----

----

*(Mark      One)*

**CPI      Corp.**

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

|  (Title                of each class)           |   |  (Name                of each exchange on which Registered) |
|------------------------------------------------------|--------|------------------------------------------------------------------|
|  **Common                Stock $.40 Par Value** |   |  **New                York Stock                Exchange**  |

|  Indicate by check mark if the              registrant is a well-known seasoned issuer, as defined in Rule 405              of the              Securities Act       |  [                 ] Yes |   |  [X]                No |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------|--------|-----------------------------|
|                                                                                                                                                                                                         |                               |   |                        |
|  Indicate by check mark if the              registrant is not required to file reports pursuant to Section 13 or              Section 15(d) of the Act.                                                 |  [ ]Yes                  |   |  [X]                No |

| **Note:** | Checking                the box above will not relieve any registrant required to file reports                pursuant to Section 13 or 15(d) of the Exchange Act from their obligations                under those Sections. |
|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 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 for                  such shorter period that the registrant was required to file such                  reports), and (2) has been subject to such filing requirements                  for the                  past 90 days.      |  [X]                  Yes |   | [                    ]                  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.                                                  |  [X]                      |   |                                                 |

----

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| PART                    I   |                                                                                             |                                                                                                                                                                               |   |   |       |   |   |   |
|-----------------------------|--------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|--------|
|                        |                                                                                             |                                                                                                                                                                               |   |   |       |   |   |   |   |   |   |
| Item                    1.  |                                                                                             | Business                                                                                                                                                                           |   |   |       |   | 4      |
| Item                    1A. | Risk                    Factors                                                                  |                                                                                                                                                                               |   |   |       | 9      |
| Item                    1B. |                                                                                             | Unresolved                    Staff Comments                                                                                                                                       |   |   | 11         |
| Item                    2.  |                                                                                             | Properties                                                                                                                                                                         |   |   |       |   | 12     |
| Item                    3.  |                                                                                             | Legal                    Proceedings                                                                                                                                               |   |   |       | 12     |
| Item                    4.  |                                                                                             | Submission                    of Matters to a Vote of Security                    Holders                                                                                          | 12     |
|                        |                                                                                             |                                                                                                                                                                               |   |   |       |   |   |   |   |   |   |
| PART                    II  |                                                                                             |                                                                                                                                                                               |   |   |       |   |   |
|                        |                                                                                             |                                                                                                                                                                               |   |   |       |   |   |   |   |   |   |
| Item                    5.  |                                                                                             | Market                    for Registrant's Common Stock, Related                    Stockholder Matters                    and Issuer Purchases of Common                    Stock | 13     |
| Item                    6.  |                                                                                             | Selected                    Financial Data                                                                                                                                         |   |   |       | 14     |
| Item                    7.  |                                                                                             | Management's                    Discussion and Analysis of Financial                    Condition and Results of Operations                                                        | 16     |
| Item                    7A. | Quantitative                    and Qualitative Disclosures About Market                    Risk |                                                                                                                                                                               | 32     |
| Item                    8.  |                                                                                             | Financial                    Statements and Supplemental                    Data                                                                                                   |   | 32     |
| Item                    9.  |                                                                                             | Changes                    in and Disagreements with Accountants on                    Accounting and Financial Disclosure                                                         | 70     |
| Item                    9A. | Controls                    and Procedures                                                       |                                                                                                                                                                               |   |   | 70         |
| Item                    9B. |                                                                                             | Other                    Information                                                                                                                                               |   |   |       | 72     |
|                        |                                                                                             |                                                                                                                                                                               |   |   |       |   |   |   |   |   |   |
| PART                    III |                                                                                             |                                                                                                                                                                               |   |   |       |   |   |
|                        |                                                                                             |                                                                                                                                                                               |   |   |       |   |   |   |   |   |   |
| Item                    10. |                                                                                             | Directors                    and Executive Officers of the                    Registrant                                                                                           |   | 72     |
| Item                    11. |                                                                                             | Executive                    Compensation                                                                                                                                          |   |   |       | 72     |
| Item                    12. |                                                                                             | Security                    Ownership of Certain Beneficial Owners and                    Management and Related Stockholder Matters                                               | 72     |
| Item                    13. |                                                                                             | Certain                    Relationships and Related                    Transactions                                                                                               |   | 73     |
| Item                    14. |                                                                                             | Principal                    Accounting Fees and Services                                                                                                                          |   | 73     |
|                        |                                                                                             |                                                                                                                                                                               |   |   |       |   |   |   |   |   |   |
| PART                    IV  |                                                                                             |                                                                                                                                                                               |   |   |       |   |   |
|                        |                                                                                             |                                                                                                                                                                               |   |   |       |   |   |   |   |   |   |
| Item                    15. |                                                                                             | Exhibits                    and Financial Statement                    Schedules                                                                                                   |   | 73     |
|                        |                                                                                             |                                                                                                                                                                               |   |   | Signatures |   |   |   |   | 79 |

**PART      I**

*Item      1.*
*Business*

*Item      1A.*
*Risk      Factors*

*We      are materially dependent upon Sears.*

*Our      business practices and operations need to be acceptable to      Sears.*

*Sears      or Sears Canada may terminate, breach, otherwise limit or increase our expenses      under our license agreements.*

*An      economic downturn, a reduction in consumer spending or decreased customer      traffic in our host stores could materially adversely affect our      business.*

*If      our key suppliers become unable to continue to provide us supplies under our      current contract, we will need to obtain an alternative source of supplies.      If      we enter into an agreement to obtain such supplies at less desirable terms,      our      financial condition and results of operations could be materially adversely      affected.*

*Our      inability to remain competitive could have a detrimental impact on our results      of operations. *

*If      we      lose our key personnel, our business may be adversely      affected.*

*Our      fourth quarter sales and income are disproportionately high and we are      vulnerable to downturns in consumer holiday spending that can adversely affect      our business.*

*A      significant increase in piracy of our photographs could materially adversely      affect our business, financial condition or results of      operations.*

*Any      disruption in our manufacturing process could have a material adverse impact      on      our business.*

*Widespread      equipment failure in our portrait studios could materially adversely impact      the      financial condition or results of operations.*

*The      agreements governing our debt impose restrictions on our      business.*

*Item      1B.*
*Unresolved      Staff Comments*

*Item          2.*
*Properties*

|   |   |                                        |                                                     |                                |    |                              |                                                                  |                                                         |                                       |   |        |   |   |   |   |      |   |
|--------|--------|---------------------------------------------|----------------------------------------------------------|-------------------------------------|---------|-----------------------------------|-----------------------------------------------------------------------|--------------------------------------------------------------|---------------------------------------|--------|-------------|--------|--------|--------|--------|-----------|--------|
|   |   |                                        |                                                     |                                |    |                              |                                                                  |                                                         | APPROXIMATE                      AREA |   |        |   |   |   |   | OWNERSHIP |
|   |   | LOCATION                                    |                                                     | IN                      SQUARE FEET |    | PRIMARY                      USES |                                                                  | OR                      LEASE                                |
|   |   | St.                      Louis, Missouri    |                                                     |                                | 270,000 |                              | Administration                      and Photo processing              |                                                         | Owned                                 |   |
|   |   | St.                      Louis, Missouri    |                                                     |                                | 155,000 |                              | Parking                      Lots                                     |                                                         |                                  |   | Owned       |   |
|   |   | St.                      Louis, Missouri    |                                                     |                                | 56,000  |                              | Warehousing                                                           |                                                         |                                  |   | Leased      | (1)    |
|   |   | Brampton,                      Ontario      |                                                     |                                | 40,000  |                              | Administration,                      Warehousing and Photo processing |                                                         | Owned                                 |   |
|   |   |                                        |                                                     |                                |    |                              |                                                                  |                                                         |                                  |   |        |   |   |   |   |      |   |
|   |   | Thomaston,                      Connecticut |                                                     |                                |    | 25,000                            |                                                                  |  Administration                    and Photo processing |                                  |   |  Owned |   |
|   |   |                                        |                                                     |                                |    |                              |                                                                  |                                                         |                                  |   |        |   |   |   |   |      |   |   |
|   |   | (1)                                         | Lease                      term expires on June 30, 2008 |                                |    |                              |                                                                  |                                                         |                                  |   |        |

