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

                                   FORM 10-K/A

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

      For the fiscal year ended February 2, 2002

                                       OR

|_|   Transition Report Pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 [No Fee Required]

      For the transition period from ____________ to _____________

                         COMMISSION FILE NUMBER 1-10204

                                    CPI CORP.
             (Exact name of registrant as specified in its charter)

              DELAWARE                                     43-1256674
   (State or other jurisdiction of                      (I.R.S. employer
    incorporation or organization)                      identification no.)

             1706 WASHINGTON AVENUE, ST. LOUIS, MISSOURI   63103-1790
               (Address of principal executive offices)    (Zip code)

       (Registrant's telephone number including area code) (314) 231-1575

           Securities registered pursuant to Section 12(b) of the Act:

          COMMON STOCK $.40 PAR VALUE       NEW YORK STOCK EXCHANGE
          ---------------------------      ------------------------
              Title of each class          Name of each exchange on
                                                which registered

        Securities registered pursuant to Section 12(g) of the Act: None

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 (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. YES |X| NO |_|

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|

Aggregate market value of the registrant's voting stock held by non-affiliates,
based upon the closing price of said stock on the New York Stock
Exchange-Composite Transaction Listing on April 12, 2002 ($17.00 per share):
$128,397,056.

As of April 12, 2002, 8,034,111 shares of the common stock, $0.40 par value, of
the registrant were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Proxy Statement relating to the Annual Meeting of Stockholders
to be held June 6, 2002 are incorporated by reference into Part III of this
Report.

<PAGE>

                      (THIS PAGE LEFT INTENTIONALLY BLANK)


                                       2
<PAGE>

                   (PAGE NUMBERS REFER TO PAPER DOCUMENT ONLY)

                                TABLE OF CONTENTS

           PART I

           Item 1.  Business                                     5
           Item 2.  Properties                                  12
           Item 3.  Legal Proceedings                           14
           Item 4.  Results of Votes of Security Holders        14

           PART II

           Item 5.  Market for Registrant's common stock and
                     Related Stockholder Matters                15

           Item 6.  Selected Financial Data                     17
           Item 7.  Management's Discussion and Analysis of
                     Financial Condition and Results of
                     Operations                                 20
           Item 7A. Quantitative and Qualitative Disclosures
                     About Market Risk                          33
           Item 8.  Financial Statements and Supplementary
                     Data                                       33
           Item 9.  Changes in and Disagreements with
                     Accountants on Accounting and Financial
                     Disclosure                                 79

           PART III

           Item 10. Directors, Executive Officers, Promoters,
                     and Control Persons of the Registrant      80
           Item 11. Executive Compensation                      80
           Item 12. Security Ownership of Certain Beneficial
                     Owners and Management                      80
           Item 13. Certain Relationships and Related
                     Transactions                               80

           PART IV

           Item 14. Exhibits, Financial Statement Schedules
                     and Reports on Form 8-K                    82
                    Signatures                                  89
                    Certifications                              91


                                       3
<PAGE>

EXPLANATORY NOTE

      CPI Corp. is filing this Form 10-K/A for the fiscal year ended February 2,
2002 to reflect the restatement of its audited consolidated financial statements
for the fiscal years ended February 2, 2002 and February 3, 2001. The
restatement resulted from the Company changing its policy for recognizing
revenues to be consistent with Securities and Exchange Commission Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements". See
the consolidated financial statements and Note 2 thereto included herein for a
description of the restatement. Any items included in the original Form 10-K
that are not included herein are not amended and remain in effect as of the date
of the original filing thereof. Additionally, this Form 10-K/A does not purport
to provide a general update or discussion of any other developments at the
Company subsequent to the original filing. The filing of this Form 10-K/A shall
not be deemed an admission that the original filing, when made, included any
untrue statement of material fact or omitted to state a material fact necessary
to make a statement not misleading.

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


                                       4
<PAGE>

                                     PART I

ITEM I. BUSINESS

PRODUCTS AND SERVICES

      CPI Corp. is a holding company primarily engaged, through its
subsidiaries, in the development and marketing of consumer services and related
products through a network of centrally managed, small retail locations. Founded
in 1942, CPI Corp. became a publicly held company in 1982 and has operations in
two business segments: Portrait Studios and Technology Development. Unless the
context otherwise requires, references herein to "the Company" or "CPI Corp."
mean CPI Corp., its consolidated subsidiaries and their predecessor companies.

Portrait Studios Segment

      The Portrait Studios segment operates through two wholly-owned
subsidiaries, Consumer Programs Inc. and CPI Images, LLC, and a partnership,
Texas Portraits, LP. Texas Portraits, LP is owned by Consumer Programs Inc. and
another wholly-owned subsidiary, Consumer Programs Partner, Inc.

      Within the Portrait Studio segment, the Company operates 1,031 studios as
of February 2, 2002 and, as a Sears, Roebuck and Company ("Sears") licensee, is
the exclusive operator of all Sears Portrait Studios in the United States,
Canada and Puerto Rico. The Company is materially dependent upon the continued
goodwill of Sears and the integrity of the Sears name in the retail marketplace.
The Company believes its relations with Sears are excellent and that they have
been beneficial to both companies. (See "Dependence" later in this section for a
more detailed discussion.)

      As a leader, determined on the basis of revenues, in the professional
portrait photography of pre-school children market, the Company provides its
customers with a professional portrait studio experience and offers a variety of
products tailored to maximize customer satisfaction. Portraits range from wallet
size to 16" by 20", with the availability of Portrait Creations(R), greeting
cards and passport photos. The Company also provides photo accessories, such as
picture frames and photo albums, and services that include the Portrait Preview
System and Smile Savers Plan(R). The Smile Savers Plan(R) is a program designed
to increase repeat visits and develop long-term customer loyalty by allowing
customers to pay a one-time fee for unlimited visits for a two-year period.


                                       5
<PAGE>

      The strategic objectives of the Portrait Studio segment are to increase
market share and profitability through the following initiatives:

      -     create an engaging and inviting studio experience,

      -     use sophisticated, targeted marketing,

      -     build customer focus and

      -     build strategic alliances.

Technology Development Segment

      Over the last several years, the Company has allocated resources to
develop unique computer software platforms, such as the Store Automation System,
that improved the portrait studio experience, streamlined workflow in the studio
environment and provided a flexible, scalable platform to develop future
products. In 2000, the Company more fully committed to this investment in
technology by forming a wholly-owned subsidiary, Centrics Technology, Inc.,
committed to the full-time development of business computer software for both
the Portrait Studio segment and other third-party business, and to treat this
business as a separate Technology Development Segment. The Company has retained
within the Portrait Studio segment and corporate services area the information
technology services needed to support existing field systems, develop
applications for corporate use, administer and support technical systems,
desktop services and data center operations, and provide data, voice and data
security architecture for the Company's overall information technology systems.

      Third-party sales for the Technology Development segment were $408,000,
$888,000 and $70,000, respectively for the fiscal years ended 2001, 2000 and
1999. Although there were some third-party computer software sales in fiscal
years 1998 and 1999, prior to fiscal year 2000, the majority of software
products developed by the Technology Development segment were for the Portrait
Studio segment. However, in January 2001, the Company announced the formation of
searsphotos.com, a new Sears-licensed business offering on-line photofinishing
and archiving for customers of Sears and Sears Portrait Studios. The new imaging
service allows customers to preserve, share and use portrait images in
conjunction with their personally created images and other memorabilia, creating
digital archives through a Sears sponsored internet-based system maintained and
marketed by the Company. Actual photofinishing processes are outsourced to a
third party vendor. (See "Dependence" later in this section for a more detailed
discussion on the Sears license.)


                                       6
<PAGE>

      Consequently, within the Technology Development segment, the Company
markets an internet-based, mail-order photofinishing business under the name
searsphotos.com and offers software programs primarily for retail service
industry use, software consulting and custom software development under the name
Centrics Technology, Inc.

      The Technology Development group's strategic objectives are to support the
marketing of searsphotos.com, support and develop software for Portrait Studios
and develop commercial software for other retail enterprises.

      The Company, through its wholly-owned subsidiary Centrics Technology,
Inc., operates two websites (www.searsphotos.com and www.searsportrait.com)
through which products and services are offered to the Company's customers and
prospective customers. In addition to searsphotos.com which is discussed above
in the Technology Development Segment discussion, customers may also through
searsportrait.com view special offers and promotions. Revenues derived from the
Company's on-line business activities account for less than 1% of the Company's
consolidated revenues.

Supplier Relationships

      In the Portrait Studio operations, the Company purchases photographic
paper, film and chemistry, from three major manufacturers. In the Technology
Development segment, the Company has an agreement for standard film developing
and pricing as well as other digital services with one vendor. The Company
purchases other equipment and materials for all its operations from a number of
suppliers and is not dependent upon any other supplier for any specific kind of
equipment.

      The Company has had no difficulty in the past obtaining sufficient
materials to conduct its businesses and believes its relationships with
suppliers are good.

Intellectual Property

      The Company owns numerous registered service marks and trademarks,
including Portrait Creations(R) and Smile Savers Plan(R), which have been
registered with the United States Patent and Trademark Office. The Company's
rights to these trademarks in conjunction with Sears Portrait Studio will
continue as long as the Company complies with the usage, renewal filing and
other legal requirements relating to the renewal of trademarks.


                                       7
<PAGE>

Seasonality

      In the professional portrait photography business, sales are seasonal,
with the largest volume occurring in the twelve-week fourth quarter, which
includes the Thanksgiving and Christmas seasons. The Christmas season accounts
for a high percentage of Sears Portrait Studio sales and earnings, and the
fourth fiscal quarter (mid November through early February) typically produces a
large percentage of annual sales and earnings. For fiscal years 2001 and 2000,
fourth quarter sales accounted for 35% and 34%, respectively of total net sales
for the year and all of net earnings for the year.

Dependence

      The Company has enjoyed a strong relationship with Sears for over 40
years, as evidenced by having been awarded the prestigious "Partners in
Progress" award several times since the inception of the award. In 1998, Sears
also honored the Company with the "Chairman's Award" in recognition of
significant product innovations. In 1996, the Company was the sole recipient of
the newly created Sears "Golden Opportunities" award for the most responsive
handling of customer complaints of all its licensees.

      As a Sears licensee, the Company enjoys the benefits of using the Sears
name, access to prime retail locations, Sears' daily cashiering and bookkeeping
system, store security services and customers' ability to use their Sears credit
cards to purchase products or services, for which Sears bears all credit and
authorization risk.

      As of February 2, 2002, the Company operated 855 full-line Sears Portrait
Studios in the United States and, except in connection with store closings, has
never had Sears terminate the operation of any portrait studio under any license
agreement.

      On November 10, 1999, Sears extended the Company's license agreements to
act as the exclusive portrait photography licensee for Sears stores in the
United States and Puerto Rico through December 31, 2008. These agreements
provide for the Company to pay Sears a license fee of 15% of total annual net
sales for studios located in Sears stores and prohibit the Company from offering
or selling professional portrait photography studio services in the United
States, Puerto Rico or Canada in locations other than Sears retail locations, or
within twenty miles of a Sears retail location. Net sales are defined as gross
sales less customer returns, allowances and sales taxes. The Company provides
all studio furniture, equipment, fixtures, leasehold improvements and
advertising. The Company is responsible for hiring, training and compensating
Company employees and must indemnify Sears against claims arising from the
operation of the Sears Portrait Studios business.


                                       8
<PAGE>

      As of February 2, 2002, the Company also operated 53 freestanding studios
in the United States that operate under the Sears name in retail malls that are
without a Sears store. In addition to mall rent, the Company pays Sears a
license fee of 7.5% of total annual net sales per studio in these locations. The
Company provides all studio furniture, equipment, fixtures, leasehold
improvements and advertising. The Company is also responsible for hiring,
training and compensating Company employees. These studios benefit from
inclusion in advertising that promotes Sears department store studios in the
market. The license agreement with Sears for these remote studios was amended on
November 10, 1999, extending the term to December 31, 2008.

      As of February 2, 2002, all 120 Canadian studios operate under a license
agreement with Sears Canada, Inc., a subsidiary of Sears. The agreement,
originally negotiated in 1977, renews automatically on a year-to-year basis but
is terminable by either party on 60 days' notice. The license fee is 15% of
total annual net sales. Pursuant to the license agreement, the Company provides
all studio furniture, equipment, fixtures, leasehold improvements, and
advertising and is responsible for hiring, training and compensating Company
employees.

      The Company further expanded its relationship with Sears and the Sears
Portrait Studio business through a Development and License Agreement, dated
January 31, 2001 and expiring December 31, 2008, which deals with the
development and operation of an Internet-based business related to
photofinishing, archiving and related services, now known as searsphotos.com.

Competitive Conditions

      The Company Portrait Studio segment operates within the professional
portrait photography industry, primarily specializing in preschool children's
portraits. In this business, the Company competes with a number of companies
that operate fixed-location, traveling and freestanding photography studios.
Independent professional photographers also compete with the Company in various
locations. The Company believes that its portrait photography products and
services are competitive in terms of price, quality and convenience of purchase
with similar products of its competitors.

      The Technology Development segment operates within the photofinishing and
custom computer software fields - both highly fragmented and specialized fields.
In the photofinishing field, the Company believes its products and services are
competitive in terms of price, quality and convenience with similar products of
its competitors. Since few companies have specialized in delivering store
information systems to United States based retailers as the Technology
Development segment has, the Company has no basis for analyzing competitive
conditions as applicable to its custom computer software business.


                                       9
<PAGE>

Environmental

      The Company's operations are subject to normal environmental protection
regulations. Compliance with federal, state and local provisions which have been
enacted or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment, is not expected to have
a material effect upon the capital expenditures, earnings or competitive
position of the Company. At present, the Company has not been identified as a
potentially responsible party under the Comprehensive Environmental Responses,
Compensation and Liability Act and has not established any reserves or
liabilities relating to environmental matters.

Employees

      At February 2, 2002, the Company had approximately 7,200 employees, of
which approximately 4,400 were part-time or temporary employees. The Company's
employees are not members of any union, and the Company has experienced no work
stoppages. The Company believes that its relations with its employees are good.

Other Businesses

WALL DECOR

      In July 2001, the Company announced it had sold its discontinued Wall
Decor segment, a business formally operated by the Company under the name Prints
Plus that offered value-priced prints, posters, frames and framing services to
consumers. The following summarizes the Company's operations in the Wall Decor
segment.

May 1993      - purchased 102 Prints Plus store locations from
                Melville Corporation for $14.7 million

April 2000    - announced sale of segment by summer of 2000,
                classification of segment as a discontinued
                operation, and recognition of $6.4 million after
                taxes in anticipated losses and related expenses
                in fiscal year 1999 in connection with the sale


                                       10
<PAGE>

August 2000   - announced negotiations to sell Wall Decor business had
                terminated and other buyers were being pursued

April 2001    - announced signed agreement with TRU Retail, Inc.
                to buy the Wall Decor segment and recognition of
                a further $4.1 million after tax loss for the
                discontinued operations in fiscal year 2000

July 2001     - announced providing TRU Retail Inc. with a $6.4
                revolving line of credit

July 2001     - announced sale of Wall Decor segment to TRU Retail, Inc.
                for $16.0 million, which included receipt of $11.0 million in
                Preferred Security of TRU Retail Inc., $4.0 million in cash,
                other consideration netting to $1.0 million and the assumption
                of certain liabilities

January 2002  - TRU Retail, Inc. merged into Prints Plus, Inc.

PHOTOFINISHING

      In addition, in 1982, the Company started a photofinishing business and
continued operations until October 1996. The following is a listing of the
Company's disposition of its photofinishing business:

June 1996     - Sold 50 one-hour photofinishing stores to Wolf Camera,
                Inc.

October 1996  - Established a joint venture with Eastman Kodak Company by
                selling 51% interest in existing photofinishing operations.

October 1997  - Sold remaining 49% interest to Eastman Kodak Company.

     Further financial information on continuing and discontinued operations of
the Company is in Part II, Item 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS", and Part II, Item 8 as restated,
"FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA".


                                       11
<PAGE>

ITEM 2. PROPERTIES

      The following table sets forth certain information concerning the
Company's principal facilities:

PRINCIPAL FACILITIES - CPI CORP.

                        APPROXIMATE
                          AREA IN          PRIMARY         OWNERSHIP
LOCATION                SQUARE FEET          USES          OR LEASE
-------------------     -----------   ------------------   ---------

St. Louis, Missouri       270,000     Administration and   Owned (5)
                                       Photoprocessing

St. Louis, Missouri       155,000     Parking Lots         Owned (6)

St. Louis, Missouri        57,574     Warehousing          Leased(1)

St. Louis, Missouri        20,150     Warehousing          Leased(2)

Brampton, Ontario          40,000     Administration,      Owned (7)
                                       Warehousing and
                                       Photoprocessing

Las Vegas, Nevada          21,922     Photoprocessing      Leased(3)

Thomaston, Connecticut     25,000     Administration and   Owned (8)
                                       Photoprocessing

St. Louis, Missouri        14,000     Administration       Leased(4)


                                       12
<PAGE>

(1)   Lease term expires on June 30, 2002. Segment use: corporate and Portrait
      Studio

(2)   Lease term expires on June 13, 2002. Segment use: corporate

(3)   Lease term expires on May 31, 2002. Segment use: Portrait Studio

(4)   Lease term expires on February 29, 2004. Segment use: Technology
      Development

(5)   Segment use: corporate, Portrait Studio

(6)   Segment use: corporate

(7)   Segment use: Portrait Studio

(8)   Segment use: Portrait Studio

      As of February 2, 2002, the Company operated 855 portrait studios in Sears
stores in the United States pursuant to the license agreements with Sears and
120 studios in Canada under a separate license agreement with Sears Canada, Inc.
The Company pays Sears a license fee of 15% of total annual net sales for
studios located in Sears stores. This license fee covers the Company's use of
space in the Sears stores, the use of Sears' name and related intellectual
property, and all services provided by Sears. No separate amounts are paid to
Sears expressly for the use of space. The Company also operates 56 portrait
studios in shopping centers without Sears stores, which are generally leased for
at least three years with some having renewal options. See Part I, Item 1.
"BUSINESS, Dependence" for more information on the Sears license agreements.

      The Company believes that the facilities used in its operations are in
satisfactory condition and adequate for its present and anticipated future
operations.

      The Company's physical properties owned or leased are all considered
commercial property.


                                       13
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

      There are various suits pending against the Company, none of which are
material in nature. It is the opinion of management that the ultimate liability,
if any, resulting from such suits will not materially affect the consolidated
financial position or results of operations of the Company.

ITEM 4. RESULTS OF VOTES OF SECURITY HOLDERS

      No matters were submitted to stockholders for a vote during the fourth
quarter of fiscal year 2001.


                                       14
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

(a)   PRICE RANGE OF COMMON STOCK AND DIVIDENDS

      Since April 17, 1989, the Company's common stock has been traded on the
      New York Stock Exchange under the symbol CPY. The following tables set
      forth the high and low sales prices of the common stock reported by the
      New York Stock Exchange and the dividend declared for each full quarterly
      period during the Company's last two fiscal years.

