----

----

| [X] | QUARTERLY                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934For                the quarterly period ended November 10,                2007 |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| [   ] | TRANSITION                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE                ACT OF                1934 For the transition period from __________ to                __________ |
|----------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**CPI      Corp.**

| Delaware                                                                      |   | 43-1256674                                          |
|-------------------------------------------------------------------------------|--------|-----------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization) |   | (I.R.S.                Employer Identification No.) |
|                                                                          |   |                                                |
| 1706                Washington Ave., St. Louis, Missouri                      |   | 63103                                               |
| (Address                of principal executive offices)                       |   | (Zip                Code)                           |

| Indicate                by check mark whether the Registrant [1] has 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 and [2] has been subject to such filing                requirements for the past 90 days. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Yes                [X] |   |  No                [  ] |
|------------------------|--------|----------------------------------------|

| Indicate                by check mark whether the Registrant is a large accelerated filer,                an                accelerated filer, or a non-accelerated filer.  See definition                of “accelerated filer and large accelerated filer” in Rule 12b-2 of the                Exchange Act (check one): |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Large                accelerated filer [  ] |   | Accelerated                filer [X] |   | Non-accelerated                filer [  ] |
|-------------------------------------------------------|--------|--------------------------------------|--------|-----------------------------------------------------|

| Indicate                by check mark whether the Registrant is a shell company (as defined                in                Rule 12b-2 of the Exchange Act). |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Yes                [  ] |   |  No                [X] |
|-----------------------------------|--------|-----------------------------|

----

----

**CPI      CORP.**

**INDEX      TO QUARTERLY REPORT ON FORM 10-Q**

**16      and 40 Weeks ended November 10, 2007**

|                           |   | Page                                   |
|--------------------------------|--------|----------------------------------------|
|                           |   |                                   |
| PART                  I.       |   | FINANCIAL                  INFORMATION |   |   |
|                           |   |                                   |   |   |
|                           |   | Item                  1.               |   | Financial                  Statements: |   |   |
|                           |   |                                   |   |   |   |   |
|                           |   |                                   |   | InterimCondensed                  Consolidated Balance                  Sheets |   |   |
|                           |   |                                   |   | November                  10, 2007 (Unaudited) and February 3, 2007 |   | 1 |
|                           |   |                                   |   |   |   |   |
|                           |   |                                   |   | InterimCondensed                  Consolidated                  Statements of Operations (Unaudited) |   |   |
|                           |   |                                   |   | 16                  and 40 Weeks Ended November 10, 2007 and November 11, 2006 |   | 3 |
|                           |   |                                   |   |   |   |   |
|                           |   |                                   |   | Interim                  Condensed Consolidated                  Statements of Changes in Stockholders' |   |   |
|                           |   |                                   |   | Equity                  (Unaudited) 40 Weeks Ended November 10, 2007 |   | 4 |
|                           |   |                                   |   |   |   |   |
|                           |   |                                   |   | Interim                  Condensed Consolidated Statements                  of Cash Flows (Unaudited) |   |   |
|                           |   |                                   |   | 40                  Weeks Ended November 10, 2007 and November 11, 2006 |   | 5 |
|                           |   |                                   |   |   |   |   |
|                           |   |                                   |   | Notes                  to Interim Condensed                  Consolidated Financial Statements (Unaudited) |   | 7 |
|                           |   |                                   |   |   |   |   |
|                           |   | Item                  2.               |   | Management's                  Discussion and Analysis of                  Financial Condition and Results |   |   |
|                           |   |                                   |   | of                  Operations |   | 15 |
|                           |   |                                   |   |   |   |   |
|                           |   | Item                  3.               |   | Quantitative                  and Qualitative                  Disclosures about Market Risk |   | 25 |
|                           |   |                                   |   |   |   |   |
|                           |   | Item                  4.               |   | Controls                  and Procedures |   | 25 |
|                           |   |                                   |   |   |   |   |
| PART                  II.      |   | OTHERINFORMATION                       |   |   |
|                           |   |                                   |   |   |
|                           |   | Item                  1A.              |   | Risk                  Factors |   | 26 |
|                           |   | Item                  5.               |   | Other                  Information |   | 26 |
|                           |   | Item                  6.               |   | Exhibits |   | 27 |
|                           |   |                                   |
| SIGNATURES                     |   |                                   |   | 28 |
|                           |   |                                   |
| EXHIBIT                  INDEX |   |                                   |   | 29 |

**PART      I.                      FINANCIAL      INFORMATION**

*Item      1.                 Financial      Statements*

**CPI      CORP.**

**Interim      Condensed Consolidated Balance Sheets –Assets**

| *thousands*                                                                                                                       |   | November                  10, 2007 |    |   | February                  3, 2007 |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|--------|-----------------------------------|--------|
|                                                                                                                              |   | (Unaudited)                        |    |   |                              |   |
| ASSETS                                                                                                                            |   |                               |    |   |                              |   |
| Current                  assets:                                                                                                  |   |                               |    |   |                              |   |
|     Cash                  and cash equivalents                                                                |   | $                                  | 36,030  |   |                              | $      | 26,294 |   |
|     Restricted                  cash                                                                          |   |                               | -       |   |                              |   | 1,000 |   |
|     Accounts                  receivable:                                                                     |   |                               |    |   |                              |   |   |   |
|         Trade                                                                             |   |                               | 13,584  |   |                              |   | 7,308 |   |
|         Other                                                                             |   |                               | 1,052   |   |                              |   | 489 |   |
|     Inventories                                                                                               |   |                               | 17,749  |   |                              |   | 9,067 |   |
|     Prepaid                  expenses and other current assets                                                |   |                               | 12,702  |   |                              |   | 5,157 |   |
|     Refundable                  income taxes                                                                  |   |                               | 983     |   |                              |   | - |   |
|     Deferred                  tax                  assets                                                     |   |                               | 9,213   |   |                              |   | 5,756 |   |
|                                                                                                                              |   |                               |    |   |                              |   |   |   |
|     Total                  current assets                                                                     |   |                               | 91,313  |   |                              |   | 55,071 |   |
|                                                                                                                              |   |                               |    |   |                              |   |   |   |
| Property                  and equipment:                                                                                          |   |                               |    |   |                              |   |   |   |
|     Land                                                                                                      |   |                               | 5,065   |   |                              |   | 2,765 |   |
|     Buildings                  and                  improvements                                              |   |                               | 34,406  |   |                              |   | 26,485 |   |
|     Leasehold                  improvements                                                                   |   |                               | 5,469   |   |                              |   | 4,383 |   |
|     Photographic,                  sales and manufacturing equipment                                          |   |                               | 162,389 |   |                              |   | 123,518 |   |
|     Property                  held                  under capital lease                                       |   |                               | 1,062   |   |                              |   | - |   |
|         Total                                                                             |   |                               | 208,391 |   |                              |   | 157,151 |   |
|     Less                  accumulated depreciation and amortization                                           |   |                               | 150,518 |   |                              |   | 130,458 |   |
|         Property                  and                  equipment, net                     |   |                               | 57,873  |   |                              |   | 26,693 |   |
|                                                                                                                              |   |                               |    |   |                              |   |   |   |
| Other                  investments - supplemental retirement plan                                                                 |   |                               | 3,519   |   |                              |   | 3,588 |   |
| Deferred                  tax assets                                                                                              |   |                               | 8,377   |   |                              |   | 4,005 |   |
| Goodwill,                  net of amortization of $1,359 at November 10, 2007 and February                  3, 2007, respectively |   |                               | 23,420  |   |                              |   | 512 |   |
| Intangible                  assets, net of amortization of $1.5 million at November 10,                  2007                     |   |                               | 41,949  |   |                              |   | - |   |
| Other                  assets                                                                                                     |   |                               | 5,986   |   |                              |   | 810 |   |
|                                                                                                                              |   |                               |    |   |                              |   |   |   |
| **    TOTAL                  ASSETS**                                                                         |   | $                                  | 232,437 |   |                              | $      | 90,679 |   |
|                                                                                                                              |   |                               |    |   |                              |   |   |   |
| *See                  accompanying footnotes.*                                                                                    |   |                               |    |   |                              |   |   |   |