*Item      3.*
*Legal      Proceedings*

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

**PART      II**

| *Item                5.* | *Market                for Registrant's Common Stock, Related Stockholder                Matters and Issuer Purchases of Common                Stock* |
|--------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

**Price      Range of Common Stock and Dividends**

| FISCAL                  YEAR 2005          |   |   |   |   |   |     |   |
|--------------------------------------------|--------|--------|--------|--------|--------|----------|--------|
| (ending                  February 4, 2006) |   | HIGH   |   | LOW    |   | DIVIDEND |   |
| First                  Quarter             |   | $      | 16.75  |   | $      | 14.80    |   | $ | 0.16 |   |
| Second                  Quarter            |   |   | 18.88  |   |   | 16.22    |   |   | 0.16 |   |
| Third                  Quarter             |   |   | 18.31  |   |   | 17.15    |   |   | 0.16 |   |
| Fourth                  Quarter            |   |   | 19.90  |   |   | 17.40    |   |   | 0.16 |   |
|                                       |   |   |   |   |   |     |   |   |   |   |
|                                       |   |   |   |   |   |     |   |   |   |   |
| FISCAL                  YEAR 2004          |   |   |   |   |   |     |   |   |   |   |
| (ending                  February 5, 2005) |   |   | HIGH   |   |   | LOW      |   |   | DIVIDEND |   |
| First                  Quarter             |   | $      | 22.25  |   | $      | 15.34    |   | $ | 0.16 |   |
| Second                  Quarter            |   |   | 16.15  |   |   | 12.89    |   |   | 0.16 |   |
| Third                  Quarter             |   |   | 13.42  |   |   | 11.40    |   |   | 0.16 |   |
| Fourth                  Quarter            |   |   | 15.61  |   |   | 13.24    |   |   | 0.16 |   |

**Shareholders      of Record**

**Dividends**

**Issuer      Repurchases of Equity Securities**

*Item      6. *
*Selected Financial      Data*

| *thousands                  except per share data*                                     |   |   |    |   |   |    |   |   |    |   |   |
|----------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|
|                                                                                   |   | 2005   |    | 2004   |   | 2003    |   | 2002   |    | 2001   |   |
| STATEMENT                  OF OPERATIONS (1)                                           |   |   |    |   |   |    |   |   |    |   |   |
| Net                  sales                                                             |   | $      | 291,984 |   | $      | 281,865 |   | $      | 299,044 |   | $      | 308,625 |   | $ | 319,168 |   |
| Cost                  of sales                                                         |   |   | 35,129  |   |   | 36,899  |   |   | 40,070  |   |   | 40,618 |   |   | 43,280 |   |
| Selling,                  general and administrative expenses                          |   |   | 222,094 |   |   | 219,381 |   |   | 227,251 |   |   | 228,470 |   |   | 233,909 |   |
| Depreciation                  and amortization                                         |   |   | 19,952  |   |   | 16,377  |   |   | 16,793  |   |   | 20,042 |   |   | 23,628 |   |
| Other                  charges and impairments (2)                                     |   |   | 2,767   |   |   | 15,679  |   |   | 5,515   |   |   | 6,042 |   |   | 5,640 |   |
|                                                                                   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |
| Income                  (loss) from continuing operations                              |   |   | 12,042  |   |   | (6,471  | )      |   | 9,415   |   |   | 13,453 |   |   | 12,711 |   |
| Interest                  expense, net                                                 |   |   | 983     |   |   | 954     |   |   | 1,240   |   |   | 1,569 |   |   | 2,451 |   |
| Impairment                  and related obligations of preferred secuirty interest (3) |   |   | -       |   |   | 9,789   |   |   |  - |   |   | - |   |   | - |   |
| Loss                  from debt extinguishment (4)                                     |   |   | 529     |   |   | -       |   |   | -       |   |   | - |   |   | - |   |
| Other                  income, net (5)                                                 |   |   | 247     |   |   | 263     |   |   | 850     |   |   | 111 |   |   | 303 |   |
| Income                  tax expense (benefit)                                          |   |   | 4,388   |   |   | (2,189  | )      |   | 3,183   |   |   | 4,212 |   |   | 3,540 |   |
|                                                                                   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |
| Net                  earnings (loss) from continuing operations                        |   |   | 6,389   |   |   | (14,762 | )      |   | 5,842   |   |   | 7,783 |   |   | 7,023 |   |
| Net                  loss from discontinued operations (1)                             |   |   | -       |   |   | (3,746  | )      |   | (4,624  | )      |   | (1,243 | ) |   | (482 | ) |
|                                                                                   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |
| Net                  earnings (loss)                                                   |   | $      | 6,389   |   | $      | (18,508 | )      | $      | 1,218   |   | $      | 6,540 |   | $ | 6,541 |   |
|                                                                                   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |
| SHARE                  AND PER SHARE DATA (1)                                          |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |
| Net                  earnings (loss) from continuing operations - diluted (6)          |   | $      | 0.81    |   | $      | (1.87   | )      | $      | 0.72    |   | $      | 0.96 |   | $ | 0.88 |   |
| Net                  earnings (loss) from continuing operations - basic (6)            |   |   | 0.81    |   |   | (1.87   | )      |   | 0.72    |   |   | 0.97 |   |   | 0.90 |   |
| Net                  earnings (loss) - diluted                                         |   |   | 0.81    |   |   | (2.35   | )      |   | 0.15    |   |   | 0.80 |   |   | 0.82 |   |
| Net                  earnings (loss) - basic                                           |   |   | 0.81    |   |   | (2.35   | )      |   | 0.15    |   |   | 0.81 |   |   | 0.84 |   |
|                                                                                   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |
| Dividends                                                                              |   | $      | 0.64    |   | $      | 0.64    |   | $      | 0.60    |   | $      | 0.56 |   | $ | 0.56 |   |
| Average                  shares outstanding - diluted                                  |   |   | 7,881   |   |   | 7,888   |   |   | 8,148   |   |   | 8,086 |   |   | 7,939 |   |
| Average                  shares outstanding - basic                                    |   |   | 7,854   |   |   | 7,888   |   |   | 8,082   |   |   | 8,040 |   |   | 7,841 |   |
|                                                                                   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |
| CASH                  FLOW DATA (continuing operations only)                           |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |
| Net                  cash provided by operating activities                             |   | $      | 18,697  |   | $      | 16,477  |   | $      | 32,118  |   | $      | 29,386 |   | $ | 29,305 |   |
| Net                  cash used in investing activities                                 |   | $      | (17,633 | )      | $      | (6,597  | )      | $      | (14,840 | )      | $      | (6,131 | ) | $ | (12,936 | ) |
| Net                  cash used in financing activities (6)                             |   | $      | (1,223  | )      | $      | (24,827 | )      | $      | (13,929 | )      | $      | (10,644 | ) | $ | (7,522 | ) |
|                                                                                   |   |   |    |   |   |    |   |   |    |   |   |   |   |   |   |   |
| Capital                  expenditures (9)                                              |   | $      | 20,235  |   | $      | 15,157  |   | $      | 19,405  |   | $      | 8,878 |   | $ | 14,964 |   |

