)         (313)
Income tax benefit                                            (15)         (109)
                                                       ----------    ----------
Net loss                                               $       (8)   $     (204)
                                                       ==========    ==========
Net loss per share - diluted                           $       --    $    (0.03)
                                                       ==========    ==========
Net loss per share - basic                             $       --    $    (0.03)
                                                       ==========    ==========

Dividends per share                                    $     0.14    $     0.14
                                                       ==========    ==========
Weighted average number of common
 and common equivalent shares
 outstanding - diluted                                  8,037,591     7,790,534
                                                       ==========    ==========
Weighted average number of common
 and common equivalent shares
 outstanding - basic                                    8,037,591     7,790,534
                                                       ==========    ==========

See accompanying notes to consolidated financial statements.


                                       6
<PAGE>

CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) Twenty-four weeks ended July 20, 2002 and July 21, 2001
(in thousands of dollars except share and per share amounts)

                                                       Twenty-four Weeks Ended
                                                       ------------------------
                                                       (RESTATED)    (RESTATED)
                                                        July 20,      July 21,
                                                          2002          2001
                                                       ----------    ----------
Net sales                                              $  117,691    $  122,467
Costs and expenses:
  Cost of sales (exclusive of
   depreciation and amortization
   expense shown below)                                    16,759        15,822
  Selling, general and
   administrative expenses                                 91,377        94,403
  Depreciation and amortization                            10,132        11,053
  Executive management repositioning
   costs                                                       --         1,733
                                                       ----------    ----------
                                                          118,268       123,011
                                                       ----------    ----------
Loss from operations                                         (577)         (544)
Interest expense                                            1,770         2,076
Interest income                                             1,107           693
Other income, net                                              42            54
                                                       ----------    ----------
Loss before income tax benefit                             (1,198)       (1,873)
Income tax benefit                                           (477)         (654)
                                                       ----------    ----------
Net loss                                               $     (721)   $   (1,219)
                                                       ==========    ==========
Net loss per share - diluted                           $    (0.09)   $    (0.16)
                                                       ==========    ==========
Net loss per share - basic                             $    (0.09)   $    (0.16)
                                                       ==========    ==========
Dividends per share                                    $     0.28    $     0.28
                                                       ==========    ==========
Weighted average number of common
 and common equivalent shares
 outstanding - diluted                                  8,035,321     7,740,278
                                                       ==========    ==========
Weighted average number of common
 and common equivalent shares
 outstanding - basic                                    8,035,321     7,740,278
                                                       ==========    ==========

See accompanying notes to consolidated financial statements.


                                       7
<PAGE>

CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY AND COMPREHENSIVE INCOME (UNAUDITED) (Continued) (in thousands of dollars
except share and per share amounts)
Twenty-four weeks ended July 20, 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               --          --        (721)          --           --           --
  Foreign currency
    translation, as restated          --          --          --          315           --           --           --
  Comprehensive income,
    as restated                       --          --          --           --           --           --         (406)
Dividends (  $0.28 per
  common share)                       --          --      (2,245)          --           --           --       (2,245)
Amortization of deferred
  compensation -
  restricted stock                    --          --          --           --           --            7            7
                               ---------   ---------   ---------    ---------    ---------    ---------    ---------
Balance at July 20, 2002,
 as restated                   $   7,313   $  51,137   $ 229,014    $  (5,071)   $(227,642)   $     (27)   $  54,724
                               =========   =========   =========    =========    =========    =========    =========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>


                                       8
<PAGE>

CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (in thousands of dollars)
Twenty-four weeks ended July 20, 2002 and July 21, 2001

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

                                                            24 Weeks Ended
                                                       ------------------------
                                                       (RESTATED)    (RESTATED)
                                                        July 20,      July 21,
                                                          2002          2001
                                                       ----------    ----------
Net loss                                               $     (721)   $   (1,219)

Adjustments for items not requiring cash:

  Depreciation and amortization                            10,132        11,054
  Deferred income taxes                                      (209)         (743)
  Deferred revenue                                            906           193
  Post closing adjustment on preferred
   security                                                   147            --
  Accrued interest on preferred security                     (390)           --
  Other                                                    (3,495)        1,562

(Increase) decrease in current assets:

  Receivables and inventories                              (3,959)          923
  Refundable income taxes                                    (544)      (11,707)
  Prepaid expenses and other current assets                  (791)        3,544

Decrease in current liabilities:
  Accounts payable, accrued expenses and
    other liabilities                                      (1,964)         (838)
  Income taxes                                                 --        (1,067)
                                                       ----------    ----------
Cash flows (used in) provided by operating
  activities                                           $     (888)   $    1,702
                                                       ==========    ==========

See accompanying notes to consolidated financial statements.