**CPI      CORP.**

**Interim      Condensed Consolidated Balance Sheets – Liabilities and Stockholders’Equity**

| *thousands,                  except share and per share data*                                                                                                                                                                                                                                                         |   | November                  10, 2007 |     |    | February                  3, 2007 |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|----------|---------|-----------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                  |   | (Unaudited)                        |     |    |                              |   |
| LIABILITIES                                                                                                                                                                                                                                                                                                           |   |                               |     |    |                              |   |
| Current                  liabilities:                                                                                                                                                                                                                                                                                 |   |                               |     |    |                              |   |
|     Current                  maturities of long-term debt                                                                                                                                                                                                                                         |   | $                                  | 2,212    |    |                              | $      | 8,333 |   |
|     Accounts                  payable                                                                                                                                                                                                                                                             |   |                               | 10,221   |    |                              |   | 3,317 |   |
|     Accrued                  employment costs                                                                                                                                                                                                                                                     |   |                               | 21,375   |    |                              |   | 12,770 |   |
|     Customer                  deposit liability                                                                                                                                                                                                                                                   |   |                               | 30,783   |    |                              |   | 15,468 |   |
|     Income                  taxes payable                                                                                                                                                                                                                                                         |   |                               | -        |    |                              |   | 890 |   |
|     Sales                  taxes payable                                                                                                                                                                                                                                                          |   |                               | 5,881    |    |                              |   | 2,564 |   |
|     Accrued                  advertising expenses                                                                                                                                                                                                                                                 |   |                               | 4,414    |    |                              |   | 684 |   |
|     Accrued                  expenses and other liabilities                                                                                                                                                                                                                                       |   |                               | 17,655   |    |                              |   | 5,381 |   |
|                                                                                                                                                                                                                                                                                                                  |   |                               |     |    |                              |   |   |   |
|     Total                  current liabilities                                                                                                                                                                                                                                                    |   |                               | 92,541   |    |                              |   | 49,407 |   |
|                                                                                                                                                                                                                                                                                                                  |   |                               |     |    |                              |   |   |   |
| Long-term                  debt, less current maturities                                                                                                                                                                                                                                                              |   |                               | 110,739  |    |                              |   | 7,747 |   |
| Accrued                  pension plan obligations                                                                                                                                                                                                                                                                     |   |                               | 11,812   |    |                              |   | 14,367 |   |
| Supplemental                  retirement plan obligations                                                                                                                                                                                                                                                             |   |                               | 3,484    |    |                              |   | 3,472 |   |
| Customer                  deposit liability                                                                                                                                                                                                                                                                           |   |                               | 343      |    |                              |   | 2,508 |   |
| Other                  liabilities                                                                                                                                                                                                                                                                                    |   |                               | 13,492   |    |                              |   | 2,862 |   |
|                                                                                                                                                                                                                                                                                                                  |   |                               |     |    |                              |   |   |   |
|     Total                  liabilities                                                                                                                                                                                                                                                            |   |                               | 232,411  |    |                              |   | 80,363 |   |
|                                                                                                                                                                                                                                                                                                                  |   |                               |     |    |                              |   |   |   |
| 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; 17,028,454                  and                  16,975,343 shares                      outstanding                  at                  November 10, 2007 and                  February 3, 2007, respectively |   |                               | 6,811    |    |                              |   | 6,790 |   |
| Additional                  paid-in capital                                                                                                                                                                                                                                                                           |   |                               | 27,337   |    |                              |   | 25,510 |   |
| Retained                  earnings                                                                                                                                                                                                                                                                                    |   |                               | 205,319  |    |                              |   | 220,460 |   |
| Accumulated                  other comprehensive loss                                                                                                                                                                                                                                                                 |   |                               | (6,026   | )       |                              |   | (9,387 | ) |
|                                                                                                                                                                                                                                                                                                                  |   |                               | 233,441  |    |                              |   | 243,373 |   |
|                                                                                                                                                                                                                                                                                                                  |   |                               |     |    |                              |   |   |   |
| Treasury                  stock - at cost, 10,628,204 and 10,618,090 shares at November 10,                  2007 and                  February                  3, 2007, respectively                                                                                                                                |   |                               | (233,415 | )  |                              |   | (233,057 | )  |
|                                                                                                                                                                                                                                                                                                                  |   |                               |     |    |                              |   |   |   |
|     Total                  stockholders' equity                                                                                                                                                                                                                                                   |   |                               | 26       |    |                              |   | 10,316 |   |
|                                                                                                                                                                                                                                                                                                                  |   |                               |     |    |                              |   |   |   |
| **    TOTAL                  LIABILITIES AND STOCKHOLDERS' EQUITY**                                                                                                                                                                                                                               |   | $                                  | 232,437  |    |                              | $      | 90,679 |   |
|                                                                                                                                                                                                                                                                                                                  |   |                               |     |    |                              |   |   |   |
| *See                  accompanying footnotes.*                                                                                                                                                                                                                                                                        |   |                               |     |    |                              |   |   |   |

**CPI      CORP.**

**Interim      Condensed Consolidated Statements of      Operations**

| *thousands,                  except share and per share data*                                                                                                                    |   | 16                  Weeks Ended    |      |   | 40                  Weeks Ended    |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|-----------|--------|------------------------------------|--------|
|                                                                                                                                                                             |   | November                  10, 2007 |      |   | November                  11, 2006 |   |   | November                  10, 2007 |   |   | November                  11, 2006 |   |
|                                                                                                                                                                             |   |                               |      |   |                               |   |   |   |   |   |   |   |
| **Net                  sales**                                                                                                                                                   |   | $                                  | 135,391   |   |                               | $      | 77,050 |   |   | $ | 261,256 |   |   | $ | 193,064 |   |
|                                                                                                                                                                             |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| **Cost                  and expenses:**                                                                                                                                          |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|     Cost                  of                  sales (exclusive of depreciation and amortization shown                  below)                                |   |                               | 15,072    |   |                               |   | 7,841 |   |   |   | 27,719 |   |   |   | 19,216 |   |
|     Selling,                  general and administrative expenses                                                                                            |   |                               | 120,787   |   |                               |   | 65,130 |   |   |   | 224,654 |   |   |   | 156,311 |   |
|     Depreciation                  and amortization                                                                                                           |   |                               | 10,079    |   |                               |   | 5,085 |   |   |   | 19,669 |   |   |   | 13,318 |   |
|     Other                  charges and impairments                                                                                                           |   |                               | 1,937     |   |                               |   | 678 |   |   |   | 3,228 |   |   |   | 1,212 |   |
|                                                                                                                                                                             |   |                               | 147,875   |   |                               |   | 78,734 |   |   |   | 275,270 |   |   |   | 190,057 |   |
|                                                                                                                                                                             |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Earnings                  (loss) from operations                                                                                                                                 |   |                               | (12,484   | )      |                               |   | (1,684 | ) |   |   | (14,014 | ) |   |   | 3,007 |   |
|                                                                                                                                                                             |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  expense                                                                                                                                                |   |                               | 3,365     |   |                               |   | 701 |   |   |   | 5,374 |   |   |   | 1,867 |   |
| Interest                  income                                                                                                                                                 |   |                               | 537       |   |                               |   | 128 |   |   |   | 1,254 |   |   |   | 260 |   |
| Lease                  guarantee reserve reduction                                                                                                                               |   |                               | -         |   |                               |   | 587 |   |   |   | - |   |   |   | 887 |   |
| Other                  income, net                                                                                                                                               |   |                               | 43        |   |                               |   | 25 |   |   |   | 48 |   |   |   | 92 |   |
|                                                                                                                                                                             |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Earnings                  (loss) before income tax expense (benefit)                                                                                                             |   |                               | (15,269   | )      |                               |   | (1,645 | ) |   |   | (18,086 | ) |   |   | 2,379 |   |
| Income                  tax expense (benefit)                                                                                                                                    |   |                               | (5,311    | )      |                               |   | (694 | ) |   |   | (6,290 | ) |   |   | 846 |   |
|                                                                                                                                                                             |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Net                  earnings (loss) from continuing operations                                                                                                                  |   |                               | (9,958    | )      |                               |   | (951 | ) |   |   | (11,796 | ) |   |   | 1,533 |   |
|                                                                                                                                                                             |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss from discontinued operations                                                                                                                           |   |                               | (117      | )      |                               |   | - |   |   |   | (287 | ) |   |   | - |   |
|                                                                                                                                                                             |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| **NET                  EARNINGS (LOSS)**                                                                                                                                         |   | $                                  | (10,075   | )      |                               | $      | (951 | ) |   | $ | (12,083 | ) |   | $ | 1,533 |   |
|                                                                                                                                                                             |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| **NET                  EARNINGS (LOSS) PER COMMON SHARE**                                                                                                                        |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                             |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Net                  earnings (loss) per share from continuing operations -                  diluted                                                                             |   | $                                  | (1.55     | )      |                               | $      | (0.15 | ) |   | $ | (1.85 | ) |   | $ | 0.24 |   |
| Net                  loss per share from discontinued operations - diluted                                                                                                       |   |                               | (0.02     | )      |                               |   | - |   |   |   | (0.04 | ) |   |   | - |   |
| Net                  earnings (loss) per share - diluted                                                                                                                         |   | $                                  | (1.57     | )      |                               | $      | (0.15 | ) |   | $ | (1.89 | ) |   | $ | 0.24 |   |
|                                                                                                                                                                             |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Net                  earnings (loss) per share from continuing operations -                  basic                                                                               |   | $                                  | (1.55     | )      |                               | $      | (0.15 | ) |   | $ | (1.85 | ) |   | $ | 0.24 |   |
| Net                  loss per share from discontinued operations - basic                                                                                                         |   |                               | (0.02     | )      |                               |   | - |   |   |   | (0.04 | ) |   |   | - |   |
| Net                  earnings (loss) per share - basic                                                                                                                           |   | $                                  | (1.57     | )      |                               | $      | (0.15 | ) |   | $ | (1.89 | ) |   | $ | 0.24 |   |
|                                                                                                                                                                             |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Dividends                  per share                                                                                                                                             |   | $                                  | 0.16      |   |                               | $      | 0.16 |   |   | $ | 0.48 |   |   | $ | 0.48 |   |
|                                                                                                                                                                             |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                  average number of common and common equivalent shares                      outstanding                  -                  diluted |   |                               | 6,401,943 |   |                               |   | 6,350,887 |   |   |   | 6,385,645 |   |   |   | 6,373,883 |   |
|                                                                                                                                                                             |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Weighted                  average number of common and common equivalent shares                      outstanding                  -                  basic   |   |                               | 6,401,943 |   |                               |   | 6,350,887 |   |   |   | 6,385,645 |   |   |   | 6,352,506 |   |
|                                                                                                                                                                             |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| *See                  accompanying footnotes.*                                                                                                                                   |   |                               |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |

**CPI      CORP.**

**Interim      Condensed Consolidated Statement of      Changes in Stockholders’ Equity**

**Forty      weeks ended November 10, 2007**

|                                                                                       |   |   |   |   |       |   |   |     |   |   | Accumulated   |   |   |                     |   |   |   |   |
|------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|------------|--------|--------|----------|--------|--------|---------------|--------|--------|--------------------------|--------|--------|--------|--------|
|                                                                                                 |   |   |   |   | Additional |   |   |     |   |   | other         |   |   | Treasury                 |   |   |   |   |
|                                                                                       |   | Common |   |   | paid-in    |   |   | Retained |   |   | comprehensive |   |   | stock,                   |   |   |   |   |
| *thousands,                  except share and per share data*                                        |   | Stock  |   |   | capital    |   |   | earnings |   |   | loss          |   |   | at                  cost |   |   | Total  |   |
|                                                                                                 |   |   |   |   |       |   |   |     |   |   |          |   |   |                     |   |   |   |   |
| Balance                  at February 3, 2007                                                         |   | $      | 6,790  |   |       | $      | 25,510 |     |   | $      | 220,460       |   |   | $                        | (9,387 | )      |   | $      | (233,057 | ) |   | $ | 10,316 |   |
|                                                                                                 |   |   |   |   |       |   |   |     |   |   |          |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| Net                  loss                                                                            |   |   | -      |   |       |   | -      |     |   |   | (12,083       | )      |   |                     | -      |   |   |   | - |   |   |   | (12,083 | ) |
| Total                  other comprehensive income, net                  of tax effect                |   |   | -      |   |       |   | -      |     |   |   | -             |   |   |                     | 3,361  |   |   |   | - |   |   |   | 3,361 |   |
| Total                  comprehensive loss                                                  |   |   | -      |   |       |   | -      |     |   |   | -             |   |   |                     | -      |   |   |   | - |   |   |   | (8,722 | ) |
| Surrender                  of employee shares to satisfy personal tax                                |   |   |   |   |       |   |   |     |   |   |          |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| liabilities                  upon vesting of formerly                  restricted shares   |   |   | -      |   |       |   | -      |     |   |   | -             |   |   |                     | -      |   |   |   | (547 | )  |   |   | (547 | )  |
| Issuance                  of common stock to employee benefit plans and                              |   |   |   |   |       |   |   |     |   |   |          |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| restricted                  stock awards                  (53,111 shares)                            |   |   | 21     |   |       |   | 237    |     |   |   | -             |   |   |                     | -      |   |   |   | 189 |   |   |   | 447 |   |
| Stock-based                  compensation recognized                                                 |   |   | -      |   |       |   | 1,590  |     |   |   | -             |   |   |                     | -      |   |   |   | - |   |   |   | 1,590 |   |
| Dividends                  ($0.48 per common share)                                                  |   |   | -      |   |       |   | -      |     |   |   | (3,058        | )      |   |                     | -      |   |   |   | - |   |   |   | (3,058 | ) |
|                                                                                                 |   |   |   |   |       |   |   |     |   |   |          |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| Balance                  at November 10, 2007                                                        |   | $      | 6,811  |   |       | $      | 27,337 |     |   | $      | 205,319       |   |   | $                        | (6,026 | )      |   | $      | (233,415 | ) |   | $ | 26 |   |
|                                                                                                 |   |   |   |   |       |   |   |     |   |   |          |   |   |                     |   |   |   |   |   |   |   |   |   |   |
| *See                  accompanying footnotes.*                                                       |   |   |   |   |       |   |   |     |   |   |          |   |   |                     |   |   |   |   |   |   |   |   |   |   |

**CPI      CORP.**

**Interim      Condensed Consolidated Statements of Cash      Flows**

| *thousands*                                                                                                                            |   | 40                  Weeks Ended    |    |
|----------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|
|                                                                                                                                   |   | November                  10, 2007 |    |   | November                  11, 2006 |   |
| Reconciliation                  of net earnings (loss) to cash flows provided by (used in) operating                  activities: |   |                               |    |   |   |   |
|                                                                                                                                   |   |                               |    |   |   |   |
| Net                  earnings (loss)                                                                                                   |   | $                                  | (12,083 | ) |   | $ | 1,533 |   |
|                                                                                                                                   |   |                               |    |   |   |   |   |   |
| Adjustments                  for items not (providing) requiring cash:                                                                 |   |                               |    |   |   |   |   |   |
|     Depreciation                  and amortization                                                                 |   |                               | 19,669  |   |   |   | 13,318 |   |
|     Stock-based                  compensation expense                                                              |   |                               | 1,590   |   |   |   | 591 |   |
|     Loss                  on                  disposition of property, plant and equipment                         |   |                               | 79      |   |   |   | 204 |   |
|     Loss                  on                  assets held for resale                                               |   |                               | 60      |   |   |   | - |   |
|     Loss                  from discontinued operations                                                             |   |                               | 287     |   |   |   | - |   |
|     Deferred                  income                  tax provision                                                |   |                               | (5,503  | ) |   |   | 877 |   |
|     Pension,                  supplemental retirement plan and profit sharing expense                              |   |                               | 1,611   |   |   |   | 1,907 |   |
|     Lease                  guarantee reserve reduction                                                             |   |                               | -       |   |   |   | (887 | ) |
|     Other                                                                                                          |   |                               | 458     |   |   |   | 378 |   |
|                                                                                                                                   |   |                               |    |   |   |   |   |   |
| Increase                  (decrease) in cash flow from operating assets and                  liabilities:                              |   |                               |    |   |   |   |   |   |
|     Receivables                  and                  inventories                                                  |   |                               | (6,601  | ) |   |   | (7,933 | ) |
|     Prepaid                  expenses and other current assets                                                     |   |                               | (4,471  | ) |   |   | (4,172 | ) |
|     Accounts                  payable                                                                              |   |                               | 4,224   |   |   |   | 4,478 |   |
|     Contribution                  to                  pension plan                                                 |   |                               | (3,508  | ) |   |   | - |   |
|     Supplemental                  retirement plan payments                                                         |   |                               | (203    | ) |   |   | (212 | ) |
|     Accrued                  expenses and other liabilities                                                        |   |                               | 6,377   |   |   |   | 672 |   |
|     Income                  taxes payable                                                                          |   |                               | (2,370  | ) |   |   | 96 |   |
|     Deferred                  revenues and related costs                                                           |   |                               | 10,170  |   |   |   | 2,583 |   |
|     Other                                                                                                          |   |                               | 1,802   |   |   |   | (320 | ) |
|                                                                                                                                   |   |                               |    |   |   |   |   |   |
| Cash                  flows provided by operations                                                                                     |   |                               | 11,588  |   |   |   | 13,113 |   |
| Cash                  flows from discontinued operations                                                                               |   |                               | (313    | ) |   |   | - |   |
| Cash                  flows used in operating activities                                                                               |   | $                                  | 11,275  |   |   | $ | 13,113 |   |
|                                                                                                                                   |   |                               |    |   |   |   |   |   |
| *See                  accompanying footnotes.*                                                                                         |   |                               |    |   |   |   |   |   |