*Item      6. *
*      Selected Consolidated Financial Data (continued)*

|  *thousands*                                                                  |   |   |    |   |   |    |   |   |        |   |   |
|------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|--------|-------------|--------|--------|
|                                                                               |   | 2005   |    | 2004   |   | 2003    |   | 2002   |        | 2001   |   |
| BALANCE                  SHEET                                                     |   |   |    |   |   |    |   |   |        |   |   |
| Cash                  and cash equivalents                                         |   | $      | 34,269  |   | $      | 33,883  |   | $      | 51,011      |   | $      | 57,922 |   | $ | 46,555 |   |
| Current                  assets                                                    |   |   | 69,629  |   |   | 72,868  |   |   | 93,215      |   |   | 96,522 |   |   | 82,804 |   |
| Net                  fixed assets                                                  |   |   | 41,282  |   |   | 41,658  |   |   | 52,735      |   |   | 47,502 |   |   | 63,708 |   |
| Assets                  of business transferred under contractual arrangements (7) |   |   | -       |   |   |  - |   |   |  8,975 |   |   | 10,041 |   |   | 11,587 |   |
| Assets                  of supplemental retirement plan (8)                        |   |   | 3,706   |   |   | 6,141   |   |   | 11,491      |   |   | 13,761 |   |   | 14,406 |   |
| Other                  assets                                                      |   |   | 9,044   |   |   | 14,433  |   |   | 2,052       |   |   | 11,464 |   |   | 9,056 |   |
| Total                  assets                                                      |   |   | 123,661 |   |   | 135,100 |   |   | 168,468     |   |   | 179,290 |   |   | 181,561 |   |
| Current                  liabilities                                               |   |   | 58,264  |   |   | 71,761  |   |   | 68,799      |   |   | 66,490 |   |   | 65,982 |   |
| Other                  liabilities                                                 |   |   | 23,540  |   |   | 23,403  |   |   | 22,254      |   |   | 24,501 |   |   | 16,896 |   |
| Long-term                  debt, less current maturities                           |   |   | 15,747  |   |   | 17,050  |   |   | 25,589      |   |   | 34,116 |   |   | 42,639 |   |
| Stockholders'                  equity (6)                                          |   |   | 26,110  |   |   | 22,886  |   |   | 51,826      |   |   | 54,183 |   |   | 56,044 |   |

| (1)   | Following                are business areas classified as discontinued operations and for                which                prior year’s consolidated financial statements were reclassified to                reflect these changes: |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| -   | In                2004, mobile photography operations and the Mexican Portrait Studio                business |
|---------------|---------------------------------------------------------------------------------------------------------------|
| -   | In                2002, the former Technology Development                segment |
|---------------|----------------------------------------------------------------------------------|

| *thousands*                                                                         |   |  2005   |   | 2004   |   | 2003   |   | 2002   |   | 2001   |   |
|-------------------------------------------------------------------------------------|--------|--------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                |   |    |   |   |   |   |   |   |   |   |   |
| Accruals                  related to accelerated vesting of supplemental retirement |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| plan                  benefits and                  guaranteed bonuses for 2004 (a) |   | $            | -      |   | $      | 3,656  |   | $      | -      |   | $      |  - |   | $ | - |   |
| Impairment                  charges (b)                                             |   |         | 567    |   |   | 6,516  |   |   | -      |   |   | 4,171 |   |   | - |   |
| Reserves                  for severance and related costs (c )                      |   |         | 2,546  |   |   | 3,430  |   |   | 1,346  |   |   | 889 |   |   | 5,640 |   |
| Pension                  plan curtailment (d)                                       |   |         | -      |   |   | -      |   |   | 2,385  |   |   | - |   |   | - |   |
| Consent                  solicitation costs (e)                                     |   |         | -      |   |   | 816    |   |   | 1,663  |   |   | - |   |   | - |   |
| Production                  facility closure (f)                                    |   |         | -      |   |   | -      |   |   | 121    |   |   | 982 |   |   | - |   |
| Contract                  terminations and settlements (g)                          |   |         | (346   | )      |   | 1,261  |   |   | -      |   |   | - |   |   | - |   |
|                                                                                |   | $            | 2,767  |   | $      | 15,679 |   | $      | 5,515  |   | $      | 6,042 |   | $ | 5,640 |   |
|                                                                                |   |         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

| (a)    | Consists                  of costs related to accelerated vesting of executive benefits and                  bonuses.                                               |                                                                                                                                                                              |   |   |   |   |   |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
| (b)    | Consists                  of 2002 and 2004 write-offs and write-downs of certain previously                  capitalized technology costs and 2005 parts and film   |
|   |                                                                                                                                                                | inventory                  and other asset write-offs resulting from the conversion from an                  analog                  film environment to the full digital format. |
| (c)    | Consists                  principally of expenses and related costs for employee severance,                  retirements and repositioning.                         |                                                                                                                                                                              |   |
| (d)    | Consists                  of the charge related to the freeze of future benefit accruals                  under the                  pension plan.                  |                                                                                                                                                                              |   |   |   |
| (e)    | Consists                  of professional fees relative to the proxy consent                  solicitation.                                                         |                                                                                                                                                                              |   |   |   |   |   |   |   |
| (f)    | Consists                  of expenses related to employee severance and retirement, asset                  abandonment write-offs and a remaining lease             |
|   |                                                                                                                                                                | obligation                  accrual.                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |
| (g)    | Consists                  of expenses related to non-refundable loan commitment fees as well                  as                  charges related to early contract |                                                                                                                                                                              |   |
|   |                                                                                                                                                                | terminations                  and settlements with certain of the Company's vendors and                  consultants.                                                             |   |   |   |   |   |   |
|   |                                                                                                                                                                |                                                                                                                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |

*Item      6. *
*      Selected Consolidated Financial Data (continued)*

| (3)    |   | In                  2004, the Company recorded a $7.7 million valuation reserve against                  the                  carrying value of its preferred security interest and $2.1 million                  of                  additional accrued |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   | lease                  liability obligations relating to its lease guarantees on certain                  of                  Prints Plus' retail stores.                                                                                                |
|   |   |                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (4)    |   | Consists                  of a make-whole fee totaling $457,000 and the write-off of unamortized                  fees, both related to the early redemption of the Company's Senior                  Notes                  in                          |
|   |   | November,                  2005.                                                                                                                                                                                                                         |   |   |   |   |   |   |   |   |   |
|   |   |                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (5)    |   | In                  2003, the Company recognized $503,000 in other income related to                  a                  liquidating distribution of the Company's membership interest in                  General                  American Life        |
|   |   | Insurance                  Co. ("GA") when GA's stock was sold to MetLife and $118,000 in                  other                  income related to death benefits received from a company-owned                  life                  insurance        |
|   |   | policy                  on a former executive.   In                  2001, the Company, recognized $218,000 in other income related                  to the                  termination of a merger agreement.                                |
|   |   |                                                                                                                                                                                                                                                     |   |   |
| (6)    |   | The                  Company recorded the repurchase of:                                                                                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |
|   |   | -                                                                                                                                                                                                                                                        | 406,780                  shares of common stock for $6.0 million in 2004 and |   |   |   |   |   |   |   |   |
|   |   | -                                                                                                                                                                                                                                                        | 54,200                  shares of common stock for $935,000 in 2003. |   |   |   |   |   |   |   |   |
|   |   |                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (7)    |   | Assets                  of business transferred under contractual arrangements resulted                  from the                  sale of the discontinued Wall Décor operation.  As a result of the                  deteriorating           |
|   |   | financial                  performance of Prints Plus and its subsequent bankruptcy declaration,                  in                  2004 certain assets related to the Company's preferred security                  interest                  in      |
|   |   | Prints                  Plus totaling $7.7 million                  were written off and the Company’s revolving line of credit to Prints Plus                  was repaid in full and then terminated.                                       |
|   |   |                                                                                                                                                                                                                                                     |
| (8)    |   | Represents                  a benefit trust established in 2000 to fund supplemental retirement                  benefits for certain current and former executives.                                                                                     |
|   |   |                                                                                                                                                                                                                                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (9)    |   | 2003                  includes $7.3 million representing an accrued commitment for computer                  equipment and peripherals that were purchased in the fourth quarter                  of                  2003 and                           |
|   |   | paid                  for in 2004.                                                                                                                                                                                                                       |   |   |   |   |   |   |   |   |

*Item      7.*
*Management's      Discussion and Analysis of Financial Condition and      Results of Operations*

***EXECUTIVE      OVERVIEW***

**The      Company’s Operations**

|                                                 |   |   |   | 2005   |   | 2004   |   | 2003   |   |
|------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                 |   |   |   |   |   |   |   |   |   |
|  United                States and Puerto Rico:  |   |        |   |   |   |   |   |   |   |
| Within                  full-line Sears stores       |   |   |   |   |   | 858    |   |   | 860    |   |   | 854 |   |
| Locations                  not within Sears stores   |   |   |   |   |   | 38     |   |   | 40     |   |   | 48 |   |
| Within                  Sears Essential/Grand stores |   |   |   |   |   | 36     |   |   | 4      |   |   | - |   |
|                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Canada                                               |   |   |   |   |   | 114    |   |   | 117    |   |   | 119 |   |
|                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                                                |   |   |   |   |   | 1,046  |   |   | 1,021  |   |   | 1,021 |   |
|                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |

**Competitive      Factors/Trends/Challenges**

| ·   | Exited                the Mexican and mobile photography businesses that were draining                scarce                managerial and financial resources from the core Sears Portrait Studio                business. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Terminated                a major internal software development project intended to be the                foundation for the Company’s ultimate transition to a digital format and                instead pursued outsourcing options with third-party                vendors. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Upgraded                computer hardware in all U.S. studios, improving the performance                of legacy                DOS-based systems while preparing the way for a transition to                digital. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Restored                coverage, training and retention hours in the studios that had been                reduced in 2003 in response to declining                sales. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Raised                prices and tapped more efficient advertising                vehicles. |
|--------------------|---------------------------------------------------------------------------------------------|
| ·   | Introduced                several new products that contributed approximately $1 million in                busy                season sales. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Converted                128 of our U.S. studios to full digital format prior to the 2004                busy                season. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Successfully                converted all of the remaining U.S. studios to full digital format. |
|--------------------|-------------------------------------------------------------------------------------------------|
| ·   | Leveraged                our recently-installed digital technology to provide customers greater                variety in posing and effects, speedier (including same-day) fulfillment                of portrait orders, a range of new product and service options, and                an                improved overall experience. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Implemented                on-going extensive changes in our marketing program designed to                transition to everyday value, reduce dependence on coupons and promotional                activity and prepare the way for a repositioning of the Sears Portrait                Studio brand in conjunction with the completion of the digital rollout.                At                the same time, we have broadly tested various offer changes, including                higher prices, designed to reflect the differentiated value proposition                offered in our digital studios. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Implemented                various field initiatives to drive improvement in quality, customer                service, productivity and customer                retention. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***RESULTS      OF OPERATIONS***

| *thousands,                  except share and per share data*                                                                                                  |   | 2005   |    | 2004   |   | 2003    |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|---------|--------|
|                                                                                                                                                           |   |   |    |   |   |    |   |
| **Net                  sales**                                                                                                                                 |   | $      | 291,984 |   | $      | 281,865 |   | $ | 299,044 |   |
|                                                                                                                                                           |   |   |    |   |   |    |   |   |   |   |
| **Cost                  and expenses:**                                                                                                                        |   |   |    |   |   |    |   |   |   |   |
|     Cost                  of                  sales (exclusive of depreciation and amortization shown                  below)              |   |   | 35,129  |   |   | 36,899  |   |   | 40,070 |   |
| *        Cost                  of                  sales as a percentage of net sales*                                 |   |   | 12.0    | %      |   | 13.1    | %      |   | 13.4 | % |
| *        Gross                  margin as a percentage of net sales*                                                   |   |   | 88.0    | %      |   | 86.9    | %      |   | 86.6 | % |
|     Selling,                  general and administrative expenses                                                                          |   |   | 222,094 |   |   | 219,381 |   |   | 227,251 |   |
| *        Selling,                  general and administrative expenses as a percentage of net                  sales*  |   |   | 76.1    | %      |   | 77.8    | %      |   | 76.0 | % |
|     Depreciation                  and amortization                                                                                         |   |   | 19,952  |   |   | 16,377  |   |   | 16,793 |   |
|     Other                  charges and impairments                                                                                         |   |   | 2,767   |   |   | 15,679  |   |   | 5,515 |   |
|                                                                                                                                                           |   |   | 279,942 |   |   | 288,336 |   |   | 289,629 |   |
|                                                                                                                                                           |   |   |    |   |   |    |   |   |   |   |
| Income                  (loss) from continuing operations                                                                                                      |   |   | 12,042  |   |   | (6,471  | )      |   | 9,415 |   |
|                                                                                                                                                           |   |   |    |   |   |    |   |   |   |   |
| Interest                  expense                                                                                                                              |   |   | 1,680   |   |   | 2,180   |   |   | 2,949 |   |
| Interest                  income                                                                                                                               |   |   | 697     |   |   | 1,226   |   |   | 1,709 |   |
| Impairment                  and related obligations of preferred security interest                                                                             |   |   | -       |   |   | 9,789   |   |   | - |   |
| Loss                  from debt extinguishment                                                                                                                 |   |   | 529     |   |   | -       |   |   | - |   |
| Other                  income, net                                                                                                                             |   |   | 247     |   |   | 263     |   |   | 850 |   |
| Earnings                  (loss) from continuing operations before income tax expense                  (benefit)                                               |   |   | 10,777  |   |   | (16,951 | )      |   | 9,025 |   |
|                                                                                                                                                           |   |   |    |   |   |    |   |   |   |   |
| Income                  tax expense (benefit)                                                                                                                  |   |   | 4,388   |   |   | (2,189  | )      |   | 3,183 |   |
|                                                                                                                                                           |   |   |    |   |   |    |   |   |   |   |
| Net                  earnings (loss) from continuing operations                                                                                                |   |   | 6,389   |   |   | (14,762 | )      |   | 5,842 |   |
|                                                                                                                                                           |   |   |    |   |   |    |   |   |   |   |
| Net                    loss from discontinued operations, net of income tax benefit                    of $2,201 in                    2004 and $2,518 in 2003 |   |   | -       |   |   | (3,746  | )      |   | (4,624 | ) |
|                                                                                                                                                           |   |   |    |   |   |    |   |   |   |   |
| **NET                  EARNINGS (LOSS)**                                                                                                                       |   | $      | 6,389   |   | $      | (18,508 | )      | $ | 1,218 |   |
|                                                                                                                                                           |   |   |    |   |   |    |   |   |   |   |
| **Net                  earnings (loss) per share - diluted**                                                                                                   |   | $      | 0.81    |   | $      | (2.35   | )      | $ | 0.15 |   |