                                       9
<PAGE>

CPI CORP. INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (in thousands of dollars)
Twenty-four weeks ended July 20, 2002 and July 21, 2001

                                                            24 Weeks Ended
                                                       ------------------------
                                                       (RESTATED)    (RESTATED)
                                                        July 20,      July 21,
                                                          2002          2001
                                                       ----------    ----------
Cash flows (used in) provided by
 operating activities                                  $     (888)   $    1,702
                                                       ----------    ----------
Cash flows (used in) provided by
 financing activities:

  Repayment of long-term debt                              (8,580)       (8,580)
  Issuance of common stock in
   conjunction with employee benefit
   plans and option exercises                               1,324         4,580
  Cash dividends                                           (2,245)       (2,149)
  Issuance of treasury stock                                   --            62
  Purchase of treasury stock                                   --            (4)
                                                       ----------    ----------
Cash flows used in financing activities                    (9,501)       (6,091)
                                                       ----------    ----------
Cash flows (used in) provided by
 investing activities:

  Additions to property and equipment                      (4,527)       (9,756)
  Change in loan receivable                                (1,599)       (3,615)
  Purchase of investment securities in
   Rabbi Trust                                               (698)         (994)
  Proceeds from sale of investment
   securities in Rabbi Trust                                2,092         2,609
                                                       ----------    ----------
  Cash flows used in investing activities                  (4,732)      (11,756)
                                                       ----------    ----------
Effect of exchange rate changes on
 cash and cash equivalents                                    138          (140)
                                                       ----------    ----------
Net decrease in cash and cash
 equivalents                                              (14,983)      (16,285)
Cash and cash equivalents at
 beginning of period                                       46,555        38,820
                                                       ----------    ----------
Cash and cash equivalents at end of
 period                                                $   31,572    $   22,535
                                                       ==========    ==========
Supplemental cash flow information:

  Interest paid                                        $    1,920    $    2,277
                                                       ==========    ==========
  Income taxes paid                                    $      358    $    6,436
                                                       ==========    ==========

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 Companys)
financial position as of July 20, 2002 and February 2, 2002 and the results of
its operations and changes in its cash flows for the twelve and twenty-four
weeks ended July 20, 2002 and July 21, 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 fees) to defer the entire amount of the fee received and
amortize it into revenues on a


                                       11
<PAGE>

straight-line basis over the twenty-four month period of the customers 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 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
$1.4 million in the second quarter of fiscal 2001 and $3.1 million in the
twenty-four weeks ended July 21, 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 Executive Management Repositioning Costs a component of operating
income.

The following tables reflect the specific line item impact of the aforementioned
restatements, including related changes to the Companys 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>

TWELVE WEEKS ENDED FISCAL 2002

<TABLE>
<CAPTION>
                                                July 20, 2002                July 21, 2001
                                           Restated       Orig Rept     Restated       Orig Rept
                                          -----------    -----------   -----------    -----------
<S>                                       <C>            <C>           <C>            <C>
STATEMENT OF OPERATIONS DATA:
Net sales                                 $    57,688    $    56,660   $    60,291    $    59,071
Cost and expenses:
 Cost of sales (exclusive of
  depreciation expense shown below)             8,378          8,456         8,072          8,447
 Selling, general and administrative
  expense                                      44,350         44,103        46,252         46,067
Income (loss) from operations                     116           (743)          416           (994)
Loss before income tax benefit                    (23)          (882)         (313)        (1,723)
Income tax benefit                                (15)          (344)         (109)          (603)
Net loss                                  $        (8)   $      (538)  $      (204)   $    (1,120)
                                          ===========    ===========   ===========    ===========

Net loss per share - diluted              $        --    $     (0.07)  $     (0.03)   $     (0.14)
                                          ===========    ===========   ===========    ===========
Weighted average number of common
 and common equivalent shares
 outstanding - diluted                      8,037,591      8,037,591     7,790,534      7,790,534
                                          ===========    ===========   ===========    ===========
</TABLE>