**CPI      CORP.**

**Interim      Condensed Consolidated Statements of Cash Flows      (continued)**

| *thousands*                                                                                                                                                                                                                                                                                                                                                                             |   | 40                      Weeks Ended    |    |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------|---------|
|                                                                                                                                                                                                                                                                                                                                                                                    |   | November                      10, 2007 |    |   | November                      11, 2006 |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                                   |    |   |   |   |
| Cash                      flows provided by operating activities                                                                                                                                                                                                                                                                                                                        |   | $                                      | 11,275  |   |   | $ | 13,113 |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                                   |    |   |   |   |   |   |
| Cash                      flows (used in) provided by financing activities:                                                                                                                                                                                                                                                                                                             |   |                                   |    |   |   |   |   |   |
|     Repayment                      of                      long-term obligations                                                                                                                                                                                                                                                                                    |   |                                   | (16,954 | ) |   |   | (4,167 | ) |
|     Proceeds                      from                      long-term borrowings                                                                                                                                                                                                                                                                                    |   |                                   | 116,061 |   |   |   | - |   |
|     Release                      of restricted cash                                                                                                                                                                                                                                                                                                                 |   |                                   | 1,000   |   |   |   | - |   |
|     Payment                      of debt issuance costs                                                                                                                                                                                                                                                                                                             |   |                                   | (2,690  | ) |   |   | - |   |
|     Purchase                      of                      treasury stock                                                                                                                                                                                                                                                                                            |   |                                   | -       |   |   |   | (32,539 | ) |
|     Surrender                      of                      employee shares to satisfy personal tax liability upon                      vesting                                                                                                                                                                                                                      |   |                                   | (547    | ) |   |   | (89 | ) |
|     Excess                      tax benefits from stock-based compensation                                                                                                                                                                                                                                                                                          |   |                                   | -       |   |   |   | 338 |   |
|     Cash                      dividends                                                                                                                                                                                                                                                                                                                             |   |                                   | (3,058  | ) |   |   | (3,034 | ) |
|     Stock                      option exercises                                                                                                                                                                                                                                                                                                                     |   |                                   | -       |   |   |   | 531 |   |
|     Other                                                                                                                                                                                                                                                                                                                                                           |   |                                   | -       |   |   |   | (54 | ) |
|     Cash                      flows provided by (used in) financing activities                                                                                                                                                                                                                                                                                      |   |                                   | 93,812  |   |   |   | (39,014 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                                   |    |   |   |   |   |   |
| Cash                      flows (used in) provided by investing activities:                                                                                                                                                                                                                                                                                                             |   |                                   |    |   |   |   |   |   |
|     Acquisition                      of                      certain net assets of Portrait Corporation of America, net                      of cash and                      cash equivalents                                                   acquired of $97 (excludes                      unpaid costs totaling $138) |   |                                   | (83,284 | ) |   |   | - |   |
|     Additions                      to                      property and equipment                                                                                                                                                                                                                                                                                   |   |                                   | (12,504 | ) |   |   | (2,625 | ) |
|     Proceeds                      from                      sale of assets held for sale                                                                                                                                                                                                                                                                            |   |                                   | 65      |   |   |   | 19 |   |
|     Increase                      in                      assets held by Rabbi Trust                                                                                                                                                                                                                                                                                |   |                                   | (144    | ) |   |   | (131 | ) |
|     Proceeds                      from                      Rabbi Trust used for supplemental retirement plan payments                                                                                                                                                                                                                                              |   |                                   | 213     |   |   |   | 221 |   |
|     Cash                      flows used in investing activities                                                                                                                                                                                                                                                                                                    |   |                                   | (95,654 | ) |   |   | (2,516 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                                   |    |   |   |   |   |   |
| Effect                      of exchange rate changes on cash and cash equivalents                                                                                                                                                                                                                                                                                                       |   |                                   | 303     |   |   |   | - |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                                   |    |   |   |   |   |   |
| Net                      increase (decrease) in cash and cash equivalents                                                                                                                                                                                                                                                                                                               |   |                                   | 9,736   |   |   |   | (28,417 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                                   |    |   |   |   |   |   |
| **Cash                      and cash equivalents at beginning of period**                                                                                                                                                                                                                                                                                                               |   |                                   | 26,294  |   |   |   | 34,269 |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                                   |    |   |   |   |   |   |
| **Cash                      and cash equivalents at end of period**                                                                                                                                                                                                                                                                                                                     |   | $                                      | 36,030  |   |   | $ | 5,852 |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                                   |    |   |   |   |   |   |
| Supplemental                      cash flow information:                                                                                                                                                                                                                                                                                                                                |   |                                   |    |   |   |   |   |   |
|     Interest                      paid                                                                                                                                                                                                                                                                                                                              |   | $                                      | 3,624   |   |   | $ | 1,655 |   |
|     Income                      taxes paid                                                                                                                                                                                                                                                                                                                          |   | $                                      | 2,092   |   |   | $ | 997 |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                                   |    |   |   |   |   |   |
| Supplemental                      non-cash financing activities:                                                                                                                                                                                                                                                                                                                        |   |                                   |    |   |   |   |   |   |
|     Issuance                      of                      treasury stock under the Employee Profit Sharing Plan                                                                                                                                                                                                                                                     |   | $                                      | 442     |   |   | $ | 440 |   |
|     Issuance                      of                      restricted stock to employees and directors                                                                                                                                                                                                                                                               |   | $                                      | 2,683   |   |   | $ | 785 |   |
|     Executive                      retirement stock option modification                                                                                                                                                                                                                                                                                             |   | $                                      | 6       |   |   | $ | 71 |   |
|                                                                                                                                                                                                                                                                                                                                                                                    |   |                                   |    |   |   |   |   |   |
| *See                      accompanying footnotes.*                                                                                                                                                                                                                                                                                                                                      |   |                                   |    |   |   |   |   |   |

**CPI      CORP.**

**Notes      to Interim Condensed Consolidated      Financial Statements**

| ** NOTE                1   -** | **DESCRIPTION                OF BUSINESS AND INTERIM CONDENSED CONSOLIDATED FINANCIAL                STATEMENTS** |
|----------------------------------------------------|-------------------------------------------------------------------------------------------------------------------|

| ** NOTE 2   -** | **CORRECTION                      TO PRIOR PERIODS** |
|------------------------------------------|------------------------------------------------------|

| ** NOTE 3   -** | **ADOPTION                OF NEW ACCOUNTING                STANDARDS** |
|------------------------------------------|------------------------------------------------------------------------|

**CPI      CORP.**

**Notes      to Interim Condensed Consolidated Financial Statements**

| ** NOTE 4   -** | **BUSINESS                ACQUISITION** |
|------------------------------------------|-----------------------------------------|

| Current                  assets                 |   | $      | 9,807   |   |
|-------------------------------------------------|--------|--------|---------|--------|
| Property                  and equipment         |   |   | 36,874  |   |
| Goodwill                                        |   |   | 22,461  |   |
| Intangibles                  (See Note 7)       |   |   | 42,300  |   |
| Other                  assets                   |   |   | 5,929   |   |
|                                            |   |   |    |   |
| Total                  assets acquired          |   | $      | 117,371 |   |
|                                            |   |   |    |   |
| Current                  liabilities assumed    |   |   | (25,624 | )      |
| Long-term                  liabilities assumed  |   |   | (8,228  | )      |
|                                            |   |   |    |   |
| Total                  allocated purchase price |   | $      | 83,519  |   |
|                                            |   |   |    |   |

**CPI      CORP.**

**Notes      to Interim Condensed Consolidated Financial Statements**

|                                                      |   | Third                  Quarter |    |   | First                  Three Quarters |   |
|-----------------------------------------------------------|--------|--------------------------------|---------|--------|---------------------------------------|--------|
|                                                      |   | 2007                           |    |   | 2006                                  |   |   | 2007 |   |   | 2006 |   |
|                                                      |   |                           |    |   |                                  |   |   |   |   |   |   |   |
| Revenue                                                   |   | $                              | 135,391 |   |                                  | $      | 140,536 |   |   | $ | 344,038 |   |   | $ | 385,285 |   |
|                                                      |   |                           |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
| Net                  loss                                 |   | $                              | (9,958  | )      |                                  | $      | (16,220 | ) |   | $ | (33,845 | ) |   | $ | (25,931 | ) |
|                                                      |   |                           |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
| Basic                  earnings (loss) per common share   |   | $                              | (1.55   | )      |                                  | $      | (2.55 | ) |   | $ | (5.30 | ) |   | $ | (4.08 | ) |
|                                                      |   |                           |    |   |                                  |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                  earnings (loss) per common share |   | $                              | (1.55   | )      |                                  | $      | (2.55 | ) |   | $ | (5.30 | ) |   | $ | (4.08 | ) |

| ** NOTE 5   -** | **DISCONTINUED                OPERATIONS** |
|------------------------------------------|--------------------------------------------|

|                                                        |   | Institutional                  Business |   |
|-------------------------------------------------------------|--------|-----------------------------------------|--------|
| *thousands*                                                 |   | 16                  Weeks Ended         |   |   | 22                  Weeks Ended |   |
|                                                        |   | November                  10, 2007      |   |   | November                  10, 2007 |   |
| Discontinued                  operations:                   |   |                                    |   |   |   |   |
|                                                        |   |                                    |   |   |   |   |
| Net                  Sales                                  |   | $                                       | 748    |   |   | $ | 813 |   |
|                                                        |   |                                    |   |   |   |   |   |   |
|  Operating                  loss                       |   | $                                       | (89    | ) |   | $ | (243 | ) |
|                        Tax benefit |   |                                    | 31     |   |   |   | 85 |   |
|                                                        |   |                                    |   |   |   |   |   |   |
| Net                  loss from discontinued operations      |   | $                                       | (58    | ) |   | $ | (158 | ) |
|                                                        |   |                                    |   |   |   |   |   |   |

|                                                     |   | UK                  Operations     |   |
|----------------------------------------------------------|--------|------------------------------------|--------|
| *thousands*                                              |   | 16                  Weeks Ended    |   |   | 22                  Weeks Ended |   |
|                                                     |   | November                  10, 2007 |   |   | November                  10, 2007 |   |
| Discontinued                  operations:                |   |                               |   |   |   |   |
|                                                     |   |                               |   |   |   |   |
| Net                  Sales                               |   | $                                  | 166    |   |   | $ | 231 |   |
|                                                     |   |                               |   |   |   |   |   |   |
|                       Operating loss |   | $                                  | (91    | ) |   | $ | (197 | ) |
|                       Tax benefit    |   |                               | 32     |   |   |   | 68 |   |
| Net                  loss from discontinued operations   |   | $                                  | (59    | ) |   | $ | (129 | ) |
|                                                     |   |                               |   |   |   |   |   |   |