      FISCAL YEAR 2001
      (ending Feb. 2, 2002)     HIGH      LOW      DIVIDEND
      ---------------------   -------   --------   --------
      First Quarter           $ 21.99   $  18.50   $   0.14
      Second Quarter            24.50      18.10       0.14
      Third Quarter             21.70      13.65       0.14
      Fourth Quarter            18.90      15.50       0.14

      FISCAL YEAR 2000
      (ending Feb. 3, 2001)
      ---------------------
      First Quarter           $ 24.94   $  22.38   $   0.14
      Second Quarter            25.69      20.06       0.14
      Third Quarter             25.94      19.13       0.14
      Fourth Quarter            24.13      19.06       0.14

(b)   STOCKHOLDERS OF RECORD

      As of April 12, 2002, the market price of the Registrant's common stock
      was $17.00 per share with 8,034,111 shares outstanding and 1,818 holders
      of record.

(c)   DIVIDENDS

      The Company intends, from time to time, to pay cash dividends on its
      common stock, as its Board of Directors deems appropriate, after
      consideration of the Company's operating results, financial condition,
      cash requirements, general business conditions and such other factors as
      the Board of Directors deems relevant.


                                       15
<PAGE>

Sales of Securities Other Than Sales of Equity Securities Pursuant to Regulation
S-K

(a)   Between February 7, 1999 and June 28, 2001, the Company sold a total of
      206,070 shares of its common stock, par value $0.40 per share to an
      aggregate of 10 senior executives.

(b)   No underwriter was involved in the sales.

(c)   All shares were issued for cash pursuant to options granted under the CPI
      Corp. Voluntary Stock Option Plan, which was approved by stockholders in
      1993.

(d)   The options and shares were issued pursuant to Rule 505 of Regulation D,
      to a group of executives who were primarily accredited investors. The
      Company filed a Form D with the SEC in 1993.

(e)   The options had a term of eight years, with a three-year vesting period.
      During this period, 24,250 options were exercised at $15.50 per share and
      181,820 options were exercised at $18.375 per share. The proceeds received
      by the Company from the option exercises during this period totaled
      $3,716,818, which the Company used for general corporate purposes.


                                       16
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA FINANCIAL HIGHLIGHTS (1) (in
millions of dollars)

We derived the financial data presented below for, and as of the end of, each of
the years in the five-year period ended February 2, 2002 from our consolidated
financial statements and the related notes, as restated, which have been audited
by KPMG LLP, independent accountants. The consolidated financial statements for
the years 2001 and 2000 have been restated (see Note 2 to the consolidated
financial statements).

<TABLE>
<CAPTION>
                                           2001       2000       1999       1998      1997
                                           ----       ----       ----       ----      ----
                                        (restated) (restated)
<S>                                      <C>        <C>         <C>        <C>       <C>
INCOME DATA
 Net sales                               $ 319.3    $ 320.0     $ 319.1    $ 325.5   $ 303.7
 Income from cont. operations               12.2       25.6         6.7       28.4      29.2
 Net interest expense (2)                    2.5        2.9         1.7        0.9       2.0
 Other income (expense) (3)(4)               0.3        0.1        (0.1)       5.3       2.2
 Gain (loss) on sale of interest in
  Photofinishing segment (5)                  --         --          --         --      (4.2)
 Interest in joint venture (5)                --         --          --         --      (3.3)
 Income taxes                                3.5        8.0         1.7       11.5       8.6
 Net earnings from continuing operations
  before cumulative effect of change in
  accounting principle                       6.5       14.9         3.2       21.3      13.3
</TABLE>

For more detailed financial information and for the definition of capitalized
terms, see Part II, Item 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS".

(1)   In 1999, the Company classified the Wall Decor segment as a discontinued
      operation and reclassified the prior years' consolidated financial
      statements to reflect this change.

(2)   In 1998 and 1997, $2.8 million and $1.1 million, respectively,
      amortization for interest income was recognized from the Promissory Note
      from Kodak.

(3)   In 1999, 1998 and 1997, the Company recognized $3.2 million, $5.0 million
      and $1.8 million, respectively, in other income from the Noncompete
      Agreement.

(4)   In 2001, 2000 and 1999, the Company, recognized $218,000 in income and
      $145,000 and $3.5 million in expense, respectively, in other expense for
      costs related to the termination of the Merger Agreement.

(5)   In October 1997, the Company recorded a $4.2 million loss before taxes on
      the sale of its remaining interest in the joint venture formed in October
      1996.


                                       17
<PAGE>

FINANCIAL HIGHLIGHTS (1) (continued)

<TABLE>
<CAPTION>
                                               2001       2000       1999       1998       1997
                                              ------     ------     ------     ------     ------
                                            (restated) (restated)
<S>                                           <C>        <C>        <C>        <C>        <C>
PER SHARE
 Net earnings from continuing operations-
  diluted (2)                                 $ 0.82     $ 1.84     $ 0.32     $ 2.08     $ 1.12
 Net earnings from continuing operations-
  basic (2)                                     0.83       1.89       0.33       2.14       1.14
 Dividends                                      0.56       0.56       0.56       0.56       0.56
 Avg. shares outstanding (millions of
  shares)-diluted                                7.9        8.1       10.0       10.2       11.8
 Avg. shares outstanding (millions of
  shares)-basic                                  7.8        7.9        9.7        9.9       11.6
</TABLE>

For more detailed financial information see Part II, Item 7. "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS".

(1)   In 1999, the Company classified the Wall Decor segment as a discontinued
      operation and reclassified the prior years' consolidated financial
      statements to reflect this change.

(2)   The Company recorded the repurchase of 1,211,124 shares of common stock
      for $28.3 million in 2000, 1,166,650 shares of common stock for $28.2
      million in 1999, 252,214 shares of common stock for $5.4 million in 1998
      and 2,059,499 shares of common stock for $47.7 million in 1997.


                                       18
<PAGE>

FINANCIAL HIGHLIGHTS (1) (in millions of dollars) (continued)

<TABLE>
<CAPTION>
                                                2001        2000        1999        1998        1997
                                               ------      ------      ------      ------      ------
                                             (restated)  (restated)
<S>                                            <C>         <C>         <C>         <C>         <C>
BALANCE SHEET
  Cash and cash equivalents (2)                $ 46.6      $ 38.8      $ 49.5      $ 76.0      $ 15.3
  Current assets                                 82.2        75.6        81.5       113.7        94.4
  Net fixed assets                               63.7        72.6        84.9       111.1       124.7
  Net assets of discontinued operation             --        16.0        23.2          --          --
  Assets of business transferred under
   contractual arrangements(3)                   11.6          --          --          --          --
  Other assets (4)                               23.5        20.7         9.7         9.9         9.7
  Total assets                                  180.9       184.9       199.3       234.7       228.8
  Current liabilities                            66.3        67.4        42.1        36.7        47.4
  Other liabilities and long-term                16.6        16.3        16.3        21.9        19.8
           deferred revenue
  Long-term debt, less current maturities        42.6        51.1        59.6        59.6        59.5
  Stockholders' equity                           55.4        50.1        81.3       116.5       102.1
</TABLE>

For more detailed financial information and for the definition of capitalized
terms, see Part II, Item 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS".

(1)   In 1999, the Company classified the Wall Decor segment as a discontinued
      operation and reclassified the prior years' consolidated financial
      statements to reflect this change.

(2)   The Promissory Note from Kodak of $43.9 million was paid January 4, 1999,
      which resulted in the increased cash balance in 1998.

(3)   Assets of business transferred under contractual arrangements is the
      result of the sale of the discontinued Wall Decor operation.

(4)   In 2000, initial funding of a supplementary retirement benefit trust for
      key executives was established.


                                       19
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

      The Company's fiscal year ends the first Saturday of February.
Accordingly, fiscal years 2001, 2000 and 1999 ended February 2, 2002, February
3, 2001 and February 5, 2000, respectively, and consisted of 52 weeks.
Throughout MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION," reference to 2001, 2000 or 1999 will mean the fiscal year
ended February 2, 2002, February 3, 2001 and February 5, 2000, respectively.

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

      As described below in Note 2 to the Audited Consolidated Financial
Statements, which are included herein, based on a review of applicable
accounting rules and interpretations, we have decided to restate certain of our
previously issued financial statements. As a result, certain information in the
accompanying financial statements and notes was restated from the original
presentation in our Annual Report on Form 10-K for the fiscal year ended
February 2, 2002. All comparisons and references in this Form 10-K/A to results
for 2001 and 2000 are to the restated results.

RESULTS OF OPERATION-FISCAL YEAR 2001 COMPARED TO FISCAL YEAR 2000

      The following table sets forth certain operating information for each
period and should be viewed in conjunction with the consolidated financial
statements and notes included in Item 8 of this Form 10-K/A.


                                       20
<PAGE>

                                         (Restated)
                                         Fiscal Year                Change
                                  -------------------------        Increase
                                    2001             2000          (Decrease)
                                  --------         --------        ----------
                                   (in millions of dollars)
Net sales:
 Portrait Studios                 $  318.9         $  319.1             (0.1)%
 Technology Development                3.0              0.9               --
 Intersegment sales                   (2.6)              --               --
                                  --------         --------
  Total net sales                 $  319.3         $  320.0             (0.2)%
                                  ========         ========
Operating earnings (losses):
 Portrait Studios                 $   28.1         $   42.4            (33.7)%
 Technology Development               (1.7)            (1.1)            54.5%
                                  --------         --------
  Total operating earnings            26.4             41.3            (36.1)%
                                  --------         --------
General corporate expenses            14.2             15.7             (9.5)%
                                  --------         --------
Income from operations            $   12.2         $   25.6            (52.3)%
                                  ========         ========

      Net sales for the Portrait Studios segment were relatively unchanged in
2001 from 2000, as the 2.0% decrease in customer traffic was offset by the 1.8%
increase in average sales per customer. Operating earnings decreased in 2001
from 2000 primarily due to increased labor costs, a result of increased
employment hours and pay rates, and increased packaging and shipping costs, a
result of higher shipping rates.

      Included in the above mentioned sales revenues for fiscal 2001 and 2000 is
$4.5 million and $18.1 million, respectively, of pre-tax revenues that were
included in the cumulative effect adjustment recorded in fiscal 2000 as
discussed in Note 2 to the Consolidated Financial Statements.

      Net sales for the Technology Development segment reflected an increase in
2001, the first full year of operation as a separate business segment, from 2000
due to intersegment sales. However, net sales to nonaffiliated companies
decreased in 2001 from 2000 levels. After elimination of intersegment sales,
operating losses increased in 2001 from 2000, reflecting lower revenues from
nonaffiliated companies and additional costs associated with establishing
separate administrative offices for the segment.

      General corporate expense decreased in 2001 from 2000 primarily as a
result of lower administrative bonuses.


                                       21
<PAGE>

      The following table sets forth certain operating information for each
period and should be viewed in conjunction with the consolidated financial
statements and notes included in Item 8 of this Form 10-K/A.

                                          Fiscal Year
                                  ---------------------------        Change
                                  (Restated)                        Increase
                                      2000            1999         (Decrease)
                                  ------------    -----------      ----------
                                   (in millions of dollars)
Net sales:
 Portrait Studios                   $ 319.1         $ 319.1              --
 Technology Development                 0.9              --              --
                                    -------         -------
  Total net sales                   $ 320.0         $ 319.1            (0.3)%
                                    =======         =======
Operating earnings (losses):
 Portrait Studios                   $  42.4         $  22.9            85.2%
 Technology Development                (1.1)           (1.7)          (35.3)%
                                    -------         -------
  Total operating earnings             41.3            21.2            94.8%
                                    -------         -------
General corporate expenses             15.7            14.5             8.2%
                                    -------         -------
Income from operations              $  25.6         $   6.7           282.1%
                                    =======         =======

      Net sales for the Portrait Studios segment were relatively unchanged in
2000 from 1999, as the 2.9% decrease in customer traffic was offset by the 3.0%
increase in average sales per customer. Operating earnings for Portrait Studios
increased in 2000 from 1999 due to lower employment costs, which resulted from
reduced studio labor hours offset partially by increased hourly wage rates, and
lower advertising expenditures, telephone costs and administrative support costs
in 2000 versus 1999 as a result of a Company-wide profit improvement plan
introduced late in 1999.

      Included in the above mentioned sales revenues for fiscal 2000 are $18.1
million of pre-tax revenues that were included in the cumulative effect
adjustment recorded in fiscal 2000 as discussed in Note 2 to the Consolidated
Financial Statements.


                                       22
<PAGE>

      Net sales for the Technology Development segment increased in 2000 from
1999 due primarily to business development fees received in 2000 for the
development of the searsphotos.com internet site. Operating losses decreased in
2000 from 1999 reflecting the higher revenues.

      General corporate expense increased in 2000 from 1999 primarily as a
result of higher administrative bonuses.

OTHER ITEMS EFFECTING RESULTS OF OPERATIONS

      The following table sets forth certain operating information for each
period and should be viewed in conjunction with the consolidated financial
statements and notes included in Item 8 of this Form 10-K/A.

                                                     Fiscal Year
                                         -----------------------------------
                                           2001         2000          1999
                                         --------     --------      --------
                                        (restated)   (restated)
                                             (in millions of dollars)
Interest expense:
  Debt                                   $    4.1     $    4.6      $    4.6
  Other                                       0.1          0.1           0.2
                                         --------     --------      --------
    Total interest expense               $    4.2     $    4.7      $    4.8
                                         ========     ========      ========
Interest income:
  Investments                            $    1.2     $    1.8      $    3.1
  Income from Preferred Security(1)           0.5           --            --
  Revolver (1)                                0.1           --            --
                                         --------     --------      --------
    Total interest income                $    1.8     $    1.8      $    3.1
                                         ========     ========      ========
Other expense, net:
 Other income                            $   (0.1)    $   (0.2)     $   (0.1)
 Joint venture income (3)                      --           --          (3.3)
 ASCP expense (2)                            (0.2)         0.1           3.5
                                         --------     --------      --------
    Total other (income) expense, net    $   (0.3)    $   (0.1)     $    0.1
                                         ========     ========      ========
Net earnings(loss) from
  discontinued operations (1)            $     --     $   (4.1)     $   (6.4)
                                         ========     ========      ========
Effective income tax rate                    35.0%        35.0%         35.0%
                                         ========     ========      ========


                                       23
<PAGE>

(1)   See Discontinued Operations discussion

(2)   See Terminated Merger Agreement discussion

(3)   See Joint Venture discussion

      Interest expense decreased in 2001 from 2000 as a result of the scheduled
repayment of long-term debt. Interest expense was unchanged in 2000 from 1999.

      Interest income was relatively unchanged in 2001 from 2000 as lower
interest earned on short-term investments was offset by the receipt of income
from the Preferred Security. Interest income decreased in 2000 from 1999 due to
lower cash and cash equivalent balances as a result of the repurchase of Company
stock. (See Discontinued Operations discussion for further information.)

Discontinued Operations

      In April 2000, the Company announced it was negotiating to sell its Wall
Decor segment, a business operated by the Company since 1993 under the name
Prints Plus. As a result of the decision to exit this business, a loss of $6.4
million after taxes was recorded in 1999 to recognize anticipated losses and
related expenses in connection with the sale. The Company also classified the
Wall Decor segment as a discontinued operation and reclassified prior years'
financial statements to reflect this change.

      The Company had planned to complete this transaction in the summer of
2000. However, in August 2000, the Company announced that negotiations to sell
its Wall Decor business had terminated and the Company was pursuing other buyers
for this business. Subsequently, in April 2001, the Company announced it had
signed an agreement with TRU Retail, Inc. ("TRU Retail"), a corporation formed
by top management of Prints Plus, to buy the Wall Decor segment from the
Company.

      As a result of these events, in 2000, net earnings of the Company were
adjusted to include a further $4.1 million after tax loss for the discontinued
wall decor operations. This loss reflected 2000 operating results of the Wall
Decor operation, the consideration to be received at the closing date of the
sale, and the anticipated fiscal year 2001 losses and related expenses in
connection with the sale.


                                       24
<PAGE>

      In July 2001, the Company announced it provided TRU Retail with a $6.4
million revolving line of credit (the "Revolver"). The Company elected to
provide a revolving line of credit to TRU Retail because it believed a third
party commercial lender would have imposed certain restrictions on the amount of
cash TRU Retail could use to pay dividends on and redeem shares of the preferred
stock. The Company did not want to be in a subordinate position to another
lender, in part because the Company is the guarantor of certain retail store
leases that TRU Retail assumed (see below). The Revolver is fully collateralized
by the assets of TRU Retail, expires on July 26, 2004, has interest charged at
1.0% over prime, and has a commitment fee of 0.5% per annum payable on the
unused portion of the Revolver. The Revolver also requires TRU Retail to
maintain certain financial ratios and comply with certain restrictive covenants.
The Revolver is held as a long-term asset on the Company's balance sheet
captioned "Assets of business transferred under contractual arrangements: Loan
Receivable." As of February 2, 2002, TRU Retail had net borrowings of $1.5
million under the Revolver and the Company had recorded $120,000 in interest
income in 2001 in connection with the Revolver.

      The Company also announced in July 2001 that the sale of the Wall Decor
segment had been completed to TRU Retail for $16.0 million, which included the
receipt of $11.0 million in a Preferred Security of TRU Retail, approximately
$4.0 million in cash, other consideration netting to $1.0 million and the
assumption of certain liabilities including the ongoing guarantee of certain
operating real estate leases. To effect the closing of the transaction, TRU
Retail drew approximately $3.6 million on the Revolver.

      Although the legal transfer of the ownership was completed in July 2001,
for accounting purposes, the Preferred Security, which has a mandatory
redemption in January 2012 and pays 9% income annually, is classified as a
long-term asset under the caption "Assets of business transferred under
contractual arrangements: Preferred Security" on the Company's balance sheet. In
addition, although $11.0 million in a Preferred Security was received in July
2001, in January 2002, TRU Retail completed an optional redemption of $1.0
million of the Preferred Security, resulting in the Company holding $10.0
million in a Preferred Security at the end of 2001. The Company has also
recorded income from the Preferred Security of $529,000 to reflect TRU Retail's
payment in January 2002 of interest income of $460,000 and $69,000 in accrued
interest income at year-end.

      In assessing the recoverability of its recorded investment in the
Preferred Security, the Company reviews whether events or changes in
circumstances indicate that the carrying value may not be recoverable. This
review includes an analysis of the current operating performance of Prints Plus,
including the amounts of free cash flow being generated providing for interest
and debt service as well as their compliance with all the performance standards
included within the covenants of the Preferred Security. Based on this review,
no valuation allowance is deemed necessary at February 2, 2002.


                                       25
<PAGE>

      Due to the Company's continuing financial interest in TRU Retail, the
Company is required to follow a modified equity method of accounting, which
requires losses incurred by TRU Retail be reflected in the Company's financials
as a valuation allowance and corresponding charge to income. However, any future
profitability within the Company's fiscal year can be used to offset this
quarterly valuation allowance. As a result, in third quarter 2001, the Company
recorded a $402,000 valuation allowance and charge to income included in other
expense to reflect losses incurred by TRU Retail from July 22, 2001 through
November 10, 2001 but reversed this valuation in the fourth quarter as TRU
Retail's unaudited net earnings from July 22, 2001 to February 2, 2002 were $1.9
million.

      In January 2002, TRU Retail, Inc. notified the Company that it had been
merged into Prints Plus, Inc. In future financial reporting of the Company,
reference to "Prints Plus, Inc." will include its predecessor legal entity, TRU
Retail, Inc.