                                       13
<PAGE>

TWENTY-FOUR WEEKS ENDED FISCAL 2002

<TABLE>
<CAPTION>
                                                July 20, 2002                July 21, 2001
                                           Restated       Orig Rept     Restated       Orig Rept
                                          -----------    -----------   -----------    -----------
<S>                                       <C>            <C>           <C>            <C>
STATEMENT OF OPERATIONS DATA:
Net sales                                 $   117,691    $   118,556   $   122,467    $   124,098
Cost and expenses:
 Cost of sales (exclusive of
  depreciation expense shown below)            16,759         16,996        15,822         16,637
 Selling, general and administrative
  expense                                      91,377         91,573        94,403         95,004
 Executive management repositioning
  costs                                            --             --         1,733             --
Income (loss) from operations                    (577)          (145)         (544)         1,403
Other income (expense), net                        42             --            54         (1,680)
Loss before income tax benefit                 (1,198)          (766)       (1,873)        (1,660)
Income tax benefit                               (477)          (299)         (654)          (581)
Net loss                                  $      (721)   $      (467)  $    (1,219)   $    (1,079)
                                          ===========    ===========   ===========    ===========

Net loss per share - diluted              $     (0.09)   $     (0.06)  $     (0.16)   $     (0.14)
                                          ===========    ===========   ===========    ===========
Weighted average number of common
 and common equivalent shares
 outstanding - diluted                      8,035,321      8,035,321     7,740,278      7,740,278
                                          ===========    ===========   ===========    ===========
</TABLE>


                                       14
<PAGE>

FISCAL 2002

<TABLE>
<CAPTION>
                                                July 20, 2002                July 21, 2001
                                           Restated       Orig Rept     Restated       Orig Rept
                                          -----------    -----------   -----------    -----------
<S>                                       <C>            <C>           <C>            <C>
BALANCE SHEET DATA:
ASSETS:

 Receivables, less allowance              $     9,841    $    12,523   $     5,421    $     8,417
 Inventories                                   12,458          8,882        12,920          9,510
 Prepaid expenses and other current
  assets                                        7,889          5,068         6,795          4,257
 Deferred tax assets                            2,263             --         1,990             --
 Total current assets                          73,690         67,712        82,804         77,862
 Other assets, net                              9,164          5,612         9,056          5,239
 Total assets                             $   168,054    $   158,524   $   181,561    $   172,802
                                          ===========    ===========   ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY:
 Deferred revenue                              28,893          9,664        26,953          9,529
 Accrued expenses and other
  liabilities                                   3,612          4,615         3,289          4,134
 Total current liabilities                     66,277         48,051        66,301         49,722
 Long-term deferred revenue                     4,830          3,241         5,891          3,677
 Retained earnings                            229,014        239,303       231,980        242,015
 Accumulated other comprehensive
  income (loss)                                (5,071)        (5,075)       (5,386)        (5,387)
 Total stockholders' equity                    54,724         65,009        56,044         66,078
 Total liabilities and stockholders'
  equity                                  $   168,054    $   158,524   $   181,561    $   172,802
                                          ===========    ===========   ===========    ===========
</TABLE>


                                       15
<PAGE>

Note 2

      The Company has operations in two business segments: Portrait Studios and
Technology Development. The Portrait Studios segment functions as the exclusive
operator of Sears Portrait Studios with 1,025 locations in the United States,
Canada and Puerto Rico as of July 20, 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)

                                                          Twelve Weeks Ended
                                                       ------------------------
                                                       (RESTATED)    (RESTATED)
                                                        July 20,      July 21,
                                                          2002          2001
                                                       ----------    ----------
NET SALES:
  Portrait Studios                                     $   57,204    $   60,229
  Technology Development                                    1,296         1,431
  Intersegment sales                                         (812)       (1,369)
                                                       ----------    ----------
                                                       $   57,688    $   60,291
                                                       ==========    ==========
INCOME (LOSS) FROM OPERATIONS:
 Portrait Studios                                      $    3,375    $    3,153
 Technology Development                                       (31)           75
 Corporate expense                                         (3,228)       (2,812)
                                                       ----------    ----------
                                                       $      116    $      416
                                                       ==========    ==========


                                       16
<PAGE>

SELECTED INDUSTRY SEGMENT INFORMATION (in thousands of dollars)