**CPI        CORP.**

**Notes        to Interim Condensed Consolidated Financial Statements**

|                                                     |   | Total                  Discontinued Operations |   |
|----------------------------------------------------------|--------|------------------------------------------------|--------|
| *thousands*                                              |   | 16                  Weeks Ended                |   |   | 22                  Weeks Ended |   |
|                                                     |   | November                  10, 2007             |   |   | November                  10, 2007 |   |
| Discontinued                  operations:                |   |                                           |   |   |   |   |
|                                                     |   |                                           |   |   |   |   |
| Net                  Sales                               |   | $                                              | 914    |   |   | $ | 1,044 |   |
|                                                     |   |                                           |   |   |   |   |   |   |
|                       Operating loss |   | $                                              | (180   | ) |   | $ | (440 | ) |
|                       Tax benefit    |   |                                           | 63     |   |   |   | 153 |   |
| Net                  loss from discontinued operations   |   | $                                              | (117   | ) |   | $ | (287 | ) |
|                                                     |   |                                           |   |   |   |   |   |   |

| ** NOTE 6   -** | **INVENTORIES** |
|------------------------------------------|-----------------|

| *thousands*                                          |   | November                  10, 2007 |   |   | February                  3, 2007 |   |
|------------------------------------------------------|--------|------------------------------------|--------|--------|-----------------------------------|--------|
|                                                 |   |                               |   |   |                              |   |
| Raw                  materials - paper and chemicals |   | $                                  | 6,529  |   |                              | $      | 4,086 |   |
| Portraits                  in process                |   |                               | 3,207  |   |                              |   | 777 |   |
| Finished                  portraits pending delivery |   |                               | 1,696  |   |                              |   | 369 |   |
| Frames                  and accessories              |   |                               | 1,023  |   |                              |   | 1,118 |   |
| Studio                  supplies                     |   |                               | 3,306  |   |                              |   | 2,083 |   |
| Equipment                  repair parts and supplies |   |                               | 1,258  |   |                              |   | 428 |   |
| Other                                                |   |                               | 730    |   |                              |   | 206 |   |
|                                                 |   |                               |   |   |                              |   |   |   |
| Total                                                |   | $                                  | 17,749 |   |                              | $      | 9,067 |   |
|                                                 |   |                               |   |   |                              |   |   |   |

| ** NOTE 7   -** | **GOODWILL                AND INTANGIBLE ASSETS** |
|------------------------------------------|---------------------------------------------------|

| PCA                  acquisition                        |   | $      | 22,461 |   |
|---------------------------------------------------------|--------|--------|--------|--------|
|                                                    |   |   |   |   |
| Goodwill                  from prior acquisitions       |   |   | 1,872  |   |
|                                                    |   |   |   |   |
| Accumulated                  amortization               |   |   | (1,359 | )      |
|                                                    |   |   |   |   |
| Translation                  impact on foreign balances |   |   | 446    |   |
|                                                    |   |   |   |   |
|                                                    |   | $      | 23,420 |   |
|                                                    |   |   |   |   |

**CPI      CORP.**

**Notes      to Interim Condensed Consolidated Financial Statements**

*”*

|                                     |   |                          |   |   | Accumulated  |   |   | Translation                  Impact of |   |   |                              |   |
|------------------------------------------|--------|-------------------------------|--------|--------|--------------|--------|--------|----------------------------------------|--------|--------|------------------------------|--------|
|                                     |   | Gross                  Amount |   |   | Amortization |   |   | Foreign                  Balances      |   |   | Net                  Balance |   |
|                                     |   |                          |   |   |         |   |   |                                   |   |   |                         |   |
| Acquired                  host agreement |   | $                             | 39,850 |   |         | $      | 798    |                                   |   | $      | 1,132                        |   |   | $ | 40,184 |   |
| Acquired                  customer list  |   |                          | 2,450  |   |         |   | 751    |                                   |   |   | 66                           |   |   |   | 1,765 |   |
|                                     |   | $                             | 42,300 |   |         | $      | 1,549  |                                   |   | $      | 1,198                        |   |   | $ | 41,949 |   |
|                                     |   |                          |   |   |         |   |   |                                   |   |   |                         |   |   |   |   |   |

| ** NOTE 8   -** | **OTHER                ASSETS AND OTHER                LIABILITIES** |
|------------------------------------------|----------------------------------------------------------------------|

| ** NOTE 9   -** | **BORROWINGS** |
|------------------------------------------|----------------|

**CPI      CORP.**

**Notes      to Interim Condensed Consolidated Financial Statements**

| **  NOTE 10   -** | **STOCK-BASED                COMPENSATION PLANS** |
|-------------------------------------------------|---------------------------------------------------|

|                                                       |                            |   | Options                  Outstanding and Exercisable |      |
|------------------------------------------------------------|---------------------------------|--------|------------------------------------------------------|-----------|
|                                                       |                            |   |                                                 |      |   | Weighted-Average |   |   |   |   |
|                                                       |                            |   |                                                 |      |   | Remaining                  Contractual |   |   | Weighted-Average |   |
| Range                  of Exercise Prices                  |                            |   | Shares                                               |      |   | Life                  (Years) |   |   | Exercise                  Price |   |
| $                                                          | 12.96                           |   |                                                 |      | 10,046 |   |   |   | 2.95 |   |   | $ | 12.96 |   |
| $                                                          | 16.50                  - $17.00 |   |                                                 |      | 25,000 |   |   |   | 2.41 |   |   |   | 16.60 |   |
|                                                       |                            |   |                                                 |      |   |   |   |   |   |   |   |   |   |   |
| Total                                                      |                            |   |                                                 | 35,046    |   |   |   | 2.57 |   |   |   | 15.56 |   |
|                                                       |                            |   |                                                 |      |   |   |   |   |   |   |   |   |   |   |
| Reserved                  for future grants at quarter-end |                            |   |                                                 | 1,020,639 |   |   |   |   |   |   |   |   |   |
| Exercisable                                                |                            |   |                                                 | 35,046    |   |   |   |   |   |   |   |   |   |

**CPI      CORP.**

**Notes      to Interim Condensed Consolidated Financial Statements**

|                                                                                           |   | 40                  Weeks Ended November 10, 2007 |    |
|------------------------------------------------------------------------------------------------|--------|---------------------------------------------------|---------|
|                                                                                           |   |                                              |    |   | Weighted-Average |   |
|                                                                                           |   | Shares                                            |    |   | Grant-date                  Value |   |
| Nonvested                  stock, beginning of period                                          |   |                                              | 4,448   |   |   | $ | 17.99 |   |
| Granted                                                                                        |   |                                              | 53,250  |   |   |   | 50.52 |   |
| Forfeited                                                                                      |   |                                              | (139    | ) |   |   | 54.00 |   |
| Nonvested                  stock, end of period                                                |   |                                              | 57,559  |   |   |   | 48.00 |   |
| Reserved                  for future grants at quarter-end                                     |   |                                              | 187,798 |   |   |   |   |   |
|                                                                                           |   |                                              |    |   |   |   |   |   |
| Stock-based                  compensation expense related to                  restricted stock |   |                                              |    |   |   | $ | 1,590 |   |
|                                                                                                |   |                                              |    |   |   |   |   |   |

| ** NOTE                11  -** | ** EMPLOYEE                BENEFIT PLANS** |
|-----------------------------------------------|-------------------------------------------------|

| *thousands*                                              |   | 16                Weeks Ended    |   |
|----------------------------------------------------------|--------|----------------------------------|--------|
|                                                     |   | Pension                Plan      |   |   | Supplemental                Retirement Plan |   |
|                                                     |   | November                10, 2007 |   |   | November                11, 2006 |   |   | November                10, 2007 |   |   | November                11, 2006 |   |
|                                                     |   |                             |   |   |   |   |   |   |   |   |   |   |
| Components                of net periodic benefit costs: |   |                             |   |   |   |   |   |   |   |   |   |   |
| Service                cost                              |   | $                                | 101    |   |   | $ | 129 |   |   | $ | 23 |   |   | $ | 23 |   |
| Interest                cost                             |   |                             | 898    |   |   |   | 880 |   |   |   | 64 |   |   |   | 61 |   |
| Expected                return on plan assets            |   |                             | (904   | ) |   |   | (862 | ) |   |   | - |   |   |   | - |   |
| Amortization                of prior service cost        |   |                             | 14     |   |   |   | 13 |   |   |   | 9 |   |   |   | 9 |   |
| Amortization                of net (gain) loss           |   |                             | 274    |   |   |   | 332 |   |   |   | (10 | ) |   |   | (7 | ) |
|                                                     |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                periodic benefit cost                 |   | $                                | 383    |   |   | $ | 492 |   |   | $ | 86 |   |   | $ | 86 |   |
|                                                     |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| *thousands*                                                                                  |   | 40                  Weeks Ended    |   |
|----------------------------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                                         |   | Pension                  Plan      |   |   | Supplemental                  Retirement Plan |   |
|                                                                                         |   | November                  10, 2007 |   |   | November                  11, 2006 |   |   | November                  10, 2007 |   |   | November                  11, 2006 |   |
|                                                                                         |   |                               |   |   |   |   |   |   |   |   |   |   |
| Components                  of net periodic benefit costs:                                   |   |                               |   |   |   |   |   |   |   |   |   |   |
|     Service                  cost                                        |   | $                                  | 251    |   |   | $ | 323 |   |   | $ | 60 |   |   | $ | 57 |   |
|     Interest                  cost                                       |   |                               | 2,248  |   |   |   | 2,200 |   |   |   | 159 |   |   |   | 153 |   |
|     Expected                  return                  on plan assets     |   |                               | (2,262 | ) |   |   | (2,156 | ) |   |   | - |   |   |   | - |   |
|     Amortization                  of                  prior service cost |   |                               | 34     |   |   |   | 33 |   |   |   | 23 |   |   |   | 23 |   |
|     Amortization                  of                  net (gain) loss    |   |                               | 684    |   |   |   | 830 |   |   |   | (26 | ) |   |   | (17 | ) |
|                                                                                         |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  periodic benefit cost                                                   |   | $                                  | 955    |   |   | $ | 1,230 |   |   | $ | 216 |   |   | $ | 216 |   |
|                                                                                         |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