Separation

      In February 2001, the Company announced it had hired J. David Pierson as
Chairman and Chief Executive Officer to replace the retiring Alyn V. Essman. The
Company incurred expenses of $1.7 million and $175,000 in 2001 and 2000,
respectively, in Executive Management Repositioning Costs, a component of income
from operations, which are included in the accompanying consolidated financial
statements related to the severance pay, recognition of unamortized supplemental
employee retirement plan benefits and other costs associated with the retirement
of Mr. Essman and recruitment of Mr. Pierson.

      In addition, in December 2001, the Company announced that Russ Isaak,
President, and Pat Morris, Senior Executive Vice President and President of the
Company's Portrait Studio division, would retire from their respective positions
and resign from the Company's Board of Directors effective the end of the fiscal
year. The Company incurred $2.8 million of expenses in 2001, which are recorded
in Executive Management Repositioning Costs, a component of income from
operations, in the accompanying consolidated financial statements for severance
pay, recognition of unamortized supplemental employee retirement plan benefits
and other costs related to these and other administrative retirements at
year-end.

      Throughout 2001, the Company reviewed its administrative employee
structure in an effort to more efficiently support the operating divisions,
which resulted in $1.1 million in severance pay and recognition of unamortized
supplemental employee retirement plan benefits that were also included in
Executive Management Repositioning Costs.


                                       26
<PAGE>

Terminated Merger Agreement

      On June 15, 1999, the Company announced that it entered into a definitive
merger agreement under which entities controlled by affiliates of American
Securities Capital Partners, L.P. ("ASCP") (collectively, "ASCP Affiliates") and
the Company's management were to acquire the Company.

      Subsequently, on October 12, 1999, the Company announced that it received
a notice from ASCP Affiliates terminating the Merger Agreement and of legal
action by ASCP Affiliates seeking a declaration that they were entitled to
terminate and demanding reimbursement from the Company for expenses incurred in
connection with the Merger Agreement, not to exceed $6.0 million.

      The Company served an answer and a counterclaim on October 18, 1999 in New
York against the ASCP Affiliates and ASCP, asserting that the ASCP Affiliates
were in willful breach of their obligations under the Merger Agreement. The
Company's counterclaim sought damages for the willful breach of the Merger
Agreement by ASCP Affiliates and also asserted a claim for up to $80 million,
together with attorney's fees and costs, from ASCP under ASCP's guarantee of the
performance obligations of its affiliates under the Merger Agreement.

      On January 30, 2001, the Company announced that it had entered into a
settlement agreement resolving all claims and counterclaims between ASCP, ASCP
Affiliates and the Company arising out of the termination of the Merger
Agreement without the payment of any compensation by any party.

      As a result of these events, from 1999 to 2001, the Company recognized
$3.4 million in other expenses for costs related to the termination of the
Merger Agreement. These costs included expenses the Company incurred during the
merger process and legal and other expenses incurred related to the litigation
described above.

Joint Venture

      In October 1996, the Company announced it had completed a photofinishing
joint venture with Eastman Kodak Company ("Kodak") whereby Kodak purchased new
shares of a former subsidiary, Fox Photo, Inc. ("Fox"), constituting 51% of the
outstanding common stock of Fox for a cash purchase price of $56.1 million. In
October 1997, the Company further announced the termination of the
photofinishing joint venture. Pursuant to the termination, Kodak purchased the
remaining 49% of Fox that it did not already own for a purchase price of $53.9
million that consisted of $10.0 million in cash in consideration of the
Company's agreement not to compete with Fox for two years (the "Noncompete
Agreement") and $43.9 million in the form of a note (the "Promissory Note") that
matured and was paid on January 4, 1999. The Noncompete Agreement with Kodak
resulted in recording $3.2 million in 1999 as a component of other income.


                                       27
<PAGE>

LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION

Operating Activities

      Net cash generated by operating activities in 2001 of $28.8 million
decreased $9.1 million from 2000 due to lower earnings. In 2000, net cash
generated by operating activities of $37.9 million was $7.5 million more than in
1999 primarily as a result of higher operating earnings offset slightly by
decreases in deferred revenue in 2000 from 1999, the first full year the Smile
Savers Plan(R) was in effect. The Smile Savers Plan (R) allows customers to pay
a one-time fee, in lieu of sitting or session fees, for unlimited customer
visits over the ensuing two year period. The Company offers a customer loyalty
program (Smile Savers Plan (R)) under which a customer pays a one-time fee and
in return pays no sitting fees for unlimited portrait sessions over the
twenty-four month period covered by the program. The entire Smile Savers Plan(R)
fee received is deferred and amortized into revenues on a straight-line basis
over the twenty-four month period of the customer's program.

Investing Activities

      Net cash used in investing activities in 2001 of $13.5 million reflect a
$3.7 million decrease from 2000 as higher levels of capital expenditures were
offset by lower funding requirements of long-term investments relating to the
supplementary retirement benefits for key executives and decreases in Loan
Receivable to TRU Retail, Inc. In 2000, net cash used in investing activities of
$17.2 million was $7.3 million less than in 1999 as a result of lower capital
expenditures being partially offset by an increase in long-term investments
caused by the initial funding of a supplementary retirement benefit plan trust
for key executives.

Financing Activities

      Under various authorizations from the Company's Board of Directors to
acquire shares of its outstanding common stock through purchases at management's
discretion from time to time at acceptable market prices, during 2000 and 1999,
the Company purchased 1,210,605 and 1,166,650 shares of stock for $28.3 million
and $28.2 million, respectively, at an average stock price of $23.34 and $24.21,
respectively. As of November 2000, essentially all shares of common stock
authorized for repurchase were acquired. Acquired shares are held as treasury
stock and will be available for general corporate purposes. The weighted-average
shares outstanding have been adjusted to reflect the changes in shares
outstanding resulting from the repurchase of the Company's common stock.

      As a result, net cash used in financing activities in 2001 of $7.3 million
reflected a $23.9 million decrease from 2000 as the initial repayment of
long-term debt obligations was offset by the decrease in purchase treasury
stock. In 2000, net cash used in financing activities was relatively unchanged
from 1999.

Cash Flows

      Cash flows from operations and cash and cash equivalents on hand represent
the Company's expected source of funds in fiscal year 2002 for planned capital
expenditures of $18.2 million, scheduled principle payments on long-term debt of
$8.6 million, normal business operations and dividends to stockholders. With the
exception of letters of credit used to support the Company's self-insurance
program and operating leases, the Company does not use off-balance sheet
arrangements to finance business activities.


                                       28
<PAGE>

Financial Condition

      Assets of the Company decreased 2.2% in 2001 from 2000 as increases in
cash and cash equivalents and tax-related assets were more than offset by an
ordinary-course decrease in net property and equipment and a decrease in assets
held in connection with the discontinued and subsequently sold Wall Decor
segment. Liabilities of the Company decreased 6.9%primarily as a result of the
repayment of long-term debt and stockholders' equity increased 10.5% due mainly
to 2001 net earnings being only partially offset by the payment of dividends to
stockholders.

Material Commitments

Debt Agreements

      The Company has a $60.0 million Senior Note Agreement (the "Note
Agreement") privately placed with two major insurance companies. The Note
Agreement was entered into in June 1997. The notes issued pursuant to the Note
Agreement mature over a ten-year period with an average maturity of seven years
with annual principal payments beginning in 2001 and the final payment due in
2007. Interest on the notes is payable semi-annually, in June and December, at
an average effective fixed rate of 7.46%. As of February 2, 2002, the
outstanding principal balance due under the Note Agreement was $51.2 million.

      The Note Agreement contains a number of covenants imposing certain
restrictions on our business. The most significant of these covenants require
that:

-     The ratio of consolidated debt to earnings before interest, taxes,
      depreciation and amortization ("EBITDA") must be less than 300% of EBITDA;

-     The ratio of consolidated earnings before interest, taxes, depreciation,
      amortization and lease rental expense ("EBITDAR") to fixed charges (income
      taxes, dividends, interest expense, current maturities of debt and lease
      expenses) must be greater than 200%, and

-     The ratio of consolidated debt to consolidated capitalization must be less
      than 55%.


                                       29
<PAGE>

      In addition, the Company has a $30.0 million revolving credit facility
(the "Revolving Facility") with two domestic banks entered into in June 2000.
The Revolving Facility, which will expire in June of 2003, has a variable
interest rate charged at either LIBOR or prime rate funds, with an applicable
margin added. It is at the Company's discretion whether borrowings are under
LIBOR or prime rate funds. A commitment fee of 0.200% to 0.375% per annum is
payable on the unused portion of the Revolving Facility.

      As of February 2, 2002, there were no borrowings under the revolving
credit facility other than the need to support the principal amount of $6.1
million in standby letters of credit outstanding at that date.

      The agreement governing our $30 million revolving credit facility contains
the following significant covenants requiring that the Company maintain:

-     Minimum consolidated EBITDA of $37 million during the four consecutive
      fiscal quarter periods ended February 2, 2002;

-     A ratio of EBITDAR to fixed charges of 1.15 to 1.00;

-     A ratio of minimum consolidated debt to consolidated EBITDA of 1.75 to
      1.00; and

-     A minimum consolidated net worth of $50 million plus 50% of consolidated
      net income with no deduction for losses for each fiscal quarter.

      As of February 2, 2002, the Company was in compliance with all debt
covenants as amended and, although dependent on attaining certain levels of
operating performance and profitability in the future, anticipates complying
with these covenants in the next year.

Operating Lease Commitments

      The Company leases various premises and equipment under noncancellable
operating lease agreements with initial terms in excess of one year and expiring
at various dates through fiscal year 2008. The leases generally provide for the
lessee to pay maintenance, insurance, taxes and certain other operating costs of
the leased property. In addition to the minimum rental commitments, certain of
these operating leases provide for contingent rentals based on a percentage of
revenues in excess of specified amounts.


                                       30
<PAGE>

MINIMUM RENTAL PAYMENTS*   (in thousands of dollars)

Fiscal Year

2002                 $ 2,701
2003                   1,386
2004                     720
2005                     371
2006                     137
Thereafter                97
                     -------
                     $ 5,412
                     =======

*     Under operating leases with initial terms in excess of one year at
      February 2, 2002.

Risk and Critical Accounting Policies

      As previously discussed in the "Discontinued Operations" section of "OTHER
ITEMS EFFECTING RESULTS OF OPERATION," although the legal transfer of the
ownership of the Wall Decor segment was completed in July 2001 to TRU Retail,
for accounting purposes, the $10.0 million Preferred Security and $1.5 million
Revolver on the Company's balance sheet at year-end are classified as a
long-term assets and represent areas of potential credit risk for the Company.
At February 2, 2002, the Company had no valuation allowances on its balance
sheet in connection with the TRU Retail Preferred Security or Revolver as, in
the opinion of management, TRU Retail is meeting the performance standards
established under the covenants of the Preferred Security and Revolver
agreements. However, there can be no assurance that in the future, such
valuation allowances will not be established.

      Further, if TRU Retail defaults on certain operating real estate leases,
the Company has guaranteed current monthly lease payments over the remaining
life of the leases. As of February 2, 2002, the maximum future obligation to the
Company would be $21.1 million before any negotiation with landlords on
subleasing. As these leases mature or expire, the credit risk to the Company
will decrease. Based on scheduled lease payments, the maximum future obligations
will decrease annually by approximately $5.4 million to $4.8 million during the
next three years. To recognize the risk associated with these leases and based
on the Company's past experience with renegotiating lease obligations, a $1.0
million reserve was established. At February 2, 2002, the Company had made no
further allowances for defaults under Wall Decor operating leases as, in the
opinion of management, TRU Retail is meeting the performance standards
established under the operating leases. However, there can be no assurance that
in the future, additional reserves will not be established.


                                       31
<PAGE>

     Accounting policies are applied in financial reports subject to multiple
sources of authoritative guidance. Certain of the policies established by
accounting standards setters and regulators are currently under reexamination.
Although no specific conclusions have been reached by these standard setters,
the Company does not anticipate any changes in its application of accounting
policies. See Part 8 as restated, Financial Statements and Supplementary Data,
Notes to Consolidated Financial Statements, footnote 1, Summary of Accounting
Policies, Business of the Company and Principles of Consolidation, which
discloses accounting policies that are followed by the Company.

Impact of Recently Issued Accounting Standards Not Yet Adopted

      Under SFAS No. 141, "Business Combinations," all business combinations
initiated after June 30, 2001 are to be accounted for using the purchase method
of accounting. Adoption of SFAS No. 141 will not impact the consolidated
financial statements of the Company.

      Under SFAS No. 142, "Goodwill and Other Intangible Assets," goodwill is no
longer subject to amortization over its useful life; rather, it is subject to at
least annual assessments of impairment. Also, under SFAS No. 142, an intangible
asset can be sold, transferred, licensed, rented or exchanged. Such intangibles
will be amortized over their useful lives. Certain intangibles that have
indefinite useful lives will not be amortized. SFAS No. 142 will be implemented
by the Company on February 3, 2002. The Company is currently in process of
assessing the future impact of adoption of SFAS No. 142, but does not anticipate
a material impact to the consolidated financial statements of the Company.

      Under SFAS No. 143, "Accounting for Asset Retirement Obligations," the
fair value of a liability for an asset retirement obligation is required to be
recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated asset retirement costs are capitalized as
part of the carrying amount of the long-lived asset. SFAS No. 143 will be
implemented by the Company on February 3, 2002. Adoption of SFAS No. 143 will
not have a material impact on the consolidated financial statements of the
Company.

      Under, SFAS No. 144, "Accounting for the Impairment of Disposal of
Long-Lived Assets," financial accounting and reporting for the impairment of
long-lived assets and for long-lived assets to be disposed of is addressed and
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed of." SFAS No. 144 establishes a single
accounting model for long-lived assets to be disposed of by sale and resolves
implementation issue related to SFAS No. 121. SFAS No. 144 will be implemented
by the Company on February 3, 2002. Adoption of SFAS No. 144 will not have a
material impact on the consolidated financial statements of the Company.


                                       32
<PAGE>

SUBSEQUENT EVENT

     On April 4, 2002, the Company announced effective April 8, 2002, Gary W.
Douglass would be Executive Vice President, Finance and Chief Financial Officer,
replacing Barry Arthur, who will continue to serve as Executive Vice President,
Administrative.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      Market risks relating to the Company's operations result primarily from
changes in interest rates and changes in foreign exchange rates. The Company's
debt obligations have primarily fixed interest rates; therefore, the Company's
exposure to changes in interest rates is minimal. The Company's exposure to
changes in foreign exchange rates relative to the Canadian operations is
minimal, as these operations constitute only 7.3% of the Company's total assets
and 7.1% of the Company's total sales.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

(a)   INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                                          PAGE
                                                          ----

      - Independent Auditors' Report                         35
      - Consolidated Balance Sheets as of
         February 2, 2002 and February 3, 2001            36-37
      - Consolidated Statements of Operations for
         the fiscal  years ended February 2, 2002,
         February 3, 2001 and  February 5, 2000           38-39
      - Consolidated Statements of Changes in
         Stockholders' Equity and Comprehensive
         Income for the fiscal years ended
         February 2, 2002 and February 3, 2001            40-42
      - Consolidated Statements of Cash Flows for
         the fiscal years ended February 2, 2002,
         February 3, 2001 and February 5, 2000            43-44
      - Notes to Consolidated Financial Statements        45-78

      The Company's fiscal year ends the first Saturday of February.
Accordingly, fiscal years 2001, 2000 and 1999 ended February 2, 2002, February
3, 2001 and February 5, 2000, respectively, and consisted of 52 weeks.
Throughout the "FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA" section, reference
to 2001, 2000 or 1999 will mean the fiscal year ended February 2, 2002, February
3, 2001 and February 5, 2000, respectively.


                                       33
<PAGE>

                      (THIS PAGE LEFT INTENTIONALLY BLANK)


                                       34
<PAGE>

INDEPENDENT AUDITORS' REPORT

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS CPI CORP.:

We have audited the consolidated financial statements of CPI Corp. and
subsidiaries as listed in the accompanying index. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards required that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CPI Corp. and
subsidiaries as of February 2, 2002 and February 3, 2001, and the results of
their operations and their cash flows for each of the fiscal years in the
three-year period ended February 2, 2002, in conformity with accounting
principles generally accepted in the United States of America.

As discussed in Note 2 to the consolidated financial statements, the Company has
restated the accompanying consolidated balance sheets as of February 3, 2001 and
February 2, 2002, the related consolidated statements of operations for the
years ended February 3, 2001 and February 2, 2002 and the related consolidated
statements of stockholders' equity and comprehensive income, and cash flows for
the years ended February 3, 2001 and February 2, 2002.

As also discussed in Note 2 to the consolidated financial statements, effective
February 6, 2000, the Company changed its method of accounting for revenue
recognition.

KPMG LLP


/s/  KPMG LLP
-------------------
St. Louis, Missouri

April 4, 2002, except for paragraph 3 of Note 4, which is as of April 12, 2002
and Note 2, which is as of May 7, 2003


                                       35
<PAGE>

CONSOLIDATED BALANCE SHEETS - ASSETS

(in thousands of dollars except share and per share amounts)

                                                      (RESTATED)     (RESTATED)
                                                      February 2,    February 3,
                                                          2002           2001
                                                      -----------    -----------
Current assets:
  Cash and cash equivalents                           $    46,555    $    38,820
  Receivables, less allowance
   of $25 and $254,
   respectively                                             5,421          6,450
  Inventories                                              12,920         14,287
  Prepaid expenses and other
    current assets                                          6,795          8,725
  Deferred tax assets                                       1,338          7,288
  Refundable income taxes                                   9,123             --
                                                      -----------    -----------
      Total current assets                                 82,152         75,570
                                                      -----------    -----------
Net property and equipment                                 63,708         72,603
Net assets of discontinued
 operations                                                    --         16,011
Assets of business transferred
 under contractual arrangements:
    Preferred Security                                     10,069             --
    Loan receivable                                         1,518             --
Other assets, net of
 amortization of $1,359 and
 $1,321, respectively                                      23,462         20,727
                                                      -----------    -----------
      Total assets                                    $   180,909    $   184,911
                                                      ===========    ===========

See accompanying notes to consolidated financial statements.


                                       36
<PAGE>

CONSOLIDATED BALANCE SHEETS-LIABILITIES AND STOCKHOLDERS' EQUITY

(in thousands of dollars except share and per share amounts)

                                                 (RESTATED)      (RESTATED)
                                                 February 2,     February 3,
                                                     2002            2001
                                                 -----------     -----------
Current liabilities:
  Current maturities of long-term debt           $     8,580     $     8,580
  Accounts payable                                     9,741           9,388
  Accrued employment costs                            13,538          11,159
  Deferred revenue                                    26,953          28,735
  Sales taxes payable                                  2,816           2,799
  Accrued advertising expense                          1,384           1,328
  Accrued expenses and other
   liabilities                                         3,289           4,300
  Income taxes                                            --           1,067
                                                 -----------     -----------
      Total current liabilities                       66,301          67,356
                                                 -----------     -----------
Long-term debt                                        42,639          51,142
Other liabilities                                     10,686          11,670
Long-term deferred revenue                             5,891           4,607
Stockholders' equity:
  Preferred Stock, no par value,
   1,000,000 shares authorized, no
   shares issued and outstanding                          --              --
  Preferred Stock Series A, no par value                  --              --
  Common stock, $0.40 par value,
   50,000,000 shares authorized;
   18,201,743 and 17,885,645
   shares outstanding at
   Feb. 2, 2002 and Feb. 3, 2001,respectively          7,281           7,154
  Additional paid-in capital                          49,845          44,363
  Retained earnings                                  231,980         229,803
  Accumulated other comprehensive
   Income (loss)                                      (6,038)         (3,478)
                                                 -----------     -----------
                                                     283,068         277,842
  Treasury stock at cost,
   10,238,303 and 10,242,035
   shares at Feb. 2, 2002 and
   Feb. 3, 2001, respectively                       (227,642)       (227,699)
  Unamortized deferred
   compensation-restricted stock                         (34)             (7)
                                                 -----------     -----------
      Total stockholders' equity                      55,392          50,136
                                                 -----------     -----------
      Total liabilities and
      stockholders' equity                       $   180,909     $   184,911
                                                 ===========     ===========

See accompanying notes to consolidated financial statements.