| **·  ** | Net                sales for 2005 increased $10.1 million, or 3.6%, to $292.0 million                from                the $281.9 million reported in 2004. The overall increase in sales                is due                to a 22.9% increase in average sales per customer sitting, partially                offset by a 16.0% year-over-year decline in sittings. |
|------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| **·  ** | Net                sales in 2004 declined $17.1 million, or 6%, to $281.9 million compared                to                the $299.0 million reported in 2003. This decline in sales is attributable                to a continued decline in customer sittings and the absence of the                additional week of sales that was reported in 2003, a 53-week fiscal                year,                both partially offset by an increase in the average sales per customer                sitting. Average sales per customer sitting in 2004 increased                approximately 5% while customer sittings declined 11%, both compared                to                the 2003 fiscal year. |
|------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Cost                of sales, excluding depreciation and amortization expense, as a percentage                of net sales was 12.0% in 2005 compared to 13.1% in 2004 and 13.4%                in                2003. Correspondingly, gross margin rates were 88.0% in 2005, 86.9%                in                2004 and 86.6% in 2003. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Selling,                general and administrative expenses were $222.1 million, $219.4 million                and $227.2 million for fiscal years 2005, 2004 and 2003, respectively.                As                a percentage of sales, these expenses were 76.1% in 2005, 77.8% in                2004                and 76.0% in 2003. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Depreciation                and amortization was $20.0 million in 2005, compared to $16.4 million                in                2004 and $16.8 million in 2003. The increase in depreciation and                amortization is attributable to significant investments that have                been                made in connection both with a studio-wide hardware and printer upgrade                in                2004 and the recently completed digital conversion of U.S. studios.                The                slight net decrease in depreciation expense between 2003 and 2004                resulted                from certain assets becoming fully depreciated in 2003, partially                offset                by increased depreciation charges related to increased levels of                capital                spending in 2003 and 2004. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other                charges and impairments reflect costs incurred from strategic actions                implemented by the Company to restructure its operations, costs that                are                unpredictable and atypical of the Company’s operations and additional                charges due to asset impairments. Actions taken over the past three                years                are as follows: |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| *thousands*                                                                                                                                |   | 2005   |   | 2004   |   | 2003   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                                                                       |   |   |   |   |   |   |   |
| Recorded                as a component of income (loss) from operations:                                                                   |   |   |   |   |   |   |   |
|     Accruals                related to accelerated vesting of supplemental                retirement plan benefits and |   |   |   |   |   |   |   |   |   |   |
|         guaranteed                bonuses for 2004                                                 |   | $      | -      |   | $      | 3,656  |   | $ | - |   |
|     Impairment                charges                                                                                  |   |   | 567    |   |   | 6,516  |   |   | - |   |
|     Reserves                for                severance and related costs                                             |   |   | 2,546  |   |   | 3,430  |   |   | 1,346 |   |
|     Pension                plan curtailment                                                                            |   |   | -      |   |   | -      |   |   | 2,385 |   |
|     Consent                soliciation costs                                                                           |   |   | -      |   |   | 816    |   |   | 1,663 |   |
|     Production                facility closure                                                                         |   |   | -      |   |   | -      |   |   | 121 |   |
|     Contract                terminations and settlements                                                               |   |   | (346   | )      |   | 1,261  |   |   | - |   |
|                                                                                                                                       |   |   | 2,767  |   |   | 15,679 |   |   | 5,515 |   |
| Recorded                as a component of other expenses following income (loss) from                operations:                           |   |   |   |   |   |   |   |   |   |   |
|     Impairment                and                related obligations of preferred security interest                    |   |   | -      |   |   | 9,789  |   |   | - |   |
|                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |
|     Total                Other Charges and Impairments                                                                 |   | $      | 2,767  |   | $      | 25,468 |   | $ | 5,515 |   |
|                                                                                                                                       |   |   |   |   |   |   |   |   |   |   |

| ·   | Accelerated                Vesting of Supplemental Retirement Plan Benefits and Guaranteed Bonuses                for 2004 |
|--------------------|----------------------------------------------------------------------------------------------------------------------------|

| ·   | Impairment                Charges |
|--------------------|-----------------------------------|

| ·   | Reserves                for Severance and Related Costs |
|--------------------|---------------------------------------------------------|

| ·   | Pension                Plan Curtailment |
|--------------------|-----------------------------------------|

| ·   | Consent                Solicitation Costs |
|--------------------|-------------------------------------------|

| ·   | Production                Facility Closure During                2003, the Company recorded an additional                charge of $121,000 relating to the closure of its Las Vegas manufacturing                facility that occurred in the fourth  quarter of 2002.                This charge                resulted principally from the Company’s inability to realize the expected                sublease income on the facility recorded in 2002 as an offset to                the                remaining lease obligation accrual. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Contract                Termination and Settlements |
|--------------------|-----------------------------------------------------|

| ·   | Impairment                and Related Obligations of Preferred Security                Interest |
|--------------------|-------------------------------------------------------------------------------------------------|

| ·   | Interest                expense was $1.7 million in 2005, compared to $2.2 million in 2004                and $2.9 million in 2003. The reduction in interest expense is principally                the result of scheduled annual principal payments of $8.6 million                made                annually in June of each year on the Company’s Senior Notes. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Interest                income was $697,000 in 2005 as compared to $1.2 million in 2004 and                $1.7 million in 2003. The decrease in interest income in 2005                compared to 2004 is principally the result of the absence of any                income in                2005 related to the Company’s preferred security interest in its former                Wall Décor segment, Prints Plus, partially offset by the impact of higher                interest rates earned on investable cash balances in 2005. In 2004,                interest income related to the Company’s preferred security interest in                Prints Plus amounting to $628,000 was recorded and then fully reserved                along with the preferred security by recording an expense for impairment                of related obligations of preferred security interest in the accompanying                Consolidated Statements of Operations. The decrease in interest income                in                2004 compared to 2003 is primarily due to lower average invested                cash                balances and the absence of interest income on an income tax refund                received and recorded in 2003, partially offset by the impact of                slightly                higher interest rates earned. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                loss from extinguishment of debt recorded in 2005 totaling $529,000                represents the payment of a make-whole fee of $457,000 and the write-off                of unamortized fees of $72,000, both related to the refinancing of                the                Company’s Senior Notes in the fourth quarter of 2005. This is more fully                discussed in the section of Management’s Discussion and Analysis entitled                “Net Cash Used in Investing Activities” which follows. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                income tax expense on earnings from continuing operations totaled                $4.4                million in 2005. The provision for income taxes from continuing operations                in 2004 and 2003 was a benefit of $2.2 million and an expense of                $3.2                million, respectively. These benefits/provisions resulted in effective                tax                rates of 40.7% in 2005, 12.9% in 2004 and 35.3% in 2003. The initiation                of                a dividend reinvestment plan to repatriate qualified earnings related                to                the Company’s Canadian subsidiary and amounting to $4.6 million increased                the effective tax rate by approximately 3.6% in 2005. The lower 2004                effective income tax rate resulted from the recording of a valuation                allowance on the Company’s foreign tax credit and capital loss carry                forwards, the tax effects of the Company’s foreign operations and a                realignment of the Company’s officer life insurance program. These benefit                reductions were partially offset by an increased current provision                relating to an assessment of taxes on prior years resulting from                an                Internal Revenue Service exam. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Net                losses from discontinued operations were $3.7 million in 2004 and                $4.6                million in 2003. These discontinued operations relate to the Company’s                previously existing Mexican and mobile photography operations and                Technology Development segment and are further discussed                below. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***LIQUIDITY      AND CAPITAL RESOURCES***