                                                       Twenty-four Weeks Ended
                                                       ------------------------
                                                       (RESTATED)    (RESTATED)
                                                        July 20,      July 21,
                                                          2002          2001
                                                       ----------    ----------
NET SALES:
  Portrait Studios                                     $  116,940    $  122,391
  Technology Development                                    2,172         1,445
  Intersegment sales                                       (1,421)       (1,369)
                                                       ----------    ----------
                                                       $  117,691    $  122,467
                                                       ==========    ==========
INCOME (LOSS) FROM OPERATIONS:
 Portrait Studios                                      $    6,650    $    7,637
 Technology Development                                      (445)         (691)
 Corporate expense                                         (6,782)       (7,490)
                                                       ----------    ----------
                                                       $     (577)   $     (544)
                                                       ==========    ==========
SEGMENT ASSETS:
 Portrait Studios                                      $   87,492    $   93,258
 Technology Development                                     1,905           901
 Corporate cash and cash
  equivalents                                              31,572        22,535
 Corporate other                                           47,085        54,161
                                                       ----------    ----------
                                                       $  168,054    $  170,855
                                                       ==========    ==========


                                       17
<PAGE>

GEOGRAPHIC FINANCIAL INFORMATION

                                                          Twelve Weeks Ended
                                                       ------------------------
                                                       (RESTATED)    (RESTATED)
                                                        July 20,      July 21,
                                                          2002          2001
                                                       ----------    ----------
NET SALES:
 United States                                         $   53,543    $   56,251
 Canada                                                     4,145         4,040
                                                       ----------    ----------
                                                       $   57,688    $   60,291
                                                       ==========    ==========

                                                       Twenty-four Weeks Ended
                                                       ------------------------
                                                       (RESTATED)    (RESTATED)
                                                        July 20,      July 21,
                                                          2002          2001
                                                       ----------    ----------
NET SALES:
 United States                                         $  109,841    $  114,450
 Canada                                                     7,850         8,017
                                                       ----------    ----------
                                                       $  117,691    $  122,467
                                                       ==========    ==========
LONG-LIVED ASSETS:
 United States                                         $   89,394    $   99,293
 Canada                                                     4,970         5,350
                                                       ----------    ----------
                                                       $   94,364    $  104,643
                                                       ==========    ==========

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 July 20, 2002, the carrying value of goodwill was
$513,000 and related to acquisitions by the Portrait Studio division prior to
June 30, 2001. The pro forma effects of the adoption of SFAS 142 on the results
of operations for periods prior to fiscal year 2002 are as follows:


                                       18
<PAGE>

<TABLE>
<CAPTION>
                                Twelve Weeks Ended        Twenty-Four Weeks Ended
                             -----------------------------------------------------
                                (in thousands of dollars, except per share data)

                              (RESTATED)  (RESTATED)        (RESTATED)   (RESTATED)
                               July 20,    July 21,          July 20,     July 21,
                                 2002        2001              2002         2001
                               --------   ---------         ---------    ----------
<S>                            <C>        <C>               <C>          <C>
Reported net loss              $    (8)   $   (204)         $   (721)    $  (1,219)
Add: Goodwill amortization,
      net of tax                    --          16                --            32
                               -------    --------          --------     ---------
Adjusted net loss              $    (8)   $   (188)         $   (721)    $  (1,187)
                               =======    ========          ========     =========
Diluted loss per share:
  Reported net loss            $    --    $  (0.03)         $  (0.09)    $   (0.16)
  Goodwill amortization,
    net of tax                      --          --                --          0.01
                               -------    --------          --------     ---------
  Adjusted net loss per share  $    --    $  (0.03)         $  (0.09)    $   (0.15)
                               =======    ========          ========     =========
Basic loss per share:
  Reported net loss            $    --    $  (0.03)         $  (0.09)    $   (0.16)
  Goodwill amortization,
    net of tax                      --          --                --          0.01
                               -------    --------          --------     ---------
  Adjusted net loss per share  $    --    $  (0.03)         $  (0.09)    $   (0.15)
                               =======    ========          ========     =========
</TABLE>


                                       19
<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 $459,000 that is also reflected in the value of the Preferred
Security, resulted in a balance on July 20, 2002 of $10.0 million. For the
twelve and twenty-four weeks of the second quarter of 2002, interest income
earned on the Preferred Security was $189,000 and $396,000, respectively.