                                       37
<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands of dollars except share and per share amounts)
Fifty-two weeks ended February 2, 2002, February 3, 2001 and February 5, 2000

                                      (RESTATED)    (RESTATED)
                                         2001          2000          1999
                                      ---------     ---------     ---------
Net sales                             $ 319,270     $ 319,973     $ 319,135
Costs and expenses:
 Cost of sales (exclusive of
  depreciation expense shown
  below)                                 41,513        39,123        41,604
Selling, administrative
  and general expenses                  236,135       230,656       244,069
Depreciation                             23,653        24,251        24,862
Amortization                                115           131         1,865
Executive management repositioning
 charges                                  5,640           175            --
                                      ---------     ---------     ---------
                                        307,056       294,336       312,400
                                      ---------     ---------     ---------
Income from operations                   12,214        25,637         6,735
Interest expense                          4,229         4,660         4,813
Interest income                           1,778         1,806         3,120
Other expense (income), net                (303)          (78)          124
                                      ---------     ---------     ---------
Earnings before income tax
 expense and cumulative effect of
 change in accounting principle          10,066        22,861         4,918
Income tax expense                        3,525         8,002         1,721
                                      ---------     ---------     ---------
Net earnings from continuing
 operations before cumulative
 effect of change in accounting
 principle                                6,541        14,859         3,197
                                      ---------     ---------     ---------
Cumulative effect of change in
 accounting principle, net of
 income tax benefit of $5,503                --       (10,219)           --
Net earnings from continuing
 operations                               6,541         4,640         3,197
Discontinued operations:
 Income from operations net of
  income tax expense of $86                  --            --           160
Loss on disposal, net of tax
 benefit of $2,213 and $3,548,
 respectively                                --        (4,110)       (6,589)
                                      ---------     ---------     ---------
Net loss from discontinued
 operations                                  --        (4,110)       (6,429)
                                      ---------     ---------     ---------

Net earnings (loss)                   $   6,541     $     530     $  (3,232)
                                      =========     =========     =========

See accompanying notes to consolidated financial statements.


                                       38
<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS (continued)

(in thousands of dollars except share and per share amounts)
Fifty-two weeks ended February 2, 2002, February 3, 2001 and February 5, 2000

                             (RESTATED)    (RESTATED)
                                2001          2000           1999
                             ----------    ----------     ----------
Net earnings from
 continuing operations-
 diluted                     $     0.82    $     1.84     $     0.32
Cumulative effect of
 change in accounting
 principle                           --         (1.27)            --
Net loss from
 discontinued operations-
 diluted                             --         (0.51)         (0.64)
                             ----------    ----------     ----------
   Net earnings (loss)-
    diluted                  $     0.82    $     0.06     $    (0.32)
                             ==========    ==========     ==========
Net earnings from
 continuing operations-
 basic                       $     0.83    $     1.89     $     0.33
Cumulative effect of
 change in accounting
 principle                           --         (1.30)            --
Net loss from
 discontinued operations-
  basic                              --         (0.52)         (0.66)
                             ----------    ----------     ----------
Net earnings (loss)-basic    $     0.83    $     0.07     $    (0.33)
                             ==========    ==========     ==========
Weighted average number
 of common and common
 equivalent shares
 outstanding- diluted         7,938,915     8,074,860     10,009,518
                             ==========    ==========     ==========
Weighted average number
 of common and common
 equivalent shares
 outstanding- basic           7,840,612     7,861,046      9,669,504
                             ==========    ==========     ==========

See accompanying notes to consolidated financial statements.


                                       39
<PAGE>

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE
INCOME

(in thousands of dollars except share and per share amounts)
Fifty-two weeks ended February 5, 2000

<TABLE>
<CAPTION>
                                                                          Accum                          Deferred
                                           Add'l                          other           Treasury       comp'n
                            Common         paid-in        Retained        comp'h          stock          restr'td
                            stock          capital        earnings        income          at cost        stock             Total
                            -----------    -----------    -----------     -----------     -----------    -----------    -----------
<S>                         <C>            <C>            <C>             <C>             <C>            <C>            <C>
Balance at Feb.6, 1999      $     7,092    $    41,605    $   242,409     $    (3,363)    $  (171,184)   $       (43)   $   116,516
                            -----------    -----------    -----------     -----------     -----------    -----------    -----------
Issuance of common stock
  (94,195 shares)                    25          1,199             --              --              --            (15)         1,209
Comprehensive income
  Net loss                           --             --         (3,232)             --              --             --
  Foreign currency
      translation                    --             --             --             418                             --
   Comprehensive income              --             --             --              --              --             --         (2,814)
Dividends ($0.56 per
  common share)                      --             --         (5,438)             --              --             --         (5,438)
Purchase of treasury
  stock, at cost                     --             --             --              --         (28,242)            --        (28,242)
Amortization of deferred
  compensation-
  restricted stock                   --             --             --              --              --             26             26
                            -----------    -----------    -----------     -----------     -----------    -----------    -----------
Balance at Feb. 5, 2000     $     7,117    $    42,804    $   233,739     $    (2,945)    $  (199,426)   $       (32)   $    81,257
                            -----------    -----------    -----------     -----------     -----------    -----------    -----------
</TABLE>

See accompanying notes to consolidated financial statements.


                                       40
<PAGE>

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE
INCOME

(in thousands of dollars except share and per share amounts)
Fifty-two weeks ended February 3, 2001

<TABLE>
<CAPTION>
                                                                       Accum                       Deferred
                                            Add'l                      other         Treasury      comp'n
                               Common       paid-in      Retained      comp'h        stock         restr'td
                               stock        capital      earnings      income        at cost       stock           Total
                               ---------    ---------    ---------     ---------     ---------     ---------     ---------
<S>                            <C>          <C>          <C>           <C>           <C>           <C>           <C>
Balance at Feb.5, 2000         $   7,117    $  42,804    $ 233,739     $  (2,945)    $(199,426)    $     (32)    $  81,257
                               ---------    ---------    ---------     ---------     ---------     ---------     ---------
Issuance of common stock
  (94,195 shares)                     37        1,559           --            --            --            --         1,596
Comprehensive income
  Net earnings, as restated           --           --          530            --            --            --
  Foreign currency
      translation,
      as restated                     --           --           --          (533)           --            --
     Comprehensive income,
     as restated                      --           --           --            --            --            --            (3)
Dividends ($0.56 per
  common share)                       --           --       (4,466)           --            --            --        (4,466)
Purchase of treasury
  stock, at cost                      --           --           --            --       (28,273)           --       (28,273)
Amortization of deferred
  compensation-
  restricted stock                    --           --           --            --            --            25            25
                               ---------    ---------    ---------     ---------     ---------     ---------     ---------
Balance at Feb. 3, 2001,
  as restated                  $   7,154    $  44,363    $ 229,803     $  (3,478)    $(227,699)    $      (7)    $  50,136
                               ---------    ---------    ---------     ---------     ---------     ---------     ---------
</TABLE>

See accompanying notes to consolidated financial statements.


                                       41
<PAGE>

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE
INCOME (continued)

(in thousands of dollars except share and per share amounts)
Fifty-two weeks ended February 2, 2002

<TABLE>
<CAPTION>
                                                                           Accum                       Deferred
                                                Add'l                      other         Treasury      comp'n
                                   Common       paid-in      Retained      comp'h        stock         restr'td
                                   stock        capital      earnings      income        at cost       stock           Total
                                   ---------    ---------    ---------     ---------     ---------     ---------     ---------
<S>                                <C>          <C>          <C>           <C>           <C>           <C>           <C>
Balance at Feb. 3, 2001,
  as restated                      $   7,154    $  44,363    $ 229,803     $  (3,478)    $(227,699)    $      (7)    $  50,136
                                   ---------    ---------    ---------     ---------     ---------     ---------     ---------
Issuance of common stock
  (316,098 shares)                       127        5,482           --            --            --           (36)        5,573
Comprehensive income
  Net earnings, as restated               --           --        6,541            --            --            --
  Foreign currency
      Translation,as restated             --           --           --          (808)           --            --
  Pension benefit costs                   --           --           --        (1,752)           --            --
    Comprehensive income,
     as restated                          --           --           --            --            --            --         3,981
Dividends ($0.56 per
  common share)                           --           --       (4,364)           --            --            --        (4,364)
Issuance of treasury
  stock, at cost                          --           --           --            --            57            --            57
Amortization of deferred
  compensation-
  restricted stock                        --           --           --            --            --             9             9
                                   ---------    ---------    ---------     ---------     ---------     ---------     ---------
Balance at Feb. 2, 2002,
  as restated                      $   7,281    $  49,845    $ 231,980     $  (6,038)    $(227,642)    $     (34)    $  55,392
                                   ---------    ---------    ---------     ---------     ---------     ---------     ---------
</TABLE>

See accompanying notes to consolidated financial statements.


                                       42
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of dollars)

Fifty-two weeks ended February 2, 2002, February 3, 2001, and February 5, 2000

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

                                          (RESTATED)   (RESTATED)
                                             2001         2000         1999
                                          ----------   ----------   ----------
Net earnings from continuing
  operations                              $    6,541   $    4,640   $    3,197
Adjustments for items not
  requiring cash:
  Depreciation and amortization               23,768       24,382       26,727
  Deferred income taxes                        5,617       (7,009)     (11,468)
  Deferred revenue                              (494)      18,177        9,212
  Amortization of noncompete
    agreement                                     --           --       (3,228)
  Other                                       (2,380)       1,814          725
Decrease (increase) in current assets:
  Receivables and inventories                  2,396          799         (116)
  Refundable income taxes                     (4,698)          --           --
  Prepaid expenses and other
    current assets                             1,738          317           36
Increase (decrease) in current
  liabilities:
  Accounts payable, accrued
    expenses and other liabilities             1,794         (639)         319
  Income taxes                                (5,492)      (3,835)       5,744
                                          ----------   ----------   ----------
Cash flows from continuing
  operations                                  28,790       38,646       31,148
Cash flows from discontinued
  operations                                      --         (793)        (844)
                                          ----------   ----------   ----------
Cash flows provided by operating
  activities                              $   28,790   $   37,853   $   30,304
                                          ==========   ==========   ==========

See accompanying notes to consolidated financial statements.


                                       43
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands of dollars) Fifty-two weeks ended February 2, 2002, February 3,
2001 and February 5, 2000

                                              2001         2000         1999
                                            --------     --------     --------
Cash flows provided by operating
 activities                                 $ 28,790     $ 37,853     $ 30,304
                                            --------     --------     --------
Cash flows used in financing activities:
 Repayment of long-term obligations           (8,580)          --           --
 Issuance of common stock to
  employee stock plans                         5,609        1,596        1,224
 Cash dividends                               (4,364)      (4,466)      (5,438)
 Issuance of treasury stock                       62           --           --
 Purchase of treasury stock                       (5)     (28,273)     (28,242)
                                            --------     --------     --------
   Cash flows used in financing
    activities                                (7,278)     (31,143)     (32,456)
                                            --------     --------     --------
Cash flows provided by (used in)
 investing activities:
 Additions to property and equipment         (14,759)     (10,795)     (24,549)
 Change in assets of business
  transferred under contractual
  arrangements                                 3,028           --           --
 Purchase of long-term investment
   for Rabbi Trust                            (1,776)      (6,419)          --
                                            --------     --------     --------
   Cash flows used in investing
    activities                               (13,507)     (17,214)     (24,549)
                                            --------     --------     --------
Effect of exchange rate changes
  on cash and cash equivalents                  (270)        (222)         247
                                            --------     --------     --------
Net increase (decrease) in cash
  and cash equivalents                         7,735      (10,726)     (26,454)
Cash and cash equivalents at
  beginning of year                           38,820       49,546       76,000
                                            --------     --------     --------
Cash and cash equivalents at
  end of year                               $ 46,555     $ 38,820     $ 49,546
                                            ========     ========     ========
Supplemental cash flow information:
 Interest paid                              $  4,242     $  4,582     $  4,476
                                            ========     ========     ========
 Income taxes paid                          $  7,350     $ 12,279     $  7,342
                                            ========     ========     ========

See accompanying notes to consolidated financial statements.


                                       44
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    SUMMARY OF ACCOUNTING POLICIES, BUSINESS OF THE COMPANY AND PRINCIPLES OF
      CONSOLIDATION

      Description of Business

            CPI Corp. (the "Company") is a holding company engaged, through its
      majority or wholly owned subsidiaries and partnerships, in developing and
      marketing consumer services and related products. The Company has
      operations in the Portrait Studios and Technology Development segments.

            The Portrait Studios segment operates professional portrait studios
      under the name Sears Portrait Studios throughout the United States, Canada
      and Puerto Rico, and is seasonal in nature, with the largest volume of
      sales and earnings occurring during the Thanksgiving and Christmas season.

            The Technology Development segment operates an internet- based and
      mail order photofinishing business under the name searsphoto.com and
      offers software programs primarily for the retail service industry use,
      software consulting and custom software development under the name
      Centrics Technology, Inc.

      Fiscal Year

            The Company's fiscal year ends the first Saturday of February.
      Accordingly, fiscal years 2001, 2000 and 1999 ended February 2, 2002,
      February 3, 2001 and February 5, 2000, respectively, and consisted of 52
      weeks.

      Principles of Consolidation

            The consolidated financial statements include the accounts of CPI
      Corp. and its subsidiaries. All significant intercompany balances and
      transactions have been eliminated in consolidation.

      Use of Estimates

            The preparation of financial statements in conformity with
      accounting principles generally accepted in the United States requires
      management to make estimates and assumptions that affect the amounts
      reported in the financial statements and accompanying notes. Actual
      results could differ from those estimates.


                                       45
<PAGE>

      Reclassifications

            Certain prior quarters and year amounts have been reclassified to
      conform to the fiscal year-end 2001 presentation.

      Translation of Foreign Currency

            Assets and liabilities of foreign operations are translated into
      U.S. dollars at the exchange rate in effect on the balance sheet date,
      while equity accounts are translated at historical rates. Income and
      expense accounts are translated at the average rates in effect during each
      fiscal period. The Company recognizes that its Canadian operating results
      are subject to variability arising from foreign exchange rate movements.
      The Company does not believe such risk is material to the results of
      operations or the financial position of the Company and as such does not
      engage in derivative activities in order to hedge against foreign currency
      fluctuations.

      Cash and Cash Equivalents

            For the purpose of reporting cash flows, cash and cash equivalents
      consist primarily of cash on hand and highly liquid investments with
      insignificant interest-rate risk and maturities of three months or less at
      date of acquisition. These highly liquid investments consist of master
      notes, commercial paper, bankers' acceptances, money market funds and
      auction rate securities. Investment interest income for 2001, 2000 and
      1999 was $1.2 million, $1.8 million and $3.1 million, respectively.

      Inventories

            Inventories are comprised of raw material inventories of film,
      paper, chemicals and are stated at the lower of cost or market, with cost
      of the majority of inventories being determined by the first-in, first-out
      (FIFO) method and the remainder by the last-in, first-out (LIFO) method.
      Costs incurred relating to portraits processed, or in-process, are
      inventoried and expensed and the related sales revenue is recognized.


                                       46
<PAGE>

      Property and Equipment

            Property and equipment are recorded at cost when acquired.
      Expenditures for improvements are capitalized, while normal repair and
      maintenance are expensed as incurred. When properties are disposed of, the
      related cost and accumulated depreciation are removed from the accounts,
      and gains or losses on the dispositions are reflected in results of
      operations.

            For the Portrait Studios segment, the Company had adopted Accounting
      Standards Executive Committee Statement of Position (SOP) 98-1,
      "Accounting for the Costs of computer Software Developed or Obtained for
      Internal Use." This SOP requires the capitalization of certain costs
      incurred in connection with developing or obtaining software for internal
      use.

            For the Technology segment, the Company has adopted Financial
      Accounting Standards Board issued Statement of Financial Accounting
      Standards ("SFAS") No. 86, "Accounting for the Costs of Computer Software
      to Be Sold, Leased, or Otherwise Marketed." This SFAS allows costs
      incurred to develop computer software products and significant
      enhancements to software features of existing products to be sold or
      otherwise marketed, be capitalized after technological feasibility is
      established.

            Depreciation on property and equipment is computed principally using
      the straight-line method over estimated service lives of the respective
      assets. A summary of estimated useful lives is as follows:

               Building improvements      15 to 19 years
               Leasehold improvements      5 to 15 years
               Furniture and fixtures      5 to  8 years
               Machinery and equipment     3 to 10 years
               Computer software                 5 years


                                       47
<PAGE>

      Intangible Assets

            Intangible assets acquired through acquisitions were accounted for
      by the purchase method of accounting and include the excess of cost over
      fair-value of net assets acquired. This excess of cost over fair-value of
      net assets acquired is being amortized on a straight-line basis over
      periods ranging from five to thirty years.

            The Company analyzes excess of cost over fair-value of net assets
      acquired periodically to determine whether any impairment has occurred in
      the value of such assets. Based upon the anticipated future income and
      cash flow from operations, in the opinion of Company management, there has
      been no impairment.

      Revenue Recognition

            Effective for fiscal 2000, the Company changed its method of
      recognizing revenues related to portrait-related sales and fees received
      in connection with its customer loyalty program (Smile Savers Plan(R)) to
      be consistent with the provisions of the Securities and Exchange
      Commission's Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue
      Recognition in Financial Statements".

            Revenues from portrait-related sales are now recognized when the
      portraits are delivered to the customer. Previously, such revenues were
      recognized at the time the customer approved photographic proofs and made
      a firm commitment for a portrait order.

            The Company offers a customer loyalty program (Smile Savers Plan(R))
      whereby a customer pays a one-time fee and in return pays no sitting fees
      for unlimited portrait sessions over the twenty-four month period covered
      by the program. The entire Smile Savers Plan(R) fee received is deferred
      and amortized into revenues on a straight-line basis over the twenty-four
      month period of the customer's program. Previously, the Company recognized
      an amount of the fee equal to its published sitting fee upfront at the
      time of the initial sitting. The remainder of the Smile Savers Plan(R) fee
      was recognized ratably over the twenty-four month period.

            The Company's change in method for revenue recognition, to be
      consistent with SAB 101, was to record a $10.2 million cumulative effect
      of change in accounting principle in the accompanying statement of
      operations.


                                       48
<PAGE>

            Technology Development revenue is recognized when earned in
      compliance with SOP 97-2, which provides guidance for recognizing revenue
      on software transactions.

      Stock-based Compensation Plans

            The Company records compensation expense for its stock- based
      employee compensation plans in accordance with the intrinsic-value method
      prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
      Stock Issued to Employees." Intrinsic value is the amount by which the
      market price of the underlying stock exceeds the exercise price of the
      stock option or award on the measurement date, generally the date of
      grant.