|  *thousands*                                        |   |   |   | 2005   |   | 2004    |   | 2003   |    |
|----------------------------------------------------------|--------|--------|--------|--------|--------|---------|--------|--------|---------|
|                                                     |   |   |   |   |   |    |   |   |    |
|  Net                cash provided by (used in):     |   |        |   |   |   |    |   |   |    |
| Operating                  activities (1)                |   |   |   |   | $      | 18,697  |   | $      | 13,738  |   | $ | 24,623 |   |
| Investing                  activities (2)                |   |   |   |   |   | (17,633 | )      |   | (6,626  | ) |   | (18,199 | ) |
| Financing                  activities                    |   |   |   |   |   | (1,223  | )      |   | (24,827 | ) |   | (13,929 | ) |
| Effect                  of exchange rate changes on cash |   |   |   |   |   | 545     |   |   | 587     |   |   | 594 |   |
| Net                  increase (decrease) in cash         |   |   |   |   | $      | 386     |   | $      | (17,128 | ) | $ | (6,911 | ) |
|                                                     |   |   |   |   |   |    |   |   |    |   |   |   |   |

**    **| (1)   | Includes                  cash flows used in discontinued operations of $2,739 and $7,495                  in 2004                  and 2003, respectively. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)   | Includes                  cash flows used in discontinued operations of $29 and $3,359 in                  2004 and                  2003, respectively. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|

**Net      Cash Provided By Operating Activities**

**Net      Cash Used In Investing Activities**

**Net      Cash Used In Financing Activities**

| ·   | Earnings                before interest, taxes, depreciation and amortization, as defined,                (“EBITDA”), |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                ratio of Funded Debt, as defined, to                EBITDA, |
|--------------------|--------------------------------------------------------------------------------|

| ·   | Net                worth, adjusted for issuance and repurchase                activities, |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | Capital                Expenditures, and  |
|--------------------|------------------------------------------------|

| ·   | The                ratio of EBITDA to certain Fixed Charges, as defined, for the most                recent                four fiscal quarters, calculated on the last day of each fiscal                quarter. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Off-Balance      Sheet Arrangements**

**Future      Cash Flows**

|                                                                 |   |                                                                  |   | **PAYMENTS                  DUE BY PERIOD** |   |    |   |
|----------------------------------------------------------------------|--------|-----------------------------------------------------------------------|--------|---------------------------------------------|--------|---------|--------|
| *thousands*                                                          |   |                                                                  |   |                                        |   |    |   |   |   | 2011                  & |   |
|                                                                 |   | Total                                                                 |   | 2006                                        |   | 2007-08 |   | 2009-10 |   | Beyond |   |
| Contractual                  obligations:                            |   |                                                                  |   |                                        |   |    |   |   |   |   |   |
|                                                                 |   |                                                                  |   |                                        |   |    |   |   |   |   |   |
| Long-term                  debt                                      |   | $                                                                     | 25,000 |                                        | $      | 8,333   |   | $ | 16,667 |   | $ | - |   | $ | - |   |
|                                                                 |   |                                                                  |   |                                        |   |    |   |   |   |   |   |   |   |   |   |   |
| Operating                  leases                                    |   |                                                                  | 2,571  |                                        |   | 1,178   |   |   | 1,117 |   |   | 276 |   |   | - |   |
|                                                                 |   |                                                                  |   |                                        |   |    |   |   |   |   |   |   |   |   |   |   |
| Purchase                  obligations for materials and services (1) |   |                                                                  | 4,288  |                                        |   | 3,511   |   |   | 712 |   |   | 65 |   |   | - |   |
|                                                                 |   |                                                                  |   |                                        |   |    |   |   |   |   |   |   |   |   |   |   |
| Other                  liabilities (2)                               |   |                                                                  | 730    |                                        |   | 730     |   |   | - |   |   | - |   |   | - |   |
|                                                                 |   |                                                                  |   |                                        |   |    |   |   |   |   |   |   |   |   |   |   |
| TOTAL                                                                |   | $                                                                     | 32,589 |                                        | $      | 13,752  |   | $ | 18,496 |   | $ | 341 |   | $ | - |   |
|                                                                 |   |                                                                  |   |                                        |   |    |   |   |   |   |   |   |   |   |   |   |
|                                                                 |   | **AMOUNT                  OF COMMITMENT EXPIRATION PER PERIOD**  |
| *thousands*                                                          |   |                                                                  |   |                                        |   |    |   |   |   |   |   |   |   |   | 2011                  & |   |
|                                                                 |   |                                                                  | Total  |                                        |   | 2006    |   |   | 2007-08 |   |   | 2009-10 |   |   | Beyond |   |
| Other                  commitments:                                  |   |                                                                  |   |                                        |   |    |   |   |   |   |   |   |   |   |   |   |
|                                                                 |   |                                                                  |   |                                        |   |    |   |   |   |   |   |   |   |   |   |   |
| Standby                  letters of credit (3)                       |   | $                                                                     | 6,309  |                                        | $      | 6,309   |   | $ | - |   | $ | - |   | $ | - |   |
|                                                                 |   |                                                                  |   |                                        |   |    |   |   |   |   |   |   |   |   |   |   |
| Contingent                  lease obligations (4)                    |   |                                                                  | 2,549  |                                        |   | 2,549   |   |   | - |   |   | - |   |   | - |   |
|                                                                 |   |                                                                  |   |                                        |   |    |   |   |   |   |   |   |   |   |   |   |
| TOTAL                                                                |   | $                                                                     | 8,858  |                                        | $      | 8,858   |   | $ | - |   | $ | - |   | $ | - |   |
|                                                                 |   |                                                                  |   |                                        |   |    |   |   |   |   |   |   |   |   |   |   |