      Borrowings under the revolving line of credit extended to Prints Plus were
$3.1 million as of July 20, 2002. For the twelve and twenty-four weeks of the
second quarter, interest income earned on this revolving line of credit by the
Company was $41,000 and $66,000, 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. Due to Prints Plus' unaudited net earnings from
July 22, 2001 to July 20, 2002 of $1.0 million and, as Prints Plus is meeting
the performance standards established under the covenants of the Preferred
Security and revolving line of credit, no valuation allowance has been recorded
as of July 20, 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 July 20, 2002, the maximum future obligation to the Company
would be $18.2 million before any negotiation with landlords or subleasing.
Based on scheduled lease payments, the maximum future obligations will decrease
$2.7 million by the end of fiscal 2002, then annually by approximately $5.3
million to $4.9 million during the


                                       20
<PAGE>

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 July 20, 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.

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, the Company amended its Revolving Facility to adjust the minimum
consolidated earnings before income taxes, depreciation and amortization
("EBITDA") covenant. As of July 20, 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 two quarters
compared to the prior year periods, plus the further deterioration in customer
sittings during the first three weeks of the third quarter, the Company does not
expect to achieve the EBITDA and the minimum consolidated fixed charge coverage
ratio covenants related solely to its Revolving Facility for the third and
possibly the fourth quarters of this fiscal year. Other than supporting
outstanding letters of credit in the principal amount of $6.7 million as of July
20, 2002, the Company has no outstanding borrowings under the Revolving
Facility, nor does it currently expect the 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 third quarter with the lending institutions
offering the Revolving Facility whereby either the above mentioned covenants
will be amended and/or the amount of the facility will be reduced or eliminated.


                                       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.
Both the second fiscal quarters of 2002 and 2001, which consisted of twelve
weeks, and the first fiscal halves of 2002 and 2001, which consisted of
twenty-four weeks, ended July 20, 2002 and July 21, 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 second quarter 2002 and second quarter 2001 or
first half 2002 and first half 2001 will mean the first fiscal quarter or first
fiscal half of 2002 and 2001, respectively.

      All comparisons and references in this Form 10-Q/A to results for the
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. The Portrait Studios segment functions as the exclusive
operator of Sears Portrait Studios with 1,025 locations in the United States,
Canada and Puerto Rico as of July 20, 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


                                       22
<PAGE>

software development under the name Centrics Technology, Inc.

RESULTS OF OPERATIONS

TWELVE WEEKS ENDED JULY 20, 2002 COMPARED TO TWELVE WEEKS ENDED
 JULY 21, 2001

Net Sales and Income (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.

                                           Twelve Weeks Ended
                                           ------------------
                                         (RESTATED)    (RESTATED)      Change
                                          July 20,      July 21,       Increase
                                            2002          2001        (Decrease)
                                        ----------    ----------      ----------
                                       (in thousands of dollars
                                      except sittings and average
                                           sale per customer)
Net sales:

  Portrait Studios                      $   57,204    $   60,229          (5.0)%
  Technology Development                     1,296         1,431          (9.4)%
  Intersegment sales                          (812)       (1,369)        (40.7)%
                                        ----------    ----------
                                        $   57,688    $   60,291          (4.3)%
                                        ==========    ==========
Operating earnings (losses):
  Portrait Studios                      $    3,375    $    3,153           7.0%
  Technology Development                       (31)           75        (141.3)%
                                        ----------    ----------
    Total operating earnings                 3,344         3,228           3.6%
                                        ----------    ----------
General corporate expenses                   3,228         2,812          14.8%
                                        ----------    ----------
Income from operations                  $      116    $      416         (72.1)%
                                        ==========    ==========
Sittings:

   Custom                                  570,379       523,838           8.9%
   Package                                 358,463       470,480         (23.8)%
                                        ----------    ----------
                                           928,842       994,318          (6.6)%
                                        ==========    ==========
Average sales per customer
 sitting:

   Custom                               $    71.43    $    71.60          (0.2)%
   Package                              $    45.83    $    48.35          (5.2)%
   Overall                              $    61.55    $    60.60           1.6%


                                       23
<PAGE>

      Net sales for the Portrait Studios segment decreased in second quarter of
2002 from second 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 is largely attributable to a decreased response to certain media
targeted toward acquisition of new mothers. The increase in average sales per
customer sitting is primarily the result of a larger percentage of customers
choosing the higher-value custom offer versus the package offers.