      Earnings per Common Share

            Basic earnings per common share are computed by dividing net
      earnings by the sum total of the weighted average number of shares of
      common stock outstanding. Diluted earnings per common share are computed
      by dividing net earnings by the sum total of the weighted average number
      of shares of common stock outstanding plus contingently issuable shares
      under the employee stock plans.

2.    RESTATEMENT OF FINANCIAL STATEMENTS

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


                                       49
<PAGE>

      Portrait studio revenues are now recognized upon delivery of the portraits
to the customer. Costs incurred relating to portraits processed, or in-process,
are deferred and expensed when the related sales revenue is recognized.
Previously, portrait studio revenues were recognized at the time the customer
approved the photographic proofs and made a firm commitment for a portrait
order, at the conclusion of the photographic session. At that same time, all
remaining costs to be incurred in the processing and delivery of the portraits
were accrued. The effect of the change is to defer the recognition of portrait
studio revenues approximately three weeks from the date of the portrait session
to allow for processing and delivery of the related portraits. The cumulative
effect of the change in accounting principle on years prior to fiscal 2000
resulted in an after-tax adjustment to earnings of $3.4 million, which has been
reflected in the results of operations for the year ended February 3, 2001. The
Company recognized $10.3 million of pre-tax revenues in fiscal 2000 that were
included in the cumulative effect adjustment.

      The Company changed its method of recognizing customer loyalty program
fees (Smile Savers Plan(R) fees) to defer the entire amount of the fee received
and amortize it into revenues on a straight-line basis over the twenty-four
month period of the customer's program. Previously, the Company allocated an
amount of the fee equal to published sitting fees to the initial sitting and
recognized that amount upfront at the time of the initial sitting. The remainder
of the Smile Savers Plan(R) fee not recognized at the time of the initial
sitting under the plan was deferred and recognized as revenue on a straight-line
basis over the remaining twenty-four month period of the plan. The cumulative
effect of this change in accounting principle on years prior to fiscal 2000
resulted in an after-tax adjustment to earnings of $6.8 million, which has been
reflected in the results of operations for the year ended February 3, 2001. The
Company recognized $4.5 million and $7.8 million of pre-tax revenues in fiscal
2001 and 2000, respectively, that were included in the cumulative effect
adjustment.

      Additionally, the Company reclassified certain management repositioning
costs totaling $4.5 million and $175,000, originally recorded in fiscal years
2001 and 2000, as a component of Other Expenses, below Income from Operations,
to a separate line entitled "Executive Management Repositioning Costs", a
component of operating income.

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

                                       50
<PAGE>
<TABLE>
<CAPTION>
                                                                FISCAL                          FISCAL
                                                                 2000                            2001
                                                      ---------------------------     ---------------------------
                                                       Restated        Orig Rptd       Restated        Orig Rptd
                                                      -----------     -----------     -----------     -----------
<S>                                                   <C>             <C>             <C>             <C>
Net sales                                             $   319,973     $   320,380     $   319,270     $   318,884
Costs and expenses:
 Cost of sales (exclusive of depreciation
  expense)                                                 39,123          39,118          41,513          41,679
 Selling, administrative and general expenses             230,656         230,755         236,135         237,339
 Executive management repositioning costs                     175              --           5,640              --
 Income from operations                                    25,637          26,125          12,214          16,098
 Other expense (income), net                                  (78)             95            (303)          4,182
Earnings before income tax expense and
 cumulative effect of change in accounting
 principle                                                 22,861          23,176          10,066           9,465
Income tax expense                                          8,002           8,112           3,525           3,313
Net earnings from continuing operations before
 cumulative effect of change in accounting
 principle                                                 14,859          15,064           6,541           6,152
Cumulative effect of change in accounting
 principle, net of income tax benefit                     (10,219)             --              --              --
Net earnings from continuing operations                     4,640          15,064           6,541           6,152
Net earnings                                                  530          10,954           6,541           6,152
                                                      ===========     ===========     ===========     ===========
Per share data:
 Net earnings from continuing operations-diluted $           1.84     $      1.87     $      0.82     $      0.77
 Cumulative effect of change in accounting
  principle                                                 (1.27)             --              --              --
 Net loss from discontinued operations-diluted              (0.51)          (0.51)             --              --
 Net earnings (loss)- diluted                                0.06            1.36            0.82            0.77
                                                      ===========     ===========     ===========     ===========
Weighted average number of common and common
 equivalent shares outstanding-diluted                  8,074,860       8,074,860       7,938,915       7,938,915
                                                      ===========     ===========     ===========     ===========
</TABLE>

                                       51
<PAGE>

<TABLE>
<CAPTION>
                                                      FISCAL                      FISCAL
                                                       2000                        2001
                                              -----------------------     -----------------------
                                              Restated      Orig Rptd     Restated      Orig Rptd
                                              ---------     ---------     ---------     ---------
<S>                                           <C>           <C>           <C>           <C>
BALANCE SHEET DATA:
ASSETS:
 Receivables, less allowance                  $   6,450     $   9,306     $   5,421     $   8,417
 Inventories                                     14,287        10,997        12,920         9,510
 Prepaid expenses and other current assets        8,725         6,013         6,795         4,178
 Deferred tax assets                              7,288         5,266         1,338            --
 Total current assets                            75,570        70,402        82,152        77,783
 Other assets, net of amortization               20,727        16,896        23,462        19,645
 Total assets                                   184,911       175,912       180,909       172,723
                                              =========     =========     =========     =========

LIABILITIES AND STOCKHOLDERS' EQUITY:
 Deferred revenue                                28,735        10,192        26,953         9,529
 Accrued expenses and other liabilities           4,300         5,049         3,289         4,134
 Deferred taxes                                   1,067         1,067            --           573
 Total current liabilities                       67,356        49,562        66,301        50,295
 Long-term deferred revenue                       4,607         2,966         5,891         3,677
 Retained earnings                              229,803       240,227       231,980       242,015
 Accumulated other comprehensive income          (3,478)       (3,466)       (6,038)       (6,039)
Total stockholders' equity                       50,136        60,572        55,392        65,426
Total liabilities and stockholders' equity    $ 184,911     $ 175,912     $ 180,909     $ 172,723
                                              =========     =========     =========     =========
</TABLE>


                                       52
<PAGE>

3.    PROPERTY AND EQUIPMENT

            The following table reflects the components of net property and
      equipment as of fiscal year-end 2001 and 2000:

PROPERTY AND EQUIPMENT  (in thousands of dollars)

                                     Feb. 2, 2002      Feb. 3, 2001
                                     ------------      ------------
Land and land improvements             $  2,803          $  2,803
Building improvements                    26,514            26,398
Leasehold improvements                   12,547            12,782
Furniture and fixtures                   58,110            52,976
Machinery and equipment                 126,005           122,707
Software                                 23,580            19,762
                                       --------          --------
                                        249,559           237,428
Less accumulated depreciation           185,851           164,825
                                       --------          --------
Net property and equipment             $ 63,708          $ 72,603
                                       ========          ========

MINIMUM RENTAL PAYMENTS*
(in thousands of dollars)
Fiscal Year
2002                 $ 2,701
2003                   1,386
2004                     720
2005                     371
2006                     137
Thereafter                97
                     -------
                     $ 5,412
                     =======

*     Under operating leases with initial terms in excess of one year at
      February 2, 2002.

      The Company leases various premises and equipment under noncancellable
operating lease agreements with initial terms in excess of one year and expiring
at various dates through fiscal year 2008. The leases generally provide for the
lessee to pay maintenance, insurance, taxes and certain other operating costs of
the leased property. In addition to the minimum rental commitments, certain of
these operating leases provide for contingent rentals based on a percentage of
revenues in excess of specified amounts.

      Rental expense during 2001, 2000, and 1999 on all operating leases was
$3.9 million, $3.9 million, and $4.9million, respectively.


                                       53
<PAGE>

4.    DISCONTINUED OPERATIONS AND SUPPLEMENTAL CASH FLOW INFORMATION

      In April 2000, the Company announced it was negotiating to sell its Wall
Decor segment, a business operated by the Company since 1993 under the name
Prints Plus. As a result of the decision to exit this business, a loss of $6.4
million after taxes was recorded in 1999 to recognize anticipated losses and
related expenses in connection with the sale. The Company also classified the
Wall Decor segment as a discontinued operation and reclassified prior years'
financial statements to reflect this change.

      The Company had planned to complete this transaction in the summer of
2000. However, in August 2000, the Company announced that negotiations to sell
its Wall Decor business had terminated and the Company was pursuing other buyers
for this business. Subsequently, in April 2001, the Company announced it had
signed an agreement with TRU Retail, Inc. ("TRU Retail"), a corporation formed
by top management of Prints Plus, to buy the Wall Decor Segment from the
Company.

      As a result of these events, in 2000, net earnings of the Company were
adjusted to include a further $4.1 million after tax loss for the discontinued
wall decor operations. This loss reflected 2000 operating results of the Wall
Decor operation, the consideration to be received at the closing date of the
sale, and the anticipated fiscal year 2001 losses and related expenses in
connection with the sale.

      In July 2001, the Company announced it provided TRU Retail with a $6.4
million revolving line of credit (the "Revolver"). (See also MD&A) The Company
elected to provide a revolving line of credit to TRU Retail because it believed
a third party commercial lender would have imposed certain restrictions on the
amount of cash TRU Retail could use to pay dividends on and redeem shares of the
preferred stock. The Company did not want to be in a subordinate position to
another lender, in part because the Company is the guarantor of certain retail
store leases that TRU Retail assumed (see below). The Revolver is fully
collateralized by the assets of TRU Retail, expires on July 26, 2004, has
interest charged at 1.0% over prime, and has a commitment fee of 0.5% per annum
payable on the unused portion of the Revolver. The Revolver also requires TRU
Retail to maintain certain financial ratios and comply with certain restrictive
covenants. The Revolver is held as a long-term asset on the Company's balance
sheet captioned "Assets of business transferred under contractual arrangements:
Loan Receivable." At the end of 2001, TRU Retail had net borrowings of $1.5
million under the Revolver and the Company had recorded $120,000 in interest
income in 2001 in connection with the Revolver.


                                       54
<PAGE>

      The Company also announced in July 2001 that the sale of the Wall Decor
segment had been completed to TRU Retail for $16.0 million, which included the
receipt of $11.0 million in a Preferred Security of TRU Retail, approximately
$4.0 million in cash, other consideration netting to $1.0 million and the
assumption of certain liabilities including the ongoing guarantee of certain
operating real estate leases. To effect the closing of the transaction, TRU
Retail drew approximately $3.6 million on the Revolver.

      Although the legal transfer of the ownership was completed in July 2001,
for accounting purposes, the Preferred Security, which has a mandatory
redemption in January 2012 and pays 9% income annually, is classified as a
long-term asset under the caption " Assets of business transferred under
contractual arrangements: Preferred Security" on the Company's balance sheet. In
addition, although $11.0 million in a Preferred Security was received in July
2001, in January 2002, TRU Retail completed an optional redemption of $1.0
million of the Preferred Security, resulting in the Company holding $10.0
million in a Preferred Security at the end of 2001. The Company has also
recorded income from the Preferred Security of $529,000 to reflect TRU Retail's
payment in January 2002 of interest income of $460,000 and $69,000 in accrued
income at year-end. In assessing the recoverability of its recorded investment
in the Preferred Security, the Company reviews whether events or changes in
circumstances indicate that the carrying value may not be recoverable. This
review includes an analysis of the current operating performance of Prints Plus,
including the amounts of free cash flow being generated providing for interest
and debt service as well as their compliance with all the performance standards
included within the covenants of the Preferred Security. Based on this review,
no valuation allowance is deemed necessary at February 2, 2002.

      Due to the Company's continuing financial interest in TRU Retail, the
Company is required to follow a modified equity method of accounting, which
requires losses incurred by TRU Retail be reflected in the Company's financials
as a valuation allowance and corresponding charge to income. However, any future
profitability within the Company's fiscal year can be used to offset this
quarterly valuation allowance. As a result, in third quarter 2001, the Company
recorded a $402,000 valuation allowance and charge to income included in other
expense to reflect losses incurred by TRU Retail from July 22, 2001 through
November 10, 2001 but reversed this valuation in the fourth quarter as TRU
Retail's unaudited net earnings from July 22, 2001 to February 2, 2002 were $1.9
million.


                                       55
<PAGE>

      Further, if TRU Retail defaults on certain operating real estate leases,
the Company has guaranteed current monthly lease payments over the remaining
life of the leases. As of February 2, 2002, the maximum future obligation to the
Company would be $21.1 million before any negotiation with landlords on
subleasing. As these leases mature or expire, the credit risk to the Company
will decrease. Based on scheduled lease payments, the maximum future obligations
will decrease annually by approximately $5.4 million to $4.8 million during the
next three years. To recognize the risk associated with these leases and based
on the Company's past experience with renegotiating lease obligations, a $1.0
million reserve was established. At February 2, 2002, the Company had made no
further allowances for defaults under Wall Decor operating leases as, in the
opinion of management, TRU Retail is meeting the performance standards
established under the operating leases. However, there can be no assurance that
in the future, additional reserves won't be established.

      In January 2002, TRU Retail, Inc. notified the Company that it had been
merged into Prints Plus, Inc. In future financial reporting of the Company,
reference to "Prints Plus, Inc." will include its predecessor legal entity, TRU
Retail, Inc. For comparative purposes, the following information is provided for
2000 and 1999 for the discontinued operations:

                                              2000           1999
                                            --------       --------
                                           (in thousands of dollars)

Net sales of discontinued operations        $ 64,998       $ 63,676
                                            ========       ========
Operating income (loss) from
  discontinued operations                   $     (6)      $    246
Tax expense (benefit)                             (2)            86
                                            --------       --------
                                                  (4)           160
                                            --------       --------
Asset writedown                               (8,718)        (7,736)
Adjustment *                                   2,401         (2,401)
Tax benefit                                    2,211          3,548
                                            --------       --------
Net earnings (loss) from
  discontinued operations                   $ (4,110)      $ (6,429)
                                            ========       ========

*     Anticipated losses for first half of 2000 recorded in 1999.


                                       56
<PAGE>

SUPPLEMENTAL CASH FLOW INFORMATION FROM DISCONTINUED OPERATIONS
(in thousands of dollars)


                                               2000           1999
                                               ----           ----
Earnings (loss) from discontinued
 operations, net of income tax
 expense (benefit) of $(2,213) and
 ($3,462), respectively                      $ (4,110)      $ (6,429)
Adjustments for items not requiring
 cash:
  Depreciation and amortization                 4,826          4,869
  Other                                           (88)            63
Decrease (increase) in current assets:
  Cash and cash equivalents                        --         (1,661)
  Receivables and inventories                     (72)          (958)
  Prepaid expenses and other current
   assets                                         (40)          (212)
Assets in excess of consideration
   received                                     8,719          7,911
Estimated net operating loss and
 reserve for costs associated with sale
 of Prints Plus                                (1,561)         2,226
Increase (decrease) in current
 liabilities:
  Accounts payable, accrued expenses
   and other liabilities                       (2,790)          (514)
  Deferred tax benefit                         (3,052)        (3,548)
  Capital expenditures                         (2,625)        (2,591)
                                             --------       --------
Cash flows from discontinued operations      $   (793)      $   (844)
                                             ========       ========

COMPONENTS OF NET ASSETS OF DISCONTINUED OPERATIONS
(in thousands of dollars)

                            Feb. 3, 2001
                            ------------
Current assets                $13,013
Property and equipment          6,607
Liabilities                     3,609
                              -------
Net assets from
 discontinued operations      $16,011
                              =======


                                       57
<PAGE>

5.    CREDIT AGREEMENTS AND OUTSTANDING DEBT

      The Company has a $60.0 million Senior Note Agreement (the "Note
Agreement") privately placed with two major insurance companies. The notes
issued pursuant to the Note Agreement mature over a ten-year period with an
average maturity of seven years with payments starting in 2001. Interest on the
notes is payable semi-annually at an average effective fixed rate of 7.46%. The
Note Agreement requires the Company maintain certain financial ratios and comply
with certain restrictive covenants.

      The Company incurred $591,000 in issuance costs associated with the
private placement of the notes. These costs are being amortized using the
effective interest method over the ten-year life of the notes.

      In addition, the Company has a $30.0 million revolving credit facility
(the "Revolving Facility") with two domestic banks entered into in June 2000.
The Revolving Facility, which will expire in June of 2003, has a variable
interest rate charged at either LIBOR or prime funds, with an applicable margin
added. It is at the Company's discretion whether borrowings are under LIBOR or
prime fund rate. A commitment fee of 0.200% to 0.375% per annum is payable on
the unused portion of the Revolving Facility. The Revolving Facility requires
the Company maintain certain financial ratios and comply with certain
restrictive covenants. The Company has amended the Revolving Facility under
various agreements made in June 2001, November 2001, January 2002 and April
2002. The June 2001 amendment adjusted all covenants to exclude the discontinued
and subsequently sold Wall Decor segment from the covenants. The November 2001
and April 2002 amendments adjusted the minimum consolidated earnings before
income taxes, depreciation and amortization covenant and the January 2002
amendment increased the dollar amount of letters of credit the Company is
allowed to have under the Revolving Facility. The Company is in compliance with
all covenants as amended and expects to be in compliance with the covenants in
the next year.

      The Company incurred $240,000 in issuance costs associated with the
Revolving Facility, which is being amortized using the effective interest method
over the three-year life of the Revolving Facility.

      There were no borrowings outstanding at February 2, 2002 or February 3,
2001 under the Revolving Facility.

      As of February 2, 2002, the Company had outstanding letters of credit for
the principal amount of $6.1 million.


                                       58
<PAGE>

DEBT OBLIGATIONS OUTSTANDING  (in thousands of dollars)

                                    Feb. 2, 2002   Feb. 3, 2001
                                    ------------   ------------
Senior notes, net of unamortized
 issuance costs                        $51,219       $59,715
Notes payable                               --             7
                                       -------       -------
                                        51,219        59,722
Less: current maturity                   8,580         8,580
                                       -------       -------
                                       $42,639       $51,142
                                       =======       =======

AGGREGATE LONG-TERM DEBT MATURITIES AS OF FEBRUARY 2, 2002
(in thousands of dollars)

Fiscal Year
-----------
2002                           $  8,580
2003                              8,580
2004                              8,580
2005                              8,580
2006                              8,580
2007                              8,520
                               --------
                                 51,420
Unamortized issuance costs         (201)
                               --------
                               $ 51,219
                               ========

6.    ADVERTISING

      The Company expenses costs involved in advertising the first time the
advertising takes place, except for direct-response advertising, which is
capitalized and amortized over its expected period of future benefits.

      Direct-response advertising consists of direct mail advertisements, that
include coupons for the Company's products, and of certain broadcast costs. The
capitalized costs of the advertising are amortized over the expected period of
future benefits following the delivery of the direct mail in which it appears.

      Total advertising reported as a capitalized cost for direct-response
advertising and classified with other assets for 2001 and 2000 was $1.3 million
and $1.2 million, respectively. Advertising expense for 2001, 2000 and 1999 was
$39.4 million, $39.2 million and $42.0 million, respectively.


                                       59
<PAGE>

7.    INCOME TAX

      A valuation allowance would be provided on deferred tax assets when it is
more likely than not that some portion of the assets will not be realized. The
Company has not established a valuation allowance as of February 2, 2002, due to
management's belief that all criteria for recognition have been met, including
the existence of a history of taxes paid and available tax planning strategies
sufficient to support the realization of deferred tax assets.