**CPI      CORP.**

**Notes      to Interim Condensed Consolidated Financial Statements**

| ** NOTE                12  -** | **INCOME                TAXES** |
|-----------------------------------------------|---------------------------------|

| ·   | Unrecognized                tax benefits were approximately $2.7 million at both February 4,                2007 and                November 10, 2007.  If these unrecognized tax benefits were                recognized, approximately $2.7 million would impact the effective                tax                rate.  While it is expected that the amount of unrecognized tax                benefits will change in the next 12 months, the Company does not                expect                the change to have a significant impact on the results of operations                or                the financial position of the                Company. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                Company recognizes interest expense and penalties related to the                above-unrecognized tax benefits within income tax expense.  Due                to the nature of the unrecognized tax benefits, the Company had no                accrued                interest and penalties as of February 4, 2007 or November 10,                2007. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                Company and its subsidiaries file income tax returns in the U.S.                federal                jurisdiction, many states, Canadian jurisdictions and Mexican                jurisdictions.  The Company is no longer subject to U.S. Federal                income tax examination for the years prior to                2003.   Ongoing examinations by various state taxing                authorities date back to February 7,                1998. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **  NOTE                13   -** | **CONTINGENCIES** |
|-----------------------------------------------------------|-------------------|

**Standby      Letters of Credit**

**Litigation**

**Potential      Studio Closures**

**CPI      CORP.**

**Notes      to Interim Condensed Consolidated Financial Statements**

**Contingent      Lease Obligations**

*Item      2.                 Management’s      Discussion and Analysis of Financial Condition and Results of      Operations*

***EXECUTIVE      OVERVIEW***

**The      Company’s Operations**

|                                                           |   | November                  10, 2007 |   |   | November                  11, 2006 |   |
|----------------------------------------------------------------|--------|------------------------------------|--------|--------|------------------------------------|--------|
| Within                  Sears or Sears Grand stores            |   |                               |   |   |                               |   |
| United                  States and Puerto Rico                 |   |                               | 893    |   |                               |   | 896 |   |
| Canada                                                         |   |                               | 112    |   |                               |   | 112 |   |
|                                                           |   |                               |   |   |                               |   |   |   |
| Within                  Wal-Mart stores                        |   |                               |   |   |                               |   |   |   |
| United                  States and Puerto Rico                 |   |                               | 1,703  |   |                               |   |   |   |
| Canada                                                         |   |                               | 252    |   |                               |   |   |   |
| Mexico                                                         |   |                               | 108    |   |                               |   |   |   |
|                                                           |   |                               |   |   |                               |   |   |   |
| Locations                  not within Sears or Wal-Mart stores |   |                               | 32     |   |                               |   | 37 |   |
|                                                           |   |                               |   |   |                               |   |   |   |
| Total                                                          |   |                               | 3,100  |   |                               |   | 1,045 |   |
|                                                           |   |                               |   |   |                               |   |   |   |

***RESULTS      OF OPERATIONS***

| *thousands,                  except per share data*                                                        |   | 16                  Weeks Ended    |    |    | 40                  Weeks Ended    |     |
|------------------------------------------------------------------------------------------------------------|--------|------------------------------------|---------|---------|------------------------------------|----------|
|                                                                                                       |   | November                  10, 2007 |    |    | November                  11, 2006 |     |   | November                  10, 2007 |   |   | November                  11, 2006 |   |
|                                                                                                       |   |                               |    |    |                               |     |   |   |   |   |   |   |
| **Net                  sales**                                                                             |   | $                                  | 135,391 |    |                               | $        | 77,050 |   |   | $ | 261,256 |   |   | $ | 193,064 |   |
|                                                                                                       |   |                               |    |    |                               |     |   |   |   |   |   |   |   |   |   |   |
| **Cost                  and expenses:**                                                                    |   |                               |    |    |                               |     |   |   |   |   |   |   |   |   |   |   |
| Cost                  of sales (exclusive of depreciation and amortization shown                  below)   |   |                               | 15,072  |    |                               |     | 7,841 |   |   |   | 27,719 |   |   |   | 19,216 |   |
| *Cost                  of sales as a percentage of net sales*                                              |   | * *                           | *11.1*  | *%*     |                               | * * | *10.2* | *%* |   | * * | *10.6* | *%* |   | * * | *10.0* | *%* |
| *Gross                  margin as a percentage of net sales*                                               |   | * *                           | *88.9*  | *%*     |                               | * * | *89.8* | *%* |   | * * | *89.4* | *%* |   | * * | *90.0* | *%* |
| Selling,                  general and administrative expenses                                              |   |                               | 120,787 |    |                               |     | 65,130 |   |   |   | 224,654 |   |   |   | 156,311 |   |
| *Selling,                  general and administrative expenses as a percentage of                  sales*  |   | * *                           | *89.2*  | *%*     |                               | * * | *84.5* | *%* |   | * * | *86.0* | *%* |   | * * | *81.0* | *%* |
| Depreciation                  and amortization                                                             |   |                               | 10,079  |    |                               |     | 5,085 |   |   |   | 19,669 |   |   |   | 13,318 |   |
| Other                  charges and impairments                                                             |   |                               | 1,937   |    |                               |     | 678 |   |   |   | 3,228 |   |   |   | 1,212 |   |
|                                                                                                       |   |                               | 147,875 |    |                               |     | 78,734 |   |   |   | 275,270 |   |   |   | 190,057 |   |
|                                                                                                       |   |                               |    |    |                               |     |   |   |   |   |   |   |   |   |   |   |
| Earnings                  (loss) from operations                                                           |   |                               | (12,484 | )       |                               |     | (1,684 | ) |   |   | (14,014 | ) |   |   | 3,007 |   |
|                                                                                                       |   |                               |    |    |                               |     |   |   |   |   |   |   |   |   |   |   |
| Interest                  expense                                                                          |   |                               | 3,365   |    |                               |     | 701 |   |   |   | 5,374 |   |   |   | 1,867 |   |
| Interest                  income                                                                           |   |                               | 537     |    |                               |     | 128 |   |   |   | 1,254 |   |   |   | 260 |   |
| Lease                  guarantee reserve reduction                                                         |   |                               | -       |    |                               |     | 587 |   |   |   | - |   |   |   | 887 |   |
| Other                  income, net                                                                         |   |                               | 43      |    |                               |     | 25 |   |   |   | 48 |   |   |   | 92 |   |
|                                                                                                       |   |                               |    |    |                               |     |   |   |   |   |   |   |   |   |   |   |
| Earnings                  (loss) before income tax expense (benefit)                                       |   |                               | (15,269 | )       |                               |     | (1,645 | ) |   |   | (18,086 | ) |   |   | 2,379 |   |
| Income                  tax expense (benefit)                                                              |   |                               | (5,311  | )       |                               |     | (694 | ) |   |   | (6,290 | ) |   |   | 846 |   |
|                                                                                                       |   |                               |    |    |                               |     |   |   |   |   |   |   |   |   |   |   |
| Net                  earnings (loss) from continuing operations                                            |   |                               | (9,958  | )       |                               |     | (951 | ) |   |   | (11,796 | ) |   |   | 1,533 |   |
|                                                                                                       |   |                               |    |    |                               |     |   |   |   |   |   |   |   |   |   |   |
| Net                  loss from discontinued operations, net of income tax benefit of                  $150 |   | $                                  | (117    | )       |                               | $        | - |   |   | $ | (287 | ) |   | $ | - |   |
|                                                                                                       |   |                               |    |    |                               |     |   |   |   |   |   |   |   |   |   |   |
| **NET                  EARNINGS (LOSS)**                                                                   |   | $                                  | (10,075 | )       |                               | $        | (951 | ) |   | $ | (12,083 | ) |   | $ | 1,533 |   |
|                                                                                                       |   |                               |    |    |                               |     |   |   |   |   |   |   |   |   |   |   |
| **Net                  earnings (loss) per share - diluted**                                               |   | $                                  | (1.57   | )  |                               | $        | (0.15 | ) |   | $ | (1.89 | ) |   | $ | 0.24 |   |
|                                                                                                       |   |                               |    |    |                               |     |   |   |   |   |   |   |   |   |   |   |