      Included in the above mentioned sales revenues for the second quarter of
2001 is $1.4 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 increased second quarter of
2002 from the same timeframe in 2001 due to lower operating expenses offsetting
the lower sales results. The lower operating expenses are due to lower
advertising expense, resulting principally from planned reductions in direct
mail advertising, reduced commissions attributable to lower sales, and other
various reductions resulting from the Company's continuing focus on expense
reductions, including reduced travel and meeting costs.

      Net sales for the Technology Development segment reflected a decrease in
the second quarter of 2002 from the second quarter of 2001 due to a decrease in
intersegment sales offsetting an increase in net sales to nonaffiliated
companies. After elimination of intersegment sales, the negative swing in
operating results quarter to quarter is attributable to the overall decrease in
the Technology Development's net sales level.

      General corporate expenses increased between quarters due to increases in
supplemental retirement benefit plan costs in the second quarter of 2002
compared to 2001 and to the incurrence in 2002 of $218,000 in professional
service fees associated with the final phase of the Company's strategic planning
initiative and use of other outside consultants.


                                       24
<PAGE>

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.

                                           Twelve Weeks Ended
                                           ------------------
                                                                        Change
                                         July 20,      July 21,        Increase
                                           2002          2001         (Decrease)
                                        ----------    ----------      ----------
                                        (in thousands of dollars)
Interest expense:

  Debt                                  $      823    $      969         (15.0)%
  Other                                         34            38          (9.4)%
                                        ----------    ----------
    Total interest expense              $      857    $    1,007         (14.8)%
                                        ==========    ==========
Interest income:

  Investments                           $      167    $      264         (36.6)%
  Interest on tax refund                       297            --            --
  Income from Preferred
    Security (1)                               189            --            --
  Revolver (1)                                  41            --            --
                                        ----------    ----------
    Total interest income               $      694    $      264         162.8%
                                        ==========    ==========

Other income, net:                      $       24    $       14          71.4%
                                        ==========    ==========

Effective income tax rate                     39.0%         35.0%
                                        ==========    ==========

(1) See Discontinued Operations discussion on page 29.

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

      Interest income was higher in the second quarter of 2002 compared to
second quarter of 2001 due to the receipt of interest in 2002 on a federal 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.

      The Company's effective income tax rate increased from 35% 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.


                                       25
<PAGE>

RESULTS OF OPERATIONS

TWENTY-FOUR WEEKS ENDED JULY 20, 2002 COMPARED TO TWENTY-FOUR
 WEEKS ENDED JULY 21, 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.

                                         Twenty-four Weeks Ended
                                         -----------------------
                                         (RESTATED)    (RESTATED)       Change
                                          July 20,      July 21,       Increase
                                            2002          2001        (Decrease)
                                        ----------    ----------      ----------
                                       (in thousands of dollars
                                      except sittings and average
                                           sale per customer)

Net sales:

  Portrait Studios                      $  116,940    $  122,391          (4.5)%
  Technology Development                     2,172         1,445          50.3%
  Intersegment sales                        (1,421)       (1,369)          3.8%
                                        ----------    ----------
                                        $  117,691    $  122,467          (3.9)%
                                        ==========    ==========
Operating earnings (losses):
  Portrait Studios                      $    6,650    $    7,637         (12.9)%
  Technology Development                      (445)         (691)        (35.6)%
                                        ----------    ----------
    Total operating earnings                 6,205         6,946         (10.7)%
                                        ----------    ----------
General corporate expenses                   6,782         7,490           9.5%
                                        ----------    ----------
Income (loss) from operations           $     (577)   $     (544)         (6.1)%
                                        ==========    ==========
Sittings:

   Custom                                1,160,433     1,018,872          13.9%
   Package                                 782,856     1,038,943         (24.6)%
                                        ----------    ----------
                                         1,943,289     2,057,815          (5.6)%
                                        ==========    ==========
Average sales per customer
 sitting:

   Custom                               $    69.44    $    72.05          (2.9)%
   Package                              $    45.66    $    47.09          (3.0)%
   Overall                              $    60.16    $    59.45           1.2%


                                       26
<PAGE>

      Net sales for the Portrait Studios segment decreased in first half of 2002
from first half 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
largely attributable to the effects of an early Easter that historically results
in reduced sittings in the first quarter and a decreased response to certain
media targeted toward acquisition of new mothers. The increase in average sales
per customer sitting is primarily the result of a larger percentage of customers
choosing the higher-value custom offer versus the package offers.