      United States income taxes have not been provided on $8.7 million of
undistributed earnings of the Canadian subsidiary because of the Company's
intention to reinvest these earnings. The determination of unrecognized deferred
U.S. tax liability for undistributed earnings of international subsidiaries is
not practicable. However, it is estimated that foreign withholding taxes of
$434,000 may be payable if such earnings were distributed.

EARNINGS (LOSS) BEFORE INCOME TAXES BY U.S. AND CANADIAN SOURCES
(in thousands of dollars)

             (RESTATED)        (RESTATED)
                2001              2000              1999
             ----------        ----------        ----------
U.S.         $   11,588        $   17,895        $   (2,723)
Canada           (1,522)           (1,357)           (2,250)
             ----------        ----------        ----------
             $   10,066        $   16,538        $   (4,973)
             ==========        ==========        ==========


COMPONENTS OF INCOME TAXES  (in thousands of dollars)

                         (RESTATED)        (RESTATED)
                            2001              2000              1999
                         ----------        ----------        ----------
Current:
 Federal                 $   (1,428)       $    7,043        $    8,096
 State and local               (509)            1,612             1,262
 Canada                        (155)              231               369
                         ----------        ----------        ----------
                             (2,092)            8,886             9,727
Deferred                      5,617            (3,097)          (11,468)
                         ----------        ----------        ----------
                         $    3,525        $    5,789        $   (1,741)
                         ==========        ==========        ==========


                                       60
<PAGE>

RECONCILIATION BETWEEN INCOME TAXES  (in thousands of dollars)

                                      (RESTATED)     (RESTATED)
                                         2001           2000          1999
                                      ----------     ----------    ----------
Taxes at U.S. federal corporate
 statutory rate                       $    3,525     $    5,789    $   (1,741)
State and local income taxes,
 net of federal tax benefit                  202            388           467
Stock options                               (294)           (49)         (217)
Other                                         92           (339)         (250)
                                      ----------     ----------    ----------
                                      $    3,525     $    5,789    $   (1,741)
                                      ==========     ==========    ==========

SOURCES OF TAX EFFECTS (in thousands of dollars)

                                                 (RESTATED)        (RESTATED)
                                                 February 2,       February 3,
                                                    2002              2001
                                                 -----------       -----------
Deferred tax assets:
  Deferred compensation and other
    employee benefits                            $      983        $    1,358
  Expense accruals                                    1,764             1,795
  Allowance for doubtful accounts                        94                71
  Reserve for discontinued operations                   468             6,259
  Net Canadian operating loss carryforward            2,422             2,102
  Deferred revenue                                    7,364             7,406
                                                 ----------        ----------
    Total deferred tax assets                        13,095            18,991
                                                 ----------        ----------
Deferred tax liabilities:
  Property and equipment                             (5,944)           (6,509)
  Revenue recognition                                  (116)               29
  Employee pension plan                                (871)             (729)
  Other                                                 (84)              (85)
                                                 ----------        ----------
    Total deferred tax liabilities                   (7,015)           (7,294)
                                                 ----------        ----------
    Net deferred tax asset                       $    6,080        $   11,697
                                                 ==========        ==========
Current deferred income taxes                    $    1,338        $    7,288
                                                 ==========        ==========
Long-term deferred income taxes                  $    4,742        $    4,409
                                                 ==========        ==========

      The Company's net operating loss carryforward for its Canadian operation
totaled $5.4 million, of which $270,000, $2.2 million, $1.3 million and $1.6
million will expire in fiscal year 2005, 2006, 2007, and 2008, respectively.


                                       61
<PAGE>

8.    RETIREMENT PLAN

      The Company maintains a qualified, noncontributory pension plan that
covers all full-time United States employees meeting certain age and service
requirements. The plan provides pension benefits based on an employee's length
of service and the average compensation earned from the later of the hire date
or January 1, 1998 to the retirement date. The Company's funding policy is to
contribute annually at least the minimum amount required by government funding
standards, but not more than is tax deductible. Plan assets consist primarily of
marketable equity securities fund, guaranteed interest contracts, cash
equivalents, immediate participation guarantee contracts and government bonds.

      The following provides a reconciliation of benefit obligations, plan
assets, and funded status of the plan. The retirement plan utilizes a December
31 measurement date.

NET PERIODIC PENSION BENEFIT COSTS  (in thousands of dollars)

                                                 Pension Benefits
                                         ---------------------------------
                                           2001         2000         1999
                                         -------      -------      -------
Service cost                             $ 1,252      $ 1,153      $ 1,207
Interest cost                              2,264        2,008        1,896
Expected return on plan assets            (2,810)      (2,697)      (2,513)
Amortization of transition obligation          3            3            3
Amortization of prior service cost           412          306          307
Amortization of net (gain) or loss            --          (91)          --
                                         -------      -------      -------
Net periodic pension expense             $ 1,121      $   682      $   900
                                         =======      =======      =======

ASSUMPTIONS ON FUNDED STATUS
                                            2001         2000         1999
                                         -------      -------      -------
Discount rate (weighted average)             7.0%        7.25%         7.5%
Expected return on plan assets               9.0%         9.0%         9.0%
Rate of compensation increase                4.0%         4.5%        4.75%


                                       62
<PAGE>

RECONCILIATION OF BENEFIT OBLIGATIONS, PLAN ASSETS, AND FUNDED STATUS (in
thousands of dollars)

                                                2001         2000
                                              --------     --------
CHANGE IN BENEFIT OBLIGATION
  Beginning benefit obligation                $ 30,698     $ 26,400
                                              --------     --------
  Service cost                                   1,252        1,153
  Interest cost                                  2,264        2,008
  Actuarial (gains) or losses                    1,248        2,316
  Benefits paid                                 (1,448)      (1,179)
  Plan amendments*                               1,051           --
                                              --------     --------
    Ending benefit obligation                 $ 35,065     $ 30,698
                                              ========     ========
CHANGE IN PLAN ASSETS
  Beginning fair value of plan assets         $ 29,365     $ 30,609
                                              --------     --------
  Actual return on plan assets                    (707)         (65)
  Employer contributions                         1,007           --
  Benefits paid                                 (1,448)      (1,179)
                                              --------     --------
    Ending fair value of assets               $ 28,217     $ 29,365
                                              ========     ========
  Funded status                               $ (6,848)    $ (1,333)
  Unrecognized transition obligation                --            3
  Unrecognized prior service costs               2,791        2,152
  Unrecognized net actuarial(gain) or loss       4,945          179
  Fourth quarter contribution                    3,347           --
                                              --------     --------
    Benefit cost recognized                   $  4,235     $  1,001
                                              ========     ========

Amounts recognized in the consolidated
  balance sheets of the Company:
    Prepaid pension assets (included
     in other assets)                         $     --     $  1,001
    Accrued benefit liability (included
     in accrued expenses and other
     liabilities)                                 (319)          --
    Accumulated other comprehensive income       1,762           --
    Intangible asset (included in other
     assets                                      2,792           --
                                              --------     --------
     Benefit cost recognized                  $  4,235     $  1,001
                                              ========     ========

*     Plan amendments at the start of fiscal 2001 included changing the limit
      used in average compensation earned from $50,000 from the later of the
      hire date or January 1, 1995 to $100,000 from the later of the hire date
      or January 1, 1998.


                                       63
<PAGE>

      The Company also maintains a noncontributory pension plan that covers all
permanent Canadian employees meeting certain service requirements. The plan
provides pension benefits based on an employee's length of service and annual
compensation earned. The Company contributed $177,000 to this retirement plan in
calendar 2001. Plan assets were $1.3 million as of December 31, 2001 and
consisted of several Canadian equity and fixed income funds and a global equity
fund. No liability is reflected on the Company's financials as the plan is fully
funded.

      For certain key executives, the Company also sponsors a noncontributory
defined benefit plan providing supplementary retirement benefits. The cost of
providing these benefits is accrued over the remaining expected service lives of
the active plan participants. Net supplementary retirement benefits costs for
2001, 2000, and 1999 were $2.0 million, $1.9 million and $1.0 million,
respectively. The status of the supplementary retirement benefit plan was:

PLAN STATUS  (in thousands of dollars)

                                      February 2,      February 3,
                                          2002             2001
                                      -----------      -----------
Present value of accumulated post-
  retirement benefit obligations      $     8,326      $     9,773
Unrecognized transition obligation           (817)          (2,168)
                                      -----------      -----------
Accrued post-retirement benefit
  obligation                          $     7,509      $     7,605
                                      ===========      ===========

Discount rate used                            7.0%            7.25%
                                      ===========      ===========

      In 2000, the Company established a Rabbi Trust (the "Trust") with an
initial cash contribution of $6.4 million in cash and certain company-owned life
insurance policies to fund the supplementary retirement benefit plan for certain
key executives. Plan assets amounted to $14.4 million on February 2, 2002. The
Trust is classified as a long-term other asset on the Company's balance sheet.


                                       64
<PAGE>

9. STOCK-BASED COMPENSATION PLANS

      The Company currently offers eight stock-based compensation plans.
Expenses recognized for 2001, 2000, and 1999 with respect to all eight
stock-based plans were:

             Plan *                 2001       2000      1999
-------------------------------    ------     ------    ------
                                    (in thousands of dollars)

Profit Sharing                     $  689     $  515    $  644
Deferred Compensation and Stock
  Appreciation Rights                 149         88        35
Restricted Stock                        9         24        26
Stock-Bonus                           (64)       180       (15)
                                   ------     ------    ------
                                   $  783     $  807    $  690
                                   ======     ======    ======

*     No expense was recognized for the Stock-Option, Voluntary Stock- Option,
      Key Executive Deferred Compensation or Centrics Stock Option plans.

      Further, except for the Restricted Stock liability, which is shown as a
component of stockholder's equity, as of the fiscal year-end 2001, 2000 and
1999, the following liabilities were included as components of other
liabilities:

                             February 2,    February 3,    February 5,
          Plan*                  2002           2001           2000
-------------------------    -----------    -----------    -----------
                                     (in thousands of dollars)

Profit Sharing               $       702    $       594    $       703
Deferred Compensation
 and Stock Appreciation
 Rights                            1,928          2,701          2,817
Stock-Bonus                          235            418            429
                             -----------    -----------    -----------
   Total liability           $     2,865    $     3,713    $     3,949
                             ===========    ===========    ===========

*     No liabilities were recognized for the Stock-Option, Voluntary
      Stock-Option, Key Executive Deferred Compensation or Centrics Stock Option
      plans.


                                       65
<PAGE>

      The following descriptions reflect pertinent information with respect to
each individual plan:

      Stock-Option Plan

      The Company has an amended and restated non-qualified stock-option plan,
under which certain officers and key employees may receive options to acquire
shares of the Company's common stock. Awards of stock options and the terms and
conditions of such awards are subject to the discretion of the Stock Option
Committee created under the plan and consisting of members of the Compensation
Committee of the Board of Directors, all of who are disinterested directors. A
total of 1,700,000 shares has been authorized for issuance under the plan. Under
the plan, 262,479 options granted become exercisable at a rate of one-fourth a
year commencing one year after award and expiring from four to eight years after
award. An additional 834,641 options granted under the plan are cliff-vested and
become exercisable from four to five years after award and expire six to eight
years after award. As of February 2, 2002, there were 155,924 shares reserved
for issuance under this plan.

TOTAL OUTSTANDING CPI CORP. STOCK OPTIONS -- YEAR-END 2001

            Number of     Per Share    Weighted     Weighted
             Shares     Option Price     Life*    Average Price
            ---------   -------------  --------   -------------
              390,162   $13.88-$20.45    3.68        $17.78
              341,958   $21.06-$27.13    3.66        $24.97
              365,000   $30.00-$35.00    1.50        $32.50
            ---------
Total       1,097,120
            =========

*     Weighted average remaining contractual life in years

TOTAL EXERCISABLE CPI CORP. STOCK OPTIONS -- YEAR-END 2001

                 Number of      Per Share     Weighted
                  Shares      Option Price      Price*
                 ---------    -------------   --------
                  405,901     $13.88-$27.13   $ 21.11
                  365,000     $30.00-$35.00   $ 32.50
                 --------
Total             770,901
                 ========

*     Weighted average exercise price in dollars


                                       66
<PAGE>

OPTIONS AWARDED UNDER THE CPI CORP. STOCK OPTION PLAN - 2001

                                       Number       Weighted
                                        of          Average
                                       Shares        Price
                                     ---------      --------
Outstanding at beginning of year      956,146       $ 25.88
Granted                               243,241         19.16
Cancelled                             (63,498)        22.87
Exercised                             (38,769)        15.75
                                     ---------      --------
At end of year:
  Total outstanding                  1,097,120       $ 24.92
                                     =========      ========
  Total exercisable                    770,901       $ 26.50
                                     =========      ========

OPTIONS AWARDED UNDER THE CPI CORP. STOCK OPTION PLAN - 2000

                                      Number        Weighted
                                        of          Average
                                      Shares         Price
                                     ---------      --------
Outstanding at beginning of year     1,010,746      $ 25.25
Granted                                  3,216        24.88
Cancelled                                   --           --
Exercised                              (57,816)       14.82
                                     ---------      -------
At end of year:
  Total outstanding                    956,146      $ 25.88
                                     =========      =======
  Total exercisable                    688,977      $ 25.98
                                     =========      =======

OPTIONS AWARDED UNDER THE CPI CORP. STOCK OPTION PLAN - 1999

                                       Number       Weighted
                                         of         Average
                                       Shares        Price
                                     ----------     --------
Outstanding at beginning of year       973,109      $ 24.82
Granted                                 75,369        27.12
Cancelled                               (2,313)       25.94
Exercised                              (35,419)       17.39
                                     ---------      -------
At end of year:
  Total outstanding                  1,010,746      $ 25.25
                                     =========      =======
  Total exercisable                    719,633      $ 25.13
                                     =========      =======


                                       67
<PAGE>

      Based on the Black-Scholes option pricing model, the weighted-average fair
value of options granted under the stock-option plan for 2001, 2000 and 1999 is
$12.54, $15.50 and $21.41, respectively, with the following weighted average
assumptions used for the grants:

                           2001          2000        1999
                         ---------    ---------    ---------
Expected life in years          5            5            5
Interest rate                 6.0%         6.0%         6.0%
Volatility                   30.7%        29.5%        43.0%
Dividend yield           2.1%-3.9%    2.1%-3.3%    2.1%-3.9%

      The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Had compensation cost for the
Company's stock option plan been determined based on the fair value at the grant
date for awards in 2001, 2000 and 1999 consistent with the provisions of SFAS
No. 123, the Company's net earnings and earnings per common share would have
been:

EARNINGS AND EARNINGS PER SHARE (in thousands of dollars except per share
amounts)

                           (RESTATED)     (RESTATED)
                               2001           2000           1999
Net earnings (loss):
  as reported              $     6,541    $       530    $    (3,232)
                           ===========    ===========    ===========
  pro forma                $     6,353    $       416    $    (3,380)
                           ===========    ===========    ===========
Diluted earnings (loss)
  per common share:
    as reported            $      0.82    $      0.06    $     (0.32)
                           ===========    ===========    ===========
    pro forma              $      0.80    $      0.05    $     (0.34)
                           ===========    ===========    ===========
Basic earnings (loss)
  per common share:
    as reported            $      0.83    $      0.07    $     (0.33)
                           ===========    ===========    ===========
    pro forma              $      0.81    $      0.05    $     (0.35)
                           ===========    ===========    ===========

      Restricted Stock Plan

            The Company has an amended and restated restricted stock plan that
has 250,000 shares of CPI Corp. common stock reserved for issuance to key
employees. In 2001, 2,500 restricted shares were issued and vest over a
three-year period. Of the grants issued, no shares were forfeited in 2001, 2000
or 1999. As of February 2, 2002, 52,257 shares are reserved for issuance under
this plan. Expenses related to the restricted stock plan are accrued every four
weeks, based on the fair market value of the Company's common stock on the grant
date.


                                       68
<PAGE>

Profit Sharing Plan

      Under the Company's profit-sharing plan, as amended and restated, eligible
employees may elect to invest from 1% to 15% of their base compensation in a
trust fund, the assets of which are invested in securities other than Company
stock. The Company matches at 50% of the employee's investment contributions, up
to a maximum of 5% of the employee's compensation, as long as the Company
remains profitable. The Company's matching contributions are made in shares of
its common stock, which vest 100% once an employee has five years of service
with the Company. The difference between the market value of forfeited shares at
the dates of their original contribution and their market value at the dates
used to satisfy subsequent requirements has been charged to expense, with a
corresponding credit to additional paid-in capital. Expenses related to the
profit-sharing plan are accrued in the year to which the awards relate, based on
the fair market value of the Company's common stock to be issued, determined as
of the date earned. The Company provided 32,624, 25,753 and 27,720 shares to
satisfy its obligations under the plan for 2001, 2000 and 1999, respectively.

Stock-Bonus Plan

      Under the Company's amended and restated stock-bonus plan, shares of the
Company's common stock are reserved for issuance to key salaried employees,
based on attainment by the Company of predefined earnings levels established
annually. Each year, employees receive one-third of the shares that were awarded
in each of the previous three years. For 2001, 2000 and 1999, 2,406, 3,159 and
2,195 shares, respectively, were distributed under this plan. As of February 2,
2002, 85,361 shares are reserved for issuance under this plan. Expenses related
to the stock-bonus plan are accrued in the year to which the awards relate,
based on the fair market value of the Company's common stock to be issued,
determined as of the date earned.

Voluntary Stock-Option Plan

      The Company has an amended and restated non-qualified voluntary
stock-option plan, under which certain key officers may receive options to
acquire shares of the Company's common stock in exchange for a voluntary
reduction in base salary. Options were


                                       69
<PAGE>

granted as participants elected, pursuant to their Stock Option Agreement, to
reduce their compensation for 1994 and 1993. A total of 1,000,000 shares has
been authorized for issuance. As of February 2, 2002, 122,156 options at an
exercise price of $15.50 for 1994 salary reduction have been awarded and remain
unexercised. Since 1995, this plan was not offered. Options granted are
exercisable after three years and expire at the end of eight years. In fiscal
2001, 2,400 shares at a price of $18.375 per share were cancelled and 250,670
shares at a weighted average price of $17.59 were exercised under this plan. In
fiscal 2000, 5,500 shares at a price of $15.50 per share were exercised under
the plan and no shares were cancelled. No shares were exercised or cancelled in
fiscal 1999. All options granted under this plan expired February 6, 2002.

Deferred Compensation and Stock Appreciation Rights Plan

      The Company has a deferred compensation and stock appreciation rights
plan. Under this plan, as amended and restated, within thirty days prior to the
beginning of the fiscal year, eligible employees may irrevocably elect by
written notice to the Company to defer the payment of a portion (not to exceed
50% and not less than $5,000 in the aggregate) of an incentive bonus. The
participant may choose to have payments made either in a lump sum or in a
specified number of annual installments, not to exceed ten. For 2001, 2000 and
1999, certain key executives elected to participate in this plan. All stock
appreciation rights previously granted under the Plan have expired.