| (1) | Amount                represents outstanding purchase                commitments at February 4, 2006. The purchase commitments principally                relate to future services to be received related to marketing, database                maintenance and telecommunications. In addition, they relate to                commitments for inventory purchases of such items as photographic                paper,                frames and accessories. Subsequent to February 4, 2006, the Company                entered into a two-year contract to purchase all photographic paper                for                central fulfillment from its current vendor at agreed-upon terms                and                pricing. The Company anticipates that it will spend approximately                $4.0                million per year under this                arrangement. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Amounts                consist primarily of accruals for severance and related costs.                Approximately $543,000 resulted from activity, which includes accruals                related to severance pay and related costs for executive retirements                and                dismissals, all recorded in our February 4, 2006 balance sheet and                described in Note 8 to the Consolidated Financial Statements. The                Company                is contesting certain of these severance amounts. Notwithstanding                the                potential reduction of certain of these amounts through settlement                negotiations and litigation, such amounts are recorded at the contractual                amounts due. Approximately $187,000 of other severance and related                costs                are recorded for employee headcount reductions in the normal course                of                business. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | We                  primarily use stand-by letters of credit to support our various                  self-insurance programs. The letters of credit generally have a                  one-year                  maturity and are renewed annually. |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | In                July 2001, the Company announced the completion of the sale of its                Wall                Décor segment, which included the ongoing guarantee of certain operating                real estate leases of Prints Plus. As of February 4, 2006, the maximum                future obligation to the Company under its guarantee of remaining                leases                is $2.6 million. To recognize the risk associated with these leases                based                upon the Company’s past experience with renegotiating lease obligations                and the significant deterioration in the financial performance of                Prints                Plus, including its bankruptcy filing, all of which is more fully                described in Note 13 to the Consolidated Financial Statements, the                Company                has recorded lease obligation reserves totaling $2.6 million at February                4, 2006. Based on the progress of the bankruptcy case to-date and                the                continued operations of selected locations of Prints Plus, the Company                believes that the $2.6 million reserve is adequate to cover the potential                losses to be realized under the Company’s operating lease guarantees. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Liquidity**

***ACCOUNTING      PRONOUNCEMENTS AND POLICIES***

**Adoption      of New Accounting Standards**

**Application      of Critical Accounting Policies**

*Item      7A.*
*Quantitative      and Qualitative Disclosures About Market      Risk*

*Item      8.    Financial Statements and      Supplemental Data*

| (a)    | INDEX                  TO FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA |   |   |
|--------|----------------------------------------------------------------------|--------|--------|
|   |                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|   |                                                                 | -      |   | Report                  of Independent Registered Public Accounting Firm |   |   | 33 |
|   |                                                                 | -      |   | Consolidated                  Balance Sheets as of February 4, 2006 and February 5, 2005 |   | 34-35 |
|   |                                                                 | -      |   | Consolidated                  Statements of Operations for the fiscal years ended February                  4, 2006, February 5, 2005 and February 7, 2004 | 36 |
|   |                                                                 | -      |   | Consolidated                  Statements of Changes in Stockholders' Equity for the fiscal years                  ended                  February 4, 2006,  February 5, 2005 and                  February 7, 2004 |   | 37 |
|   |                                                                 | -      |   | Consolidated                  Statements of Cash Flows for the fiscal years ended February 4,                  2006,                  February                  5, 2005 and February 7, 2004 | 38-40 |
|   |                                                                 | -      |   | Notes                  to Consolidated Financial Statements |   |   |   | 41-69 |

**Report      of Independent Registered Public Accounting Firm**

*Internal      Control - Integrated Framework*

**CPI      CORP.**

**Consolidated      Balance Sheets - Assets**

| *thousands*                                                                                                                       |   | February                  4, 2006 |    | February                  5, 2005 |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|---------|-----------------------------------|--------|
|                                                                                                                              |   |                              |    |                              |   |
| **ASSETS**                                                                                                                        |   |                              |    |                              |   |
| Current                  assets:                                                                                                  |   |                              |    |                              |   |
|     Cash                  and cash equivalents                                                                |   | $                                 | 34,269  |                              | $      | 33,883 |   |
|     Restricted                  cash                                                                          |   |                              | 1,000   |                              |   | 6,154 |   |
|     Accounts                  receivable:                                                                     |   |                              |    |                              |   |   |   |
|         Due                  from licensor stores                                         |   |                              | 7,944   |                              |   | 7,365 |   |
|         Other                                                                             |   |                              | 289     |                              |   | 326 |   |
|     Inventories                                                                                               |   |                              | 9,271   |                              |   | 10,521 |   |
|     Prepaid                  expenses and other current assets                                                |   |                              | 4,958   |                              |   | 6,905 |   |
|     Deferred                  tax                  assets                                                     |   |                              | 11,898  |                              |   | 7,714 |   |
|                                                                                                                              |   |                              |    |                              |   |   |   |
|     Total                  current assets                                                                     |   |                              | 69,629  |                              |   | 72,868 |   |
|                                                                                                                              |   |                              |    |                              |   |   |   |
| Property                  and equipment:                                                                                          |   |                              |    |                              |   |   |   |
|     Land                                                                                                      |   |                              | 2,765   |                              |   | 2,765 |   |
|     Building                  improvements                                                                    |   |                              | 26,472  |                              |   | 26,684 |   |
|     Leasehold                  improvements                                                                   |   |                              | 4,531   |                              |   | 6,005 |   |
|     Photographic,                  sales and manufacturing equipment                                          |   |                              | 126,132 |                              |   | 183,979 |   |
|         Total                                                                             |   |                              | 159,900 |                              |   | 219,433 |   |
|     Less                  accumulated depreciation and amortization                                           |   |                              | 118,618 |                              |   | 177,775 |   |
|         Property                  and                  equipment, net                     |   |                              | 41,282  |                              |   | 41,658 |   |
| Assets                  of business transferred under contractual arrangements:                                                   |   |                              |    |                              |   |   |   |
|     Preferred                  security                                                                       |   |                              | 7,000   |                              |   | 7,000 |   |
|     Accrued                  interest on preferred security                                                   |   |                              | 1,317   |                              |   | 689 |   |
|     Impairment                  reserve related to preferred security interest                                |   |                              | (8,317  | )                                 |   | (7,689 | ) |
| Other                  investments - supplemental retirement plan                                                                 |   |                              | 3,706   |                              |   | 6,141 |   |
| Deferred                  tax assets                                                                                              |   |                              | 7,727   |                              |   | 12,815 |   |
| Other                  assets, net of amortization of $1,359 at both  February                  4, 2006 and February 5, 2005 |   |                              | 1,317   |                              |   | 1,618 |   |
|                                                                                                                              |   |                              |    |                              |   |   |   |
| **    TOTAL                  ASSETS**                                                                         |   | $                                 | 123,661 |                              | $      | 135,100 |   |
|                                                                                                                              |   |                              |    |                              |   |   |   |
| *See                  accompanying notes to consolidated financial                  statements.*                                  |   |                              |    |                              |   |   |   |