**Impact      of the PCA Acquisition**

*Deferred      Revenue and Undelivered Receivables*

*Depreciation*

*Amortization      of Acquired Intangible Assets*

*Acquisition      Related Interest Expense*

**16      weeks ended November 10, 2007 compared to 16 weeks ended November 11,      2006**

| ·   | Net                sales for the third quarter of 2007 increased $58.3 million or                75.7*%* to $135.4 million from the $77.1 million reported in the                third quarter of 2006 as a result of the inclusion of net sales of                $63.0                million attributable to the Company's PM                brand. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Cost                of sales, excluding depreciation and amortization expense, was $15.1                million in the third quarter of 2007 compared with $7.8 million in                the                comparable prior year period.   Cost of sales, as a                percentage of net sales was 11.1% in the third quarter of 2007, compared                to 10.2% in the comparable quarter of 2006.  Correspondingly,                gross margin rates were 88.9% and 89.8% in each of the third quarters                of                2007 and 2006.  The                increase in cost of sales is attributable to the inclusion of PM cost                of sales in the third quarter of 2007, partially offset by decreased                production costs resulting from lower overall manufacturing                production levels, additional gains in                manufacturing productivity and an improved product                mix. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Selling,                general and administrative (“SG&A”) expenses were $120.8 million and                $65.1 million for the third quarter of 2007 and 2006,                respectively.  As a percentage of sales, these expenses were                89.2% in 2007 and 84.5% in 2006.  The                increase in third quarter 2007 SG&A costs is attributable to the                inclusion of PM’s costs, partially offset by the net effect of  lower                studio and corporate employment costs, reduced host sales                commissions, increased advertising spending and increased                restricted stock amortization expense associated with performance                awards.  The                relatively high level of third quarter 2007 costs in proportion to                sales                reflect the acquired legacy cost structure of the former Portrait                Corporation of America organization, and in particular, the cost                of                operating and supporting the PM brand's legacy,                film-based delivery platform pending conversion to                digital.   |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |  |
|--------|--|

| ·   | Depreciation                and amortization was $10.1 million in the third quarter of 2007,                compared                to $5.1 million in the third quarter of 2006.  This                increase is attributable to the inclusion in the third quarter of                2007 of                depreciation and amortization related to the PM brand and includes                $1.1                million of amortization of intangible assets resulting from the PM                acquisition. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other                charges and impairments reflect costs incurred from strategic actions                implemented by the Company to restructure its operations, costs that                are                unpredictable and atypical of the Company’s operations and additional                charges due to asset impairments. In the third quarter of 2007 and                2006,                the Company recognized $1.9 million and $678,000, respectively, in                other                charges and impairments.  Expense in 2007 primarily represents                costs associated with the PCA Acquisition, which include severance                costs,                severance accruals and other integration-related costs relative to                the                PM Acquisition.   The 2006-third quarter amounts relate to                reserves for severance and related costs related principally to the                separation of employment of three executives, including the Company’s                former CEO and costs incurred to date in conjunction with the Company’s                then on-going review of strategic                alternatives. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Interest                expense was $3.4 million in the third quarter of 2007 compared to                $701,000                in the comparable period of the prior year.  The increase in                interest expense is primarily the result of higher average borrowings                after the refinancing of the credit agreement as discussed in Note                7 as                well as slightly higher interest rates and increased fees for letters                of                credit. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Interest                income was $537,000 in the third quarter of 2007 compared to $128,000                in                the third quarter of 2006.  This increase is primarily                attributable to lower invested balances in 2006 as compared to 2007                due to                the purchase of stock in the Dutch Auction self-tender offer for                $32.5                million which was funded in early February                2006. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                lease guarantee reserve reduction represents a partial reversal of                reserves initially recorded in 2004 related to an investment in and                operating lease guarantees associated with the Company’s former Wall Décor                segment, Prints Plus, which were necessitated by the significant                deteriorating financial performance of Prints Plus.  As the                total guarantee related to these leases has decreased with the passage                of                time, the payment of rents by Prints Plus and the settlement by the                Company of certain leases rejected in bankruptcy, the related liability                has been reduced to reflect management’s revised estimate of remaining                potential loss.  This reserve is more fully discussed in Note 8                in the accompanying Notes to the Interim Condensed Consolidated Financial                Statements. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Income                tax benefit was $5.3 million in the third quarter of 2007 as compared                to                $694,000 in the third quarter of 2006.  The resulting effective                tax rates were 34.8% in 2007 and 42.2% in 2006.  The decrease in                the effective tax rate in 2007 is attributable to deductions available                since the Company is projecting to be no longer in a net operating                loss                position. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Net                losses from discontinued operations were $117,000 in the third quarter                of                2007.  During the third quarter, the Company exited both its                United Kingdom, five-studio operation and its Institutional (Church)                business which were acquired in conjunction with the PCA                Acquisition. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**40      weeks ended November 10, 2007 compared to 40 weeks ended November 11,      2006**

| ·   | Net                sales for the first three quarters of 2007 increased $68.2 million                or                35.3%* *to* *$261.3 million from the $193.1                million reported in the first three quarters of 2006 as                a result of the inclusion of net sales of $77.9 million attributable                to                the Company’s PM brand.   In accordance with                purchase accounting guidance, PM’s deferred revenue balance at the June 8,                2007 date of acquisition was reduced by a purchase accounting adjustment                to record deferred revenue at its fair value in PictureMe’s beginning,                post-acquisition balance sheet.  This purchase accounting                adjustment has the effect of reducing revenue in periods subsequent                to the                acquisition for approximately one year.  The deferred revenue                adjustment resulted in lower net sales of $8.2 million and an increased                pre-tax loss from operations of $3.4 million for the first three                quarters                of 2007. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

*%*

| ·   | Cost                of sales, excluding depreciation and amortization expense, was $27.7                million in the third quarter of 2007 compared with $19.2 million                in the                comparable prior year period.   Cost of sales, as a                percentage of net sales was 11.1% in the third quarter of 2007, compared                to 10.2% in the comparable quarter of 2006.  Correspondingly,                gross margin rates were 88.9% and 89.8% in each of the third quarters                of                2007 and 2006.  The                increase in cost of sales is attributable to the inclusion of PM cost                of sales in the first three quarters of 2007, partially offset by                decreased production costs resulting from lower overall manufacturing                production levels, additional gains in                manufacturing productivity and an improved product                mix. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Selling,                  general and administrative (“SG&A”) expenses were $120.8 million and                  $65.1 million for the third quarter of 2007 and 2006,                  respectively.  As a percentage of sales, these expenses were                  89.2% in 2007 and 84.5% in 2006.  The                  increase in third quarter 2007 SG&A costs is attributable to the                  inclusion of PM’s costs, partially offset by the net effect of  lower                  studio and corporate employment costs, reduced host sales                  commissions, increased advertising spending and increased                  restricted stock amortization expense associated with performance                  awards.  The relatively high level of third quarter 2007 costs                  in proportion to sales reflect the acquired legacy cost structure                  of the                  former Portrait Corporation of America organization, and in particular,                  the cost of operating and supporting the PM brand's legacy,                  film-based delivery platform pending conversion to                  digital.  |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |
|--------|--------|
| ·  | Depreciation                and amortization was $19.7 million in the first three quarters of                2007,                compared to $13.3 million in the comparable period of                2006.  This                increase is attributable to the inclusion in the third quarter of                2007 of                depreciation and amortization related to the PM brand and includes                $1.5                million of amortization of intangible assets resulting from the PM                acquisition. |
|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other                charges and impairments reflect costs incurred from strategic actions                implemented by the Company to restructure its operations, costs that                are                unpredictable and atypical of the Company’s operations and additional                charges due to asset impairments.  In the first three quarters                of 2007 and 2006, the Company recognized $3.2 million and $1.2 million,                respectively, in other charges and impairments.  Expense in 2007                primarily represents costs associated with the PCA Acquisition,                which represent severance accruals, cure costs related to contracts                assumed and other integration-related costs relative to the PM                Acquisition.  Charges in 2006 represent the separation of                employment of three executives, including the Company’s former                CEO, charges related to an executive retirement, consulting and                legal services in connection with the then on-going strategic alternative                review and charges related to the write-off of certain legacy                equipment that will no longer be used in the                business. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Interest                expense was $5.4 million in the first three quarters of 2007 compared                to                $1.9 million in the comparable period of                the prior year. The increase                in                interest expense is primarily the result of higher average borrowings                after the refinancing of the credit agreement as discussed in Note                7 as                well as slightly higher interest rates and increased fees for letters                of                credit. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Interest                income was $1.3 million in the first three quarters of 2007 compared                to                $260,000 in the first three quarters of 2006.  This increase is                primarily attributable to lower invested balances in 2006 as compared                to                2007 due to the purchase of stock in the Dutch Auction self-tender                offer                for $32.5 million which was funded in early February                2006. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                lease guarantee reserve reduction recorded in the first quarter of                2006                represents a partial reversal of reserves initially recorded in 2004                related to operating lease guarantees associated with the Company’s former                Wall Décor segment, Prints Plus.  As the total guarantee related                to these leases decreased with the passage of time, the payment of                rents                by Prints Plus and the settlement by the Company of certain leases                rejected in bankruptcy, the related liability was reduced to reflect                management’s revised estimate of remaining potential loss.  This                reserve is more fully discussed in Note 11 in the accompanying Notes                to                Interim Condensed Consolidated Financial                Statements. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Income                tax benefit was $6.3 million for the first three quarters of 2007                compared                to expense of $846,000 in the first three quarters of                2006.   The resulting effective tax rates were 34.8% in                2007 and 35.6% in 2006.  The decrease in the effective tax rate                in 2007 is attributable to deductions available since the Company                is                projecting to be no longer in a net operating loss                position. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Net                losses from discontinued operations were $287,000 in the third quarter                of                2007.  In connection with the PCA acquisition, the Company                decided to sell the operations in the United Kingdom (the UK operations)                and to discontinue the Institutional PictureMe brand.  The UK                operations consisted of 5 portrait studios, which were sold for one                pound                in October, 2007.   The Institutional PictureMe brand sells                to churches where they provide church directories and sell portraits                to                parishioners.  This business is winding down through the                completion of open orders and the discontinuance of new                business.  The decisions were made in order to eliminate                unprofitable brands and allow a more concentrated operational focus                in the                PictureMe business. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***LIQUIDITY        AND CAPITAL RESOURCES***