Key Executive Deferred Compensation Plan

      The Company has a deferred compensation plan for key executives which
allows deferral of base salary on substantially the same terms as bonus
compensation may be deferred under the Deferred Compensation and Stock
Appreciation Plan. Under this plan, as amended and restated, a participant may
elect by written notice to the Company to defer up to 50% of his base salary for
the fiscal year, but not less than $5,000 in the aggregate. Payment shall not
commence earlier than six months and one day after the initial year of deferral.
The participant may choose to have payments made either in a lump sum or in a
specified number of annual installments, not to exceed ten. For 2000 and 1999,
certain key executives elected to participate in this plan. No key executives
elected to participate in this plan in 2001.

Centrics Stock Option Plan

      On February 4, 2001, Centrics Technology, Inc. authorized 150,000 shares
at $5.00. Shares granted in 2001 were 108,000, with 12,200 exercisable at
year-end. Based on the Black-Scholes option pricing model, the weighted-average
fair value of options granted under the stock-option plan for 2001 is $2.77,
with the following weighted average assumptions used for the grants: 5-year
expected life and 6.0% interest rate.


                                       70
<PAGE>

10.   STOCK REPURCHASE PLAN

      In April 2000 and completed by November 2000, the Company's Board of
Directors authorized the purchase of up to 500,000 shares of its outstanding
common stock through purchases at management's direction from time to time at
acceptable market prices. Under this authorization, the Company purchased
489,165 shares of stock for $11.1 million at an average stock price of $22.63
and is holding these shares as treasury stock available for general corporate
purposes.

      In addition, from 1996 to 1999, the Company's Board of Directors
authorized the repurchase of up to 5,500,000 shares of its outstanding common
stock through open market purchases and authorized repurchasing 4,249,215 of it
outstanding common stock through two separate "Dutch Auction" tender offers. As
of February 2, 2002, the Company had purchased 9,749,138 shares of stock for
$216.6 million at an average stock price of $22.21 under these initiatives and
is holding it as treasury stock available for general corporate purposes.

11.   STOCKHOLDER RIGHTS PLAN

      In 2000, the Board of Directors renewed its Stockholders Rights Plan
("Rights Plan") under which holders of CPI Corp. common stock after March 2000
are granted a dividend distribution of one right ( a "Right") for each share of
Company common stock held. Each Right entitles stockholders to buy one
one-hundredth of a share of Series A Participating Preferred Stock of the
Company at an exercise price of $96.00. Each preferred share fraction is
designed to be equivalent in voting and dividend rights to one share of common
stock.

      The Rights will be exercisable and will trade separately from the shares
of common stock only if a person or group, with certain exceptions, acquires
beneficial ownership of 20% or more of the shares of common stock or commences a
tender or exchange offer that would result in such person or group beneficially
owning 20% or more of the shares of common stock. Prior to this time, the Rights
will not trade separately from the common stock. The Company may redeem the
Rights at $.001 per Right at any time prior to the occurrence of one of these
events. All Rights expire on March 13, 2010.


                                       71
<PAGE>

      Each Right will entitle its holders to purchase, at the Right's
then-current exercise price, common stock of CPI Corp, having a value of twice
the Right's exercise price. This amounts to the right to buy common stock of the
Company at half price. Rights owned by the party triggering the exercise of
Rights will not be exercisable. In addition, if, after any person has become a
20%-or-more stockholder, the Company is involved in a merger or other business
combination transaction with another person in which its shares of common stock
are exchanged or converted, or sells 50% or more of its assets or earning power
to another person, each Right will entitle its holder to purchase, at the
Right's then-current exercise price, shares of common stock of such other person
having a value of twice the Right's exercise price.

12.   INDUSTRY SEGMENT INFORMATION

      The Company has operations in two business segments: Portrait Studios and
Technology Development. The Portrait Studios segment functions as the exclusive
operator of Sears Portrait Studios and has 1,031 fixed portrait studio Locations
in the United States, Canada and Puerto Rico. The Technology Development segment
markets an internet-based, mail-order photofinishing business under the name
searsphotos.com, and offers software programs primarily for retail service
industry use, software consulting and custom software development under the name
Centrics Technology, Inc. (See ("ITEM 1, BUSINESS, PORTRAIT STUDIOS SEGMENT and
TECHNOLOGY DEVELOPMENT SEGMENT" for more information.)

      Prior to the decision in 2000 to report the Technology Development segment
separately, costs associated with this segment were included in the Portrait
Studios segment. Prior years' footnote disclosure in this report has been
restated to reflect this change.

GEOGRAPHIC FINANCIAL INFORMATION  (in thousands of dollars)

                        (RESTATED)      (RESTATED)
                           2001            2000            1999
                        ----------      ----------      ----------
NET SALES*:
 United States          $  296,565      $  296,623      $  297,206
 Canada                     22,705          23,350          21,929
                        ----------      ----------      ----------
                        $  319,270      $  319,973      $  319,135
                        ==========      ==========      ==========
LONG-LIVED ASSETS:
 United States          $   93,874      $   87,793      $   90,615
 Canada                      4,883           5,537           4,007
                        ----------      ----------      ----------
                        $   98,757      $   93,330      $   94,622
                        ==========      ==========      ==========

*     Net sales are attributed to countries based on location.


                                       72
<PAGE>

SELECTED INDUSTRY SEGMENT INFORMATION  (in thousands of dollars)

                                   (RESTATED)       (RESTATED)
                                      2001             2000             1999
NET SALES
 Portrait Studio                   $  318,862       $  319,085       $  319,065
 Technology Development                 3,034              888               70
 Intersegment sales                    (2,626)              --               --
                                   ----------       ----------       ----------
                                   $  319,270       $  319,973       $  319,135
                                   ==========       ==========       ==========
INCOME FROM OPERATIONS
 Portrait Studio operating
  earnings                         $   32,645       $   42,584       $   22,924
 Technology Development
  operating earnings                   (1,734)          (1,066)          (1,680)
 Corporate expenses                   (18,697)         (15,881)         (14,509)
                                   ----------       ----------       ----------
                                   $   12,214       $   25,637       $    6,735
                                   ==========       ==========       ==========
SEGMENT ASSETS
 Portrait Studio                   $   83,225       $   91,860       $   98,188
 Technology Development                 1,247              348               --
 Corporate cash and cash
  equivalents                          46,555           38,820           49,546
 Corporate other                       49,882           37,872           28,352
 Net assets of discontinued
  operations*                              --           16,011           23,177
                                   ----------       ----------       ----------
                                   $  180,909       $  184,911       $  199,263
                                   ==========       ==========       ==========
DEPRECIATION AND AMORTIZATION
 Portrait Studio                   $   20,542       $   21,284       $   23,885
 Technology Development                   161               21               --
 Corporate                              3,065            3,077            2,842
                                   ----------       ----------       ----------
                                   $   23,768       $   24,382       $   26,727
                                   ==========       ==========       ==========
CAPITAL EXPENDITURES
 Portrait Studio                   $   13,037       $    7,707       $   23,130
 Technology Development                   990              330               --
 Corporate                                937            3,716            2,314
 Disposals                               (205)            (958)            (895)
                                   ----------       ----------       ----------
                                   $   14,759       $   10,795       $   24,549
                                   ==========       ==========       ==========

*     See "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, 2. DISCONTINUED
      OPERATIONS AND SUPPLEMENTAL CASH FLOW INFORMATION" for more information.


                                       73
<PAGE>

SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (in thousands of dollars except
share and per share amounts) FISCAL 2001

<TABLE>
<CAPTION>
                                -----------------------  -----------------------   -----------------------   -----------------------
                                         1Q                       2Q                         3Q                        4Q
                                    Apr. 28, 2001             Jul.21, 2001              Nov. 10, 2001             Feb. 02, 2002
                                                Orig                     Orig                      Orig                      Orig
                                 Restated     Reported    Restated     Reported     Restated     Reported     Restated     Reported
                                ----------   ----------  ----------   ----------   ----------   ----------   ----------   ----------
<S>                             <C>          <C>         <C>          <C>          <C>          <C>          <C>          <C>
Net sales                       $   62,176   $   65,026  $   60,291   $   59,071   $   86,357   $   96,872   $  110,446   $   97,915
Cost and expenses:
Cost of sales (exclusive of
 depreciation expense)               7,750        8,190       8,072        8,447       11,042       12,774       14,649       12,268
Selling, administrative and
 general expenses                   48,151       48,937      46,252       46,067       72,246       75,749       69,487       66,586
Executive management
 repositioning costs                 1,733           --          --           --          480           --        3,427           --
Income (loss) from
 operations                           (960)       2,397         416         (994)      (4,658)       1,102       17,415       13,593
Interest income                        429          429         264          264          619          619          465          465
Other expense (income), net            (40)       1,693         (14)         (14)         372          372         (622)       2,131
Earnings (loss) before
 income tax expense and
 cumulative effect of change
 in accounting principle            (1,560)          64        (313)      (1,723)      (5,639)         121       17,578       11,003
Income tax expense (benefit)          (545)          23        (109)        (603)      (2,046)         (32)       6,225        3,925
Net earnings (loss) from
 continuing operations before
 cumulative effect of change
 in accounting principle            (1,015)          41        (204)      (1,120)      (3,593)         153       11,353        7,078
Cumulative effect of change in
 accounting principle, net
 of income tax benefit                  --           --          --           --           --           --           --           --
Net earnings (loss)             $   (1,015)          41        (204)      (1,120)      (3,593)         153       11,353        7,078
                                ==========   ==========  ==========   ==========   ==========   ==========   ==========   ==========
Per share data:
Net earnings (loss) per
 share-diluted                       (0.13)        0.01       (0.03)       (0.14)       (0.45)        0.02         1.42         0.88
                                ==========   ==========  ==========   ==========   ==========   ==========   ==========   ==========
Weighted average number
  of common and common
  equivalent shares
  outstanding - diluted          7,690,021    7,829,456   7,790,534    7,790,534    7,912,532    7,982,501    8,019,584    8,019,584
                                ==========   ==========  ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>


                                       74
<PAGE>

13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (continued) (in thousands of
dollars except share and per share amounts)

FISCAL 2001 continued

<TABLE>
<CAPTION>
                                     -------------------  -------------------  -------------------  -------------------
                                             1Q                  2Q                    3Q                   4Q
                                        Apr. 28, 2001        Jul.21, 2001         Nov. 10, 2001        Feb. 02, 2002
                                                  Orig                 Orig                 Orig                 Orig
                                     Restated   Reported  Restated   Reported  Restated   Reported  Restated   Reported
                                     --------   --------  --------   --------  --------   --------  --------   --------
<S>                                  <C>         <C>      <C>         <C>      <C>          <C>     <C>           <C>
Net sales:                           $ (2,850)            $  1,220             $(10,515)            $ 12,531
Cost of sales (exclusive of
 depreciation expense)                    440                  375                1,732               (2,381)
Selling, administrative and general
 expenses                                 786                 (185)               3,503               (2,900)
Executive management repositioning
 costs                                  1,733                   --                 (480)              (3,427)
Interest income                            --                   --                   --                   --
Other expense (income), net             1,733                   --                   --               (2,752)
Income tax expense (benefit)              568                 (494)               2,014               (2,300)
                                     --------             --------             --------             --------
                                     $ (1,056)            $    916             $ (3,746)            $  4,275
                                     ========             ========             ========             ========
</TABLE>


                                       75
<PAGE>

13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) - continued (in thousands of
dollars except share and per share amounts)

FISCAL 2000

<TABLE>
<CAPTION>
                               ---------------------  ---------------------   ---------------------   ---------------------
                                        1Q                     2Q                      3Q                      4Q
                                   Apr. 28, 2001           Jul.21, 2001           Nov. 10, 2001           Feb. 02, 2002
                                             Orig                   Orig                    Orig                    Orig
                               Restated    Reported   Restated    Reported    Restated    Reported    Restated    Reported
                               ---------   ---------  ---------   ---------   ---------   ---------   ---------   ---------
<S>                            <C>         <C>        <C>         <C>         <C>         <C>         <C>         <C>
Net sales                      $  59,092   $  66,901  $  64,264   $  60,845   $  87,307   $  96,453   $ 109,310   $  96,181

Cost and expenses:
Cost of sales (exclusive of
  depreciation expense shown
  below)                           7,170       7,995      7,828       7,590       9,652      11,036      14,473      12,497
Selling, administrative and
  general expenses                47,087      49,189     45,009      43,924      69,767      72,218      68,793      65,424
Executive management
 repositioning costs                  --          --         --          --          --          --         175          --
Income (loss) from operations       (847)      4,035      5,782       3,686         419       5,730      20,283      12,674
Other expense (income), net           73          73       (113)       (113)        245         245        (283)       (110)
Earnings (loss) before
 income tax expense and
 cumulative effect of change
 in accounting principle          (1,528)      3,354      5,189       3,093        (765)      4,546      19,965      12,183
Income tax expense (benefit)        (534)      1,174      1,815       1,082        (268)      1,591       6,989       4,265
Net earnings (loss) from
 continuing operations before
 cumulative effect of change
 in accounting principle            (994)      2,180      3,374       2,011        (497)      2,955      12,976       7,918
Cumulative effect of change
 in accounting principle,
 net of income tax benefit       (10,219)         --         --          --          --          --          --          --
Net earnings (loss) from
 continuing operations           (11,213)      2,180      3,374       2,011        (497)      2,955      12,976       7,918
Net earnings (loss)            $ (11,213)  $   2,180  $   2,791   $   1,428   $  (3,794)  $    (342)  $  12,746   $   7,688
                               =========   =========  =========   =========   =========   =========   =========   =========
</TABLE>


                                       76
<PAGE>

13. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) - continued(in thousands of
dollars except share and per share amounts) FISCAL 2000 (continued)

<TABLE>
<CAPTION>
                               ---------------------  ---------------------   ---------------------   ---------------------
                                        1Q                    2Q                       3Q                     4Q
                                   Apr. 28, 2001          Jul.21, 2001            Nov. 10, 2001          Feb. 02, 2002
                                              Orig                  Orig                    Orig                     Orig
                               Restated    Reported   Restated    Reported    Restated    Reported    Restated    Reported
                               ---------   ---------  ---------   ---------   ---------   ---------   ---------   ---------
<S>                            <C>         <C>        <C>         <C>         <C>         <C>         <C>         <C>
Per share data:
Net earnings (loss) before
 cumulative effect of change
 in accounting principle           (0.12)       0.26       0.41        0.25       (0.07)       0.37        1.67        1.02
Cumulative effect of change
 in accounting principle           (1.20)         --         --          --          --          --          --          --
Net loss from discontinued
 operations                           --          --      (0.07)      (0.07)      (0.41)      (0.41)      (0.03)      (0.03)
Net earnings (loss) per
 share-diluted                     (1.32)       0.26       0.34        0.18       (0.48)      (0.04)       1.64        0.99
                               =========   =========  =========   =========   =========   =========   =========   =========
Weighted average number of
 common and common equivalent
 shares outstanding - diluted  8,470,212   8,470,212  8,176,471   8,176,471   7,922,530   7,922,530   7,781,004   7,781,004
                               =========   =========  =========   =========   =========   =========   =========   =========

<CAPTION>

RESTATEMENT ADJUSTMENTS TO INCOME             -------------------  -------------------  -------------------  -------------------
 BEFORE CUMULATIVE EFFECT OF CHANGE                    1Q                  2Q                   3Q                   4Q
 IN ACCOUNTING PRINCIPLE:                         Apr. 29, 2000        Jul.22, 2000        Nov. 11, 2000        Feb. 03, 2001
                                                           Orig                 Orig                 Orig                 Orig
                                              Restated   Reported  Restated   Reported  Restated   Reported  Restated   Reported
                                              --------   --------  --------   --------  --------   --------  --------   --------
<S>                                             <C>        <C>       <C>        <C>       <C>        <C>       <C>        <C>
Net sales:                                      (7,809)               3,419               (9,146)              13,129
Cost of sales (exclusive of
 depreciation expense)                             825                 (238)               1,384               (1,976)
Selling, administrative and general expenses     2,102               (1,085)               2,451               (3,369)
Executive management repositioning costs            --                   --                   --                 (175)
Other expense (income), net                         --                   --                   --                 (173)
Income tax expense (benefit)                     1,708                 (733)               1,859               (2,724)
                                              --------              --------            --------             --------
                                                (3,174)               1,363               (3,452)               5,058
                                              ========              ========            ========             ========
</TABLE>


                                       77
<PAGE>

FAIR VALUE OF FINANCIAL INSTRUMENTS

      Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates are subjective in nature and involve uncertainties and matters
of significant judgement and, therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.

Cash and Cash Equivalents, Receivables, Accounts Payable and Accrued Expenses

      The carrying amounts approximate fair value at February 2, 2002 and
February 3, 2001 due to the short maturity of these financial instruments.

Short-term Borrowing and Long-Term Debt

      The fair value of the Company's debt is estimated based on quoted market
prices for similar debt issues with the similar remaining maturities. On
February 2, 2002, the carrying value and estimated fair market value of the
Company's debt was $51.2 million and $51.7 million, respectively. On February 3,
2001, the carrying value and estimated fair market value of the Company's debt
was $59.7 million and $60.1 million, respectively.

15.   CONTINGENCIES

      The Company is a defendant in various lawsuits arising in the ordinary
course of business. It is the opinion of management that the ultimate liability,
if any, resulting from such lawsuits will not materially affect the consolidated
financial position or results of operations of the Company.

16.   JOINT VENTURE

      In October 1996, the Company announced it had completed a photofinishing
joint venture with Eastman Kodak Company ("Kodak") whereby Kodak purchased new
shares of a former subsidiary, Fox Photo, Inc. ("Fox"), constituting 51% of the
outstanding common stock of Fox for a cash purchase price of $56.1 million. In
October 1997, the Company further announced the termination of the
photofinishing joint venture. Pursuant to the termination, Kodak purchased the
remaining 49% of Fox that it did not already own for a purchase price of $53.9
million that consisted of $10.0 million in cash in consideration of the
Company's agreement not to compete with Fox for two years (the "Noncompete
Agreement") and $43.9 million in the form of a note (the "Promissory Note") that
matured and was paid on January 4, 1999. The Noncompete Agreement with Kodak
resulted in recording $3.2 million in 1999 as a component of other income.


                                       78
<PAGE>

ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
         DISCLOSURE

          Not Applicable.


                                       79
<PAGE>

                                    PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS OF THE
         REGISTRANT

      Information required under this Item will be contained in the Registrant's
2002 Proxy Statement, to be dated within 120 days of the end of the Registrant's
fiscal year 2001, is incorporated herein by reference and will be delivered to
stockholders in connection with the Annual Stockholders meeting to be held on
June 6, 2002.

ITEM 11. EXECUTIVE COMPENSATION

      Information required under this Item will be contained in the Registrant's
2002 Proxy Statement, to be dated within 120 days of the end of the Registrant's
fiscal year 2001, is incorporated herein by reference and will be delivered to
stockholders in connection with the Annual Stockholders meeting to be held on
June 6, 2002.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      Information required under this Item will be contained in the Registrant's
2002 Proxy Statement, to be dated within 120 days of the end of the Registrant's
fiscal year 2001, is incorporated herein by reference and will be delivered to
stockholders in connection with the Annual Stockholders meeting to be held on
June 6, 2002.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      On June 15, 1999, the Company announced that it had entered into a
definitive merger agreement under which entities controlled by affiliates of
American Securities Capital Partners, L.P. ("ASCP") (collectively, "ASCP
Affiliates") and the Company's management were to acquire the Company. The
merger agreement provided that each then outstanding share of the Company's
common stock (other than shares of common stock held by any of the Company's
subsidiaries, held in treasury, held by any ASCP Affiliates, or held by
stockholders who perfect their appraisal rights under Delaware law) would be
converted into the right to receive cash equal to $37.