      Included in the above mentioned sales revenues for the twenty-four weeks
ended July 21, 2001 is $3.1 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 decreased first half of 2002
from the same timeframe in 2001 due to lower sales partially offset by lower
operating expenses. The lower operating expenses resulted from lower advertising
expense, resulting principally from planned reductions in spring television and
direct mail advertising, reduced commissions attributable to lower sales, and
other various reductions resulting from the Company's continuing focus on
expense reductions, including reduced travel and meeting costs.

      Net sales for the Technology Development segment reflected an increase in
the first half of 2002 from the first half 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 decreased
reflecting an increase in nonaffiliated sales offset slightly by higher
employment costs.

      General corporate expenses decreased $708,000 between first half of 2002
compared to first half of 2001 due to the absence in 2002 of approximately $1.7
million of executive management repositioning costs incurred in 2001, partially
offset by the incurrence in 2002 of $649,000 in professional service fees
associated with the final phase of the Company's strategic planning initiative
and due to increases in supplemental retirement benefit plan costs.


                                       27
<PAGE>

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.

                                         Twenty-four Weeks Ended
                                         -----------------------
                                                                        Change
                                         July 20,      July 21,        Increase
                                           2002          2001         (Decrease)
                                        ----------    ----------      ----------
                                        (in thousands of dollars)
Interest expense:
  Debt                                  $    1,706    $    1,999         (14.7)%
  Other                                         64            77         (18.0)%
                                        ----------    ----------
    Total interest expense              $    1,770    $    2,076         (14.8)%
                                        ==========    ==========
Interest income:
  Investments                           $      348    $      693         (49.7)%
  Interest on tax refund                       297            --            --
  Income from Preferred
    Security (1)                               396            --            --
  Revolver (1)                                  66            --            --
                                        ----------    ----------
    Total interest income               $    1,107    $      693          59.7%
                                        ==========    ==========
Other income, net,
  as restated                           $       42    $       54         (22.2)%
                                        ==========    ==========
Effective income tax rate                     39.0%         35.0%
                                        ==========    ==========

(1)   See Discontinued Operations discussion on page 29.

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

      Interest income was higher in the first half of 2002 compared to first
half of 2001 due to the receipt of interest on a federal 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.


                                       28
<PAGE>

      The Company's effective income tax rate increased from 35% 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.

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 $459,000 that is also reflected in the value of the Preferred
Security, resulted in a balance on July 20, 2002 of $10.0 million. For the
twelve and twenty-four weeks of the second quarter of 2002, interest income
earned on the Preferred Security was $189,000 and $396,000, respectively.

      Borrowings under the revolving line of credit extended to Prints Plus were
$3.1 million as of July 20, 2002. For the twelve and twenty-four weeks of the
second quarter, interest income earned on this revolving line of credit by the
Company was $41,000 and $66,000, 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. Due to Prints Plus' unaudited net earnings from
July 22, 2001 to July 20, 2002 of $1.0 million and, as Prints Plus is meeting
the performance standards established under the covenants of the Preferred
Security and revolving line of credit, no valuation allowance has been recorded
as of July 20, 2002.


                                       29
<PAGE>

      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 July 20, 2002, the maximum future obligation to the Company
would be $18.2 million before any negotiation with landlords or subleasing.
Based on scheduled lease payments, the maximum future obligations will decrease
$2.7 million by the end of fiscal 2002, then annually by approximately $5.3
million to $4.9 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 July 20, 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.

      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 for fiscal
year ended February 2, 2002.

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION

Operating Activities

      Net cash used in operating activities in the first half of 2002 of
$888,000 decreased $2.6 million from the $1.7 million in cash provided by
operating activities recorded in the first half 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
and a change in receivables that resulted from a change in settlement methods
with Sears Roebuck and Company ("Sears") in second quarter of 2002. The
settlement method change resulted from a recent amendment to the Company's Sears
agreement that now allows 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 receivable from Sears.

Financing Activities

      Net cash used in financing activities in the first half of 2002 of $9.5
million increased $3.4 million from the $6.1


                                       30
<PAGE>

million recorded in the first half 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.