| *thousands*                                              |   | 40                  Weeks Ended    |    |
|----------------------------------------------------------|--------|------------------------------------|---------|
|                                                     |   | November                  10, 2007 |    |   | November                  11, 2006 |   |
| Net                  cash (used in) provided by:         |   |                               |    |   |   |   |
| Operating                  activities                    |   | $                                  | 11,275  |   |   | $ | 13,113 |   |
| Financing                  activities                    |   |                               | 93,812  |   |   |   | (39,014 | ) |
| Investing                  activities                    |   |                               | (95,655 | ) |   |   | (2,516 | ) |
| Effect                  of exchange rate changes on cash |   |                               | 303     |   |   |   | - |   |
|                                                     |   |                               |    |   |   |   |   |   |
| Net                  increase (decrease) in cash         |   | $                                  | 9,736   |   |   | $ | (28,417 | ) |
|                                                     |   |                               |    |   |   |   |   |   |

**Net      Cash Provided By (Used In) Operating Activities**

**Net      Cash Provided By (Used In) Financing Activities**

**Net      Cash Used In Investing Activities**

**Off-Balance      Sheet Arrangements**

**Contingencies**

**Liquidity**

***ACCOUNTING      PRONOUNCEMENTS AND POLICIES***

**Adoption      of New Accounting Standards**

**Application      of Critical Accounting Policies**

**Business      Combinations**

**Recoverability      of Goodwill, Acquired Intangible Assets and Long-Lived      Assets**

**CAUTIONARY      STATEMENT REGARDING FORWARD-LOOKING INFORMATION**

*Item      3.                      Quantitative      and Qualitative Disclosures About Market Risk*

| Notional                  amount        |   | $                                   | 57,500,000 |   |
|-----------------------------------------|--------|-------------------------------------|------------|--------|
| Fixed                  rate paid        |   |                                | 4.97       | %      |
| Variable                  rate received |   |                                | 5.69       | %      |
| Effective                  date         |   | September                  17, 2007 |       |
| Expiration                  date        |   | September                  17, 2010 |       |

*Item      4.                      Controls      and Procedures*

**PART      II.                      OTHER      INFORMATION**

*Item      1A.                 Risk      Factors*

**The      Company may not be able to realize the anticipated benefits from the acquisition      of the PictureMe brand.**

| ·   | Difficulties                in integrating and managing personnel, financial reporting and other                systems used by the PictureMe business into the                Company; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                failure of the PictureMe business to perform in accordance with the                Company’s expectations; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Any                future goodwill impairment charges that the Company may incur with                respect                to the assets of PictureMe; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Failure                to achieve anticipated synergies between the Company’s business units and                the business units of PictureMe;                and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                inability to maintain Wal-Mart as a                host. |
|--------------------|-----------------------------------------------------------------------------|

*Item      5.                 Other      Information*

*United      States*

*Canada*

*Mexico*

*Item      6.                 Exhibits*

**CPI      CORP.**

**SIGNATURES**

| By:    |   | /s/Gary                W. Douglass                                                                                                     |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|
|   |   | Gary                W. Douglass                                                                                                        |
|   |   | Executive                Vice President, Finance andChief                Financial Officer(Principal                Financial Officer) |

| By:    |   | /s/Dale                Heins                                                                     |
|--------|--------|--------------------------------------------------------------------------------------------------|
|   |   | Dale                Heins                                                                        |
|   |   | Vice                President, Corporate Controller(Principal                Accounting Officer) |

**CPI      CORP.**

**E-1**

**EXHIBIT      INDEX**

| 3.2    |   | Amended                and Restated By-laws of the Company, incorporated by reference to                CPI                Corp.’s Form 8-K, Exhibit 3.2, filed June 5, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 2.1    |   | Purchase                and Sale Agreement dated as of May 1, 2007, by and among Portrait                Corporation of America, PCA LLC, American Studios, Inc., PCA Photo                Corporation of Canada, PCA National LLC, PCA Finance Corp. Inc.,                Photo                Corporation of America, Inc. (each, a “Seller”) and CPI Corp.,                incorporated by reference to CPI Corp.’s Form 8-K, Exhibit 2.1, filed May                3, 2007.                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 2.2    |   | Amendment                No. 1 to the Purchase and Sale Agreement dated as of May 1, 2007,                by and                among Portrait Corporation of America, PCA LLC, American Studios,                Inc.,                PCA Photo Corporation of Canada, PCA National LLC, PCA Finance Corp.                Inc.,                Photo Corporation of America, Inc. (each, a “Seller”) and CPI Corp, such                amendment effective as of May 21, 2007, incorporated by reference                to CPI                Corp.’s Form 8-K, Exhibit 2.1, filed May 25, 2007. |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 2.3    |   | Amendment                No. 2 to the Purchase and Sale Agreement, such amendment dated as                of June                8, 2007, by and among Portrait Corporation of America, PCA LLC, American                Studios, Inc., PCA Photo Corporation of Canada, PCA National LLC,                PCA                Finance Corp. Inc., Photo Corporation of America, Inc. and CPI Corp.,                incorporated herein by reference to  CPI Corp.’s Form 8-K,                Exhibit 2.3, filed  June 24, 2007.                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.58  |   | Second                Amended and Restated Credit Agreement dated as of June 8, 2007 among                the                Company, the financial institutions that are or may from time to                time                become parties thereto and LaSalle Bank National Association, as                administrative agent and arranger for the lenders, incorporated herein                by                reference to CPI Corp.’s Form 8-K, Exhibit 10.1, filed June 14,                2007.                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.59* |   | Master                Lease Agreement between Wal-Mart Stores East, LP, Wal-Mart Stores,                Inc.,                Wal-Mart Louisiana, LLC, Wal-Mart Stores Texas, LP and Portrait                Corporation of America, Inc., effective June 8, 2007, incorporated                herein                by reference to CPI Corp.’s Form 10-Q, Exhibit 10.59,filed August 30,                2007.                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.60  |   | First                amendment to the Master Lease Agreement between Wal-Mart Stores East,                LP,                Wal-Mart Stores, Inc., Wal-Mart Louisiana, LLC, Wal-Mart Stores Texas,                LP                and Portrait Corporation of America, Inc., effective June 8,                2007.                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.61  |   | Second                amendment to the Master Lease Agreement between Wal-Mart Stores East,                LP,                Wal-Mart Stores, Inc., Wal-Mart Louisiana, LLC, Wal-Mart Stores Texas,                LP                and Portrait Corporation of America, Inc., effective June 8,                2007.                                                                                                                                                                                                                                                                                            |
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| 11.1   |   | Computation                of Per Share Earnings (Loss) – Diluted – for the 16 and 40 weeks ended                November 10, 2007 and November 11, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 11.2   |   | Computation                of Per Share Earnings (Loss) – Basic – for the 16 and 40 weeks ended                November 10, 2007 and November 11, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 31.1   |   | Certification                Pursuant to Rule 13a-14(a) Under the Securities and Exchange Act                of 1934                by the Chief Executive Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 31.2   |   | Certification                Pursuant to Rule 13a-14(a) Under the Securities and Exchange Act                of 1934                by the Chief Financial Officer.                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| 32.0   |   | Certification                Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section                906 of                the Sarbanes-Oxley Act of 2002 by the Chief Executive Officer and                the                Chief Financial Officer.                                                                                                                                                                                                                                                                                                                                                  |

| * | Confidential                treatment requested for portions of this document.  Material                omitted has been filed separately with the Securities and Exchange                Commission. |
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