      In connection with the proposed merger, twelve of the Company's then
officers and key executives, including Alyn V. Essman, Chairman and Chief
Executive Officer, Russell Isaak, President, and Patrick J. Morris, Senior
Executive Vice President, had agreed to invest a portion of their interest in
the Company into the acquiring ASCP entity. Such investment was to be effected
by an exchange, immediately prior to the merger, of an aggregate of 137,960
shares of the Company's common stock and 349,495 option shares for shares and
options of the acquiring ASCP entity, aggregating approximately 9% of the equity
interest in such acquiring ASCP entity. Additionally the merger agreement
provided for new employment agreements for such executives with the acquiring
ASCP entity.


                                       80
<PAGE>

      The proposed merger had been approved the Company's Board of Directors,
and had been submitted for approval by its Stockholders at a Special Meeting of
the Company's Stockholders scheduled on October 26, 1999. On October 12, 1999,
the Company announced that it had received a notice from ASCP Affiliates
terminating the merger agreement, and announcing legal action seeking a
declaration that ASCP Affiliates was entitled to terminate and seeking
reimbursement of expenses incurred in connection with the merger agreement, not
to exceed $6.0 million. On October 18, 1999, the Company announced that it had
filed claims against ASCP and its affiliates asserting their willful breach of
obligations under the merger agreement and seeking damages in the amount of $80
million under a guarantee from ASCP."

      On January 30, 2001 the Company announced that it had entered into a
settlement agreement resolving all claims and counterclaims between ASCP, ASCP
Affiliates and the Company arising out of the termination of the Merger
agreement without the payment of any compensation by any party.

      As described in Footnote 4 to the Consolidated Financial Statements and
"Discontinued Operations" in Item 7 (Management's Discussion and Analysis of
Financial Condition and Results of Operations), in July 2001, the Company sold
its Wall Decor segment that operated through the company's wholly owned Prints
Plus, Inc. ("Prints Plus") subsidiary to TRU Retail, Inc ("TRU"), a company
formed by the top management of Prints Plus. Mr. Ted Upland, the CEO of Prints
Plus, held all of the issued and outstanding common stock of TRU at the time of
the transaction. The purchase price to be paid by TRU was $16 million,
consisting of $11 million of TRU preferred security, $4 million of cash, and $1
million of other consideration. TRU also assumed certain liabilities of Prints
Plus. Mr. Alyn V. Essman, then the Company's Chairman and CEO, led the
negotiations for the Company. The purchase price, which the Company's Board of
Directors approved, was the result of negotiations with Mr. Upland and his
advisors following the Company's failure to negotiate definitive agreements with
at least five other potential buyers. For additional information about the TRU
transaction, see Footnote 4 to the Financial Statements and Item 7 of this Form
10-K/A.


                                       81
<PAGE>

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)   CERTAIN DOCUMENTS FILED AS PART OF FORM 10-K

                                                     PAGES
                                                     -----

(1.) FINANCIAL STATEMENTS

     - Independent Auditors' Report                     35
     - Consolidated Balance Sheets as of
        February 2, 2002 and February 3, 2001        36-37
     - Consolidated Statements of Operations for
        the fiscal years ended February 2, 2002,
        February 3, 2001 and February 5, 2000        38-39
     - Consolidated Statements of Changes in
        Stockholders' Equity for the fiscal years
        ended February 2, 2002 and February 3, 2001  40-42
     - Consolidated Statements of Cash Flows for
        the fiscal years ended February 2, 2002,
        February 3, 2001 and February 5, 2000        43-44
     - Notes to Consolidated Financial Statements    45-78

      All other schedules and notes under Regulation S-X are omitted because
they are either not applicable, not required or the information called for
therein appears in the consolidated financial statements or notes thereto.


                                       82
<PAGE>

(3.) EXHIBITS FILED UNDER ITEM 601 OF REGULATION S-K

      The exhibits listed below for CPI Corp. and its subsidiaries ("the
Company"), with their corresponding filing date and registration or Commission
file numbers where applicable, are incorporated by reference as exhibits
required by Item 601 of Regulation S-K:

(a)   EXHIBIT INDEX

EXHIBIT
NUMBER                              DESCRIPTION
-------    --------------------------------------------------------------------

(3.1)      Articles of Incorporation of the Company, incorporated by reference
           to CPI Corp.'s Annual Report for fiscal year 1989 on Form 10-K filed
           4/30/90. File No. 1-10204

(3.2)      Bylaws of the Company, incorporated by reference to CPI Corp.'s
           Annual Report for fiscal year 1989 on Form 10-K filed 4/30/90. File
           No. 1-10204

(3.3)      Amendment to Bylaws of the Company, incorporated by reference to CPI
           Corp.'s Form 8-K filed 8/18/95. File No. 0-11227

(3.4)      Amendment to Bylaws of the Company, incorporated by reference to CPI
           Corp.'s Annual Report for fiscal year 1996 on Form 10-K filed 5/2/97.
           File No. 1-10204

(3.5)      Amendment to Bylaws of the Company, incorporated by reference to CPI
           Corp.'s Annual Report for fiscal year 1993 on Form 10-K filed 5/4/94.
           File No. 1-10204

(4.1)      Articles of Incorporation and Bylaws of the Company, incorporated by
           reference to CPI Corp.'s Annual Report for fiscal year 1989 on Form
           10-K filed 4/30/90. File No. 1-10204

(4.2)      Note Agreement for CPI Corp. Senior Notes dated June 16, 1997,
           incorporated by reference to CPI Corp.'s Form 8-K filed 7/1/97. File
           No. 0-11227

(4.3)      CPI Corp. 7.46% Senior Notes due June 16, 2007, PPN 12617# ACO,
           incorporated by reference to CPI Corp.'s Form 8-K filed 7/1/97. File
           No. 0-11227

(4.4)      CPI Corp. 7.46% Senior Notes due June 16, 2007, Security
           No.!Inv5641!, incorporated by reference to CPI Corp.'s Form 8-K filed
           7/1/97. File No. 0-11227


                                       83
<PAGE>

(a)   EXHIBIT INDEX (continued)

EXHIBIT
NUMBER                                  DESCRIPTION
-------    ---------------------------------------------------------------------

(4.5)      Registration of CPI Corp. Preferred Stock Purchase Rights,
           incorporated by reference to CPI Corp.'s Form 8-A12B filed 3/15/00.
           File No. 1-10204

(10.1)     Registration of Securities on the New York Stock Exchange,
           incorporated by reference to CPI Corp.'s Form 8-A filed 3/21/89.

(10.6)     $30 Million Revolving Credit Note with Firstar Bank and Commerce
           Bank, incorporated by reference to CPI Corp.'s Form 10-Q filed
           9/1/00. File No. 1-10204

(10.7)     $10 Million Revolving Credit Note with Commerce Bank, incorporated by
           reference to CPI Corp.'s Form 10-Q filed 9/1/00. File No. 1-10204

(10.8)     $20 Million Revolving Credit Note with Firstar Bank, incorporated by
           reference to CPI Corp.'s Form 10-Q filed 9/1/00. File No. 1-10204

(10.9)     License Agreement Sears, Roebuck & Co., incorporated by reference to
           CPI Corp.'s Annual Report for fiscal year 1998 on Form 10-K filed
           5/5/99. File No. 1-10204

(10.10)    Second Amendment to License Agreement Sears, Roebuck & Co.,
           incorporated by reference to CPI Corp.'s Form 10-Q filed 12/23/99.
           File No. 1-10204

(10.11)    License Agreement Sears, Roebuck & Co. (Off Mall), incorporated by
           reference to CPI Corp.'s Annual Report for fiscal year 1998 on Form
           10-K filed 5/5/99. File No. 1-10204

(10.12)    Second Amendment to License Agreement Sears, Roebuck & Co. (Off
           Mall), incorporated by reference to CPI Corp.'s Form 10-Q filed
           12/23/99. File No. 1-10204

(10.13)    License Agreement Sears, Roebuck De Puerto Rico, Inc., incorporated
           by reference to CPI Corp.'s Annual Report for fiscal year 1998 on
           Form 10-K filed 5/5/99. File No. 1-10204


                                       84
<PAGE>

(a)   EXHIBIT INDEX (continued)

EXHIBIT
NUMBER                                   DESCRIPTION
-------    --------------------------------------------------------------------

(10.14)    License Agreement Sears Canada, Inc., incorporated by reference to
           CPI Corp.'s Annual Report for fiscal year 1998 on Form 10-K filed
           5/5/99. File No. 1-10204

(10.15)    Development and License Agreement between Sears, Roebuck and Co. and
           Consumer Programs, Incorporated, incorporated by reference to CPI
           Corp.'s Annual Report for fiscal year 2000 on Form 10-K filed 5/3/01.
           File No. 1-10204

(10.16)*   Employment Contract Alyn V. Essman, incorporated by reference to CPI
           Corp.'s Annual Report for fiscal year 1997 on Form 10-K filed 5/6/98.
           File No. 1-10204

(10.17)    Retirement Agreement for Alyn V. Essman, incorporated by reference to
           CPI Corp.'s Annual Report for fiscal year 2000 on Form 10-K filed
           5/3/01. File No. 1-10204

(10.18)*   Employment Contract for J. David Pierson, incorporated by reference
           to CPI Corp.'s Annual Report for fiscal year 2000 on Form 10-K filed
           5/3/01. File No. 1-10204

(10.19)*   Employment Contract Russell H. Isaak, incorporated by reference to
           CPI Corp.'s Annual Report for fiscal year 1997 on Form 10-K filed
           5/6/98. File No. 1-10204

(10.20)*   Employment Contract for Russell A. Isaak, incorporated by reference
           to CPI Corp.'s Annual Report for fiscal year 2000 on Form 10-K filed
           5/3/01. File No. 1-10204

(10.21)*   Employment Contract Patrick J. Morris, incorporated by reference to
           CPI Corp.'s Annual Report for fiscal year 1997 on Form 10-K filed
           5/6/98. File No. 1-10204

(10.22)*   Employment Contract for Patrick J. Morris, incorporated by reference
           to CPI Corp.'s Annual Report for fiscal year 2000 on Form 10-K filed
           5/3/01. File No. 1-10204

(10.23)*   Employment Contract for Timothy F. Hufker, incorporated by reference
           to CPI Corp.'s Annual Report for fiscal year 2000 on Form 10-K filed
           5/3/01. File No. 1-10204

(10.24)*   Employment Contract Barry C. Arthur, incorporated by reference to CPI
           Corp.'s Annual Report for fiscal year 1997 on Form 10-K filed 5/6/98.
           File No. 1-10204


                                       85
<PAGE>

(a)   EXHIBIT INDEX

EXHIBIT
NUMBER                         DESCRIPTION
-------    ---------------------------------------------------------------------

(10.25)*   Employment Contract Fran Scheper, incorporated by reference to CPI
           Corp.'s Annual Report for fiscal year 1997 on Form 10-K filed 5/6/98.
           File No. 1-10204

(10.26)*   Employment Contract Jane E. Nelson, incorporated by reference to CPI
           Corp.'s Annual Report for fiscal year 1999 on Form 10-K filed
           4/26/00. File No. 1-10204

(10.27)    CPI Corp. Employees Profit Sharing Plan & Trust (As Amended and
           Restated Effective January 1, 1998), incorporated by reference to CPI
           Corp.'s Annual Report for fiscal year 1998 on Form 10-K filed 5/5/99.
           File No. 1-10204

(10.28)    First Amendment to CPI Corp. Employee Profit Sharing Plan & Trust (As
           Amended and Restated Effective January 1, 1998) (Effective January 1,
           1999), incorporated by reference to CPI Corp.'s Annual Report for
           fiscal year 1998 on Form 10-K filed 5/5/99. File No. 1-10204

(10.29)    CPI Corp. 1981 Stock Bonus Plan (As Amended and Restated Effective
           2/3/91), incorporated by reference to CPI Corp.'s Annual Report for
           fiscal year 1992 on Form 10-K filed 5/5/93. File No. 1-10204

(10.30)    First Amendment to CPI Corp. 1981 Stock Bonus Plan (As Amended and
           Restated Effective February 3, 1991) Effective January 1, 1995,
           incorporated by reference to CPI Corp.'s Annual Report for fiscal
           year 2000 on Form 10-K filed 5/3/01. File No. 1-10204

(10.31)    CPI Corp. Deferred Compensation and Retirement Plan for
           Non-Management Directors (Amended and Restated as of January 28,
           2000), incorporated by reference to CPI Corp.'s Annual Report for
           fiscal year 2000 on Form 10-K filed 5/3/01. File No. 1-10204

(10.32)    Deferred Compensation and Stock Appreciation Rights Plan (Amended and
           Restated as of June 6, 1996), incorporated by reference to CPI
           Corp.'s Annual Report for fiscal year 2000 on Form 10-K filed 5/3/01.
           File No. 1-10204


                                       86
<PAGE>

(a)   EXHIBIT INDEX (continued)

EXHIBIT
NUMBER                                   DESCRIPTION
-------    --------------------------------------------------------------------

(10.33)    CPI Corp. Restricted Stock Plan (As Amended and Restated Effective as
           of January 16, 1995), incorporated by reference to CPI Corp.'s Annual
           Report for fiscal year 2000 on Form 10-K filed 5/3/01. File No.
           1-10204

(10.34)    CPI Corp. Stock Option Plan (Amended and Restated Effective as of
           December 16, 1997), incorporated by reference to CPI Corp.'s Annual
           Report for fiscal year 2000 on Form 10-K filed 5/3/01. File No.
           1-10204

(10.35)    CPI Corp. Voluntary Stock Option Plan (Amended and Restated Effective
           as of December 16, 1997), incorporated by reference to CPI Corp.'s
           Annual Report for fiscal year 2000 on Form 10-K filed 5/3/01. File
           No. 1-10204

(10.36)    CPI Corp. Key Executive Deferred Compensation Plan (As Amended and
           Restated June 6, 1996), incorporated by reference to CPI Corp.'s
           Annual Report for fiscal year 2000 on Form 10-K filed 5/3/01. File
           No. 1-10204

(10.37)    Stock Purchase Agreement By and Between Ridgedale Prints Plus, Inc.
           and TRU Retail, Inc., incorporated by reference to CPI Corp.'s Form
           10-Q filed 6/8/01. File No. 1-10204

(10.38)    First Amendment to Revolving Credit Agreement, incorporated by
           reference to CPI Corp.'s Form 10-Q filed 8/31/01. File No. 1-10204

(10.39)    Loan Agreement among TRU Retail, Inc., Prints Plus, Inc. and Consumer
           Programs Incorporated, incorporated by reference to CPI Corp.'s Form
           10-Q filed 8/31/01. File No. 1-10204

(10.40)    Stock Purchase Agreement among Ridgedale Prints Plus, Inc., and TRU
           Retail, Inc., incorporated, incorporated by reference to CPI Corp.'s
           Form 10-Q filed 8/31/01. File No. 1-10204

(10.41)    Exhibit B, Certificate of Designation, Preferences and Rights of
           Series A Preferred Security of TRU Retail, Inc., incorporated by
           reference to CPI Corp.'s Form 10-Q filed 8/31/01. File No. 1-10204


                                       87
<PAGE>

(a)   EXHIBIT INDEX

EXHIBIT
NUMBER                                 DESCRIPTION
-------    --------------------------------------------------------------------

(10.42)*   Employment Agreement by and between Jack Krings and CPI Corp.,
           incorporated by reference to CPI Corp.'s Form 10-Q filed 12/21/01.
           File No. 1-10204

(10.43)    Second Agreement to Revolving Credit Agreement, incorporated by
           reference to CPI Corp.'s Form 10-Q filed 12/21/01. File No. 1-10204

*     Employment contract is automatically renewed and extended for one year
      unless terminated by the Board of Directors or the employee.

The following exhibits are included in this 10-K/A Annual Report:

(3.7)      By-law Amendment

(10.44)    Third Amendment to Revolving Credit Agreement

(10.45)    Consulting Agreement by and between CPI Corp. and Patrick J. Morris

(10.46)    Retirement and Release Agreement by and between CPI Corp. and Russell
           Isaak

(10.47)    Retirement and Release Agreement by and between CPI Corp. and Patrick
           J. Morris

(10.48)    Centrics Technology, Inc. Stock Option Plan

(10.49)    Fourth Amendment to Revolving Credit Agreement

(10.50)    Employment Agreement by and between Gary W. Douglass and CPI Corp.

(11.1)     Computation of Earnings Per Share - Diluted

(11.2)     Computation of Earnings Per Share - Basic

(13.0)     2001 Annual Report to Stockholders

(21.0)     Subsidiaries of the Registrant

(23.0)     Independent Auditor's Consent

(99.1)     Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant
           to Section 906 of the Sarbanes-Oxley Act of 2002.

(99.2)     Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant
           to Section 906 of the Sarbanes-Oxley Act of 2002.

REPORTS ON FORM 8-K

-     On December 5, 2001, CPI Corp. reported the issuance of a press release on
      December 4, 2001 announcing the retirement of Russ Isaak, President, and
      Pat Morris, Senior Executive Vice President and President of the Company's
      Portrait Studio Division, effective February 2, 2002.

-     On December 12, 2001, CPI Corp. reported the issuance of a press release
      on December 11, 2001 announcing third quarter results.

-     On December 20, 2001, CPI Corp. announced the Company would begin a search
      for a new chief financial officer.

(c)   EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K

      -     See Item 14(a)(3)

(d)   FINANCIAL STATEMENT SCHEDULE REQUIRED BY REGULATION S-X

      -     See Item 14(a)(2)


                                       88
<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 15th day of May,
2003.

                              CPI CORP.


                          BY: /s/  J. David Pierson
                             -----------------------------
                                   J. David Pierson
                                   Chairman, President, and
                                   Chief Executive Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated.

SIGNATURES OF DIRECTORS AND PRINCIPAL OFFICERS

     Signature                  Title                            Date


/s/ J. David Pierson      Chairman, President, and Director  May 15, 2003
-----------------------   (Principal Executive Officer)
   (J. David Pierson)


/s/ Edmond F. Abrain      Director                           May 15, 2003
-----------------------
   (Edmond F. Abrain)


/s/ James R. Cifford      Director                           May 15, 2003
-----------------------
   (James R.Clifford)


/s/ Joanne S. Griffin     Director                           May 15, 2003
-----------------------
   (Joanne S. Griffin)


/s/ Lee Liberman          Director                           May 15, 2003
-----------------------
   (Lee Liberman)


/s/ Nicholas L. Reding    Director                           May 15, 2003
-----------------------
   (Nicholas L. Reding)


                                       89
<PAGE>

                           SIGNATURES (continued)

SIGNATURES OF DIRECTORS AND PRINCIPAL OFFICERS (continued)

     Signature                   Title                              Date


/s/ Martin Sneider          Director                            May 15, 2003
------------------------
   (Martin Sneider)


/s/ Virginia V. Weldon      Director                            May 15, 2003
------------------------
   (Virginia Weldon)


/s/ Gary W. Douglass        Executive Vice President, Finance   May 15, 2003
------------------------    and Chief Financial Officer)
   (Gary W. Douglass)       (Principal Financial Officer)


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<PAGE>

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

I, J. David Pierson, certify that:

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

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

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

Date: May 12, 2003

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


                                       91
<PAGE>

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

I, Gary W. Douglass, certify that:

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

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

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

Date: May 12, 2003

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


                                       92