      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, the Company amended its Revolving Facility to adjust the minimum
consolidated earnings before income taxes, depreciation and amortization
("EBITDA") covenant. As of July 20, 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 two quarters
compared to the prior year periods, plus the further deterioration in customer
sittings during the first three weeks of the third quarter, the Company does not
expect to achieve the EBITDA and the minimum consolidated fixed charge coverage
ratio covenants related solely to its Revolving Facility for the third and
possibly the fourth quarters of this fiscal year. Other than supporting
outstanding letters of credit in the principal amount of $6.7 million as of July
20, 2002, the Company has no outstanding borrowings under the Revolving
Facility, nor does it currently expect the 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 third quarter with the lending institutions
offering the Revolving Facility whereby either the above mentioned covenants
will be amended and/or the amount of the facility will be reduced or eliminated.

Investing Activities

      Net cash used in investing activities in the first half of 2002 of $4.7
million reflect a $7.0 million decrease from the first half of 2001 due
primarily 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 of approximately $18 million, scheduled principal payments 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.


                                       31
<PAGE>

Financial Condition

      Assets of the Company decreased 7.4% in the first half of 2002 from
year-end 2001 due primarily to an ordinary-course decrease in net property and
equipment resulting from depreciation charges exceeding property and equipment
additions and 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 seasonal cash needs.

      Liabilities of the Company decreased 9.7% primarily as a result of the
$8.6 million debt repayment in June 2002 and seasonal decreases in accrued
employment costs and other liabilities.

      Stockholders' equity decreased 2.5% at the end of the first half 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.

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.


                                       32
<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
debt obligations have 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 6.6%of the Company's total assets and
6.7% of the Company's total sales.


                                       33
<PAGE>

PART II     OTHER INFORMATION

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

            The Annual Meeting of Shareholders was held in St. Louis, Missouri
            on Thursday, June 6, 2002. The following items were voted on and the
            results are listed below:

            The following individuals were elected to the Company's Board of
            Directors:

                         RESULTS OF VOTES FOR DIRECTORS
                         ------------------------------

                                       SHARES        SHARES
                                         FOR        WITHHELD
                                     ----------     ---------
               Edmond Abrain         5,806,949      1,374,523
               Joanne Griffin        6,133,015      1,048,457
               Lee Liberman          6,066,092      1,115,380
               J. David Pierson      6,174,498      1,006,974
               Nicholas L. Reding    6,164,094      1,017,378
               Martin Sneider        6,164,090      1,017,382
               Virginia Weldon       6,028,488      1,157,984

            The Board of Directors' appointment of KPMG LLP to audit the
            Company's accounts for the 2002 fiscal year was approved by a vote
            of 6,234,019 shares in favor, 24,991 shares opposed and 922,462
            shares abstaining.

            A Resolution to provide for an Annual Incentive Program for the
            Chairman and Chief Executive Officer, President and Executive Vice
            Presidents was approved by a vote of 4,595,944 shares in favor,
            1,278,702 shares opposed and 1,306,826 shares abstaining.


                                       34
<PAGE>

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 Revolving Credit
                             Agreement

            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 May 14, 2002, CPI Corp. filed an 8-K Current
            Report announcing the issuance of a press release
            dated May 9, 2002, reporting that the Board of
            Directors approved Resolutions to amend CPI Corp.'s
            by-laws.

            On June 5, 2002, CPI Corp. filed an 8-K Current
            Report announcing the issuance of a press release
            dated June 4, 2002, relating to its strategic plan
            and also published a presentation labeled "CPI Corp.-
            The Growth Strategy" relating to its strategic
            planning initiatives.

            On June 5, 2002, CPI Corp. filed an 8-K Current
            Report announcing the issuance of a press release
            dated June 4, 2002 reporting first quarter FY 2002
            results.

            On June 18, 2002, CPI Corp. filed an 8-K Current
            Report announcing the issuance of a press release
            dated June 13, 2002 reporting that the stockholders
            had elected seven Directors to serve on its Board
            through the 2003 Annual Meeting of Stockholders.


                                       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.

Date: May 12, 2003

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


                                       37
<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.

Date: May 12, 2003

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


                                       38
<PAGE>

CPI CORP.

                                  EXHIBIT INDEX

                   (PAGE NUMBERS REFER TO PAPER DOCUMENT ONLY)

Exhibit 11.0  - Computation of Earnings Per Common
                 Share                                                    40-42

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                          43

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                          44


                                       39