**CPI      CORP.**

**Consolidated      Balance Sheets - Liabilities and Stockholders’ Equity**

| *thousands,                  except share and per share data*                                                                                                                                                                                          |   | February                  4, 2006 |     | February                  5, 2005 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|----------|-----------------------------------|--------|
|                                                                                                                                                                                                                                                   |   |                              |     |                              |   |
| **LIABILITIES**                                                                                                                                                                                                                                        |   |                              |     |                              |   |
| Current                  liabilities:                                                                                                                                                                                                                  |   |                              |     |                              |   |
|     Current                  maturities of long-term debt                                                                                                                                                                          |   | $                                 | 8,333    |                              | $      | 8,580 |   |
|     Accounts                  payable                                                                                                                                                                                              |   |                              | 9,068    |                              |   | 13,011 |   |
|     Accrued                  employment costs                                                                                                                                                                                      |   |                              | 13,016   |                              |   | 12,463 |   |
|     Customer                  deposit liability                                                                                                                                                                                    |   |                              | 18,315   |                              |   | 21,828 |   |
|     Accrued                  severance                                                                                                                                                                                             |   |                              | 730      |                              |   | 4,205 |   |
|     Income                  taxes payable                                                                                                                                                                                          |   |                              | 1,263    |                              |   | 2,872 |   |
|     Sales                  taxes payable                                                                                                                                                                                           |   |                              | 2,435    |                              |   | 1,886 |   |
|     Accrued                  advertising expenses                                                                                                                                                                                  |   |                              | 768      |                              |   | 1,568 |   |
|     Accrued                  expenses and other liabilities                                                                                                                                                                        |   |                              | 4,336    |                              |   | 5,348 |   |
|                                                                                                                                                                                                                                                   |   |                              |     |                              |   |   |   |
|     Total                  current liabilities                                                                                                                                                                                     |   |                              | 58,264   |                              |   | 71,761 |   |
|                                                                                                                                                                                                                                                   |   |                              |     |                              |   |   |   |
| Long-term                  debt, less current maturities                                                                                                                                                                                               |   |                              | 15,747   |                              |   | 17,050 |   |
| Accrued                  pension obligations                                                                                                                                                                                                           |   |                              | 15,813   |                              |   | 13,993 |   |
| Supplemental                  retirement plan obligations                                                                                                                                                                                              |   |                              | 3,833    |                              |   | 4,512 |   |
| Customer                  deposit liability                                                                                                                                                                                                            |   |                              | 3,335    |                              |   | 4,334 |   |
| Other                  liabilities                                                                                                                                                                                                                     |   |                              | 559      |                              |   | 564 |   |
|                                                                                                                                                                                                                                                   |   |                              |     |                              |   |   |   |
|     Total                  liabilities                                                                                                                                                                                             |   |                              | 97,551   |                              |   | 112,214 |   |
|                                                                                                                                                                                                                                                   |   |                              |     |                              |   |   |   |
| **STOCKHOLDERS'                  EQUITY**                                                                                                                                                                                                              |   |                              |     |                              |   |   |   |
| Preferred                  stock, no par value, 1,000,000 shares authorized; no shares                  outstanding                                                                                                                                    |   |                              | -        |                              |   | - |   |
| Preferred                  stock, Series A, no par value, 200,000 shares authorized; no shares                  outstanding                                                                                                                            |   |                              |  -  |                              |   | - |   |
| Common                  stock, $.40 par value, 50,000,000 shares authorized; 18,569,964                  and                  18,432,779 shares issued     at                  February 6, 2004 and February 5, 2005, respectively |   | 7,428                             |     |                              | 7,373  |   |
| Additional                  paid-in capital                                                                                                                                                                                                            |   |                              | 55,588   |                              |   | 53,301 |   |
| Retained                  earnings                                                                                                                                                                                                                     |   |                              | 208,183  |                              |   | 206,812 |   |
| Accumulated                  other comprehensive loss                                                                                                                                                                                                  |   |                              | (11,171  | )                                 |   | (10,505 | ) |
|                                                                                                                                                                                                                                                   |   |                              | 260,028  |                              |   | 256,981 |   |
| Treasury                  stock - at cost, 10,639,543 and 10,672,236 shares at February                  4, 2006 and February 5, 2005, respectively                                                                                                    |   |                              | (233,541 | )                            |   | (234,031 | )  |
| Unamortized                  deferred compensation- restricted stock                                                                                                                                                                                   |   |                              | (377     | )                                 |   | (64 | ) |
|                                                                                                                                                                                                                                                   |   |                              |     |                              |   |   |   |
| Total                  stockholders' equity                                                                                                                                                                                                            |   |                              | 26,110   |                              |   | 22,886 |   |
|                                                                                                                                                                                                                                                   |   |                              |     |                              |   |   |   |
| **TOTAL                  LIABILITIES AND STOCKHOLDERS' EQUITY**                                                                                                                                                                                        |   | $                                 | 123,661  |                              | $      | 135,100 |   |
|                                                                                                                                                                                                                                                   |   |                              |     |                              |   |   |   |
| *See                  accompanying notes to consolidated financial                  statements.*                                                                                                                                                       |   |                              |     |                              |   |   |   |

**CPI      CORP.**

**Consolidated      Statements of Operations**

| *thousands,                  except share and per share data*                                                                                     |   | 2005   |      | 2004   |   | 2003            |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|-----------------|---------|
|                                                                                                                                              |   |   |      |   |   |            |    |
| **Net                  sales**                                                                                                                    |   | $      | 291,984   |   | $      | 281,865         |    | $ | 299,044 |   |
|                                                                                                                                              |   |   |      |   |   |            |    |   |   |   |
| **Cost                  and expenses:**                                                                                                           |   |   |      |   |   |            |    |   |   |   |
|     Cost                  of                  sales (exclusive of depreciation and amortization shown                  below) |   |   | 35,129    |   |   | 36,899          |    |   | 40,070 |   |
|     Selling,                  general and administrative expenses                                                             |   |   | 222,094   |   |   | 219,381         |    |   | 227,251 |   |
|     Depreciation                  and amortization                                                                            |   |   | 19,952    |   |   | 16,377          |    |   | 16,793 |   |
|     Other                  charges and impairments                                                                            |   |   | 2,767     |   |   | 15,679          |    |   | 5,515 |   |
|                                                                                                                                              |   |   | 279,942   |   |   | 288,336         |    |   | 289,629 |   |
|                                                                                                                                              |   |   |      |   |   |            |    |   |   |   |
| Income                  (loss) from continuing operations                                                                                         |   |   | 12,042    |   |   | (6,471          | )       |   | 9,415 |   |
|                                                                                                                                              |   |   |      |   |   |            |    |   |   |   |
| Interest                  expense                                                                                                                 |   |   | 1,680     |   |   | 2,180           |    |   | 2,949 |   |
| Interest                  income                                                                                                                  |   |   | 697       |   |   | 1,226           |    |   | 1,709 |   |
| Impairment                  and related obligations of preferred security interest                                                                |   |   | -         |   |   | 9,789           |    |   | - |   |
| Loss                  from debt extinguishment                                                                                                    |   |   | 529       |   |   | -               |    |   | - |   |
| Other                  income, net                                                                                                                |   |   | 247       |   |   | 263             |    |   | 850 |   |
| Earnings                  (loss) from continuing operations before income tax expense                  (benefit)                                  |   |   | 10,777    |   |   | (16,951         | )       |   | 9,025 |   |
|                                                                                                                                              |   |   |      |   |   |            |    |   |   |   |
| Income                  tax expense (benefit)                                                                                                     |   |   | 4,388     |   |   | (2,189          | )       |   | 3,183 |   |
|                                                                                                                                              |   |   |      |   |   |            |    |   |   |   |
| Net                  earnings (loss) from continuing operations                                                                                   |   |   | 6,389     |   |   | (14,762         | )       |   | 5,842 |   |
|                                                                                                                                              |   |   |      |   |   |            |    |   |   |   |
| Net                  loss from discontinued operations, net of income tax benefit of$2,201                  in 2004 and $2,518 in 2003            |   |   | -         |   |   | (3,746          | )  |   | (4,624 | )  |
|                                                                                                                                              |   |   |      |   |   |            |    |   |   |   |
| **NET                  EARNINGS (LOSS)**                                                                                                          |   | $      | 6,389     |   | $      | (18,508         | )       | $ | 1,218 |   |
|                                                                                                                                              |   |   |      |   |   |            |    |   |   |   |
| **NET                  EARNINGS (LOSS) PER COMMON SHARE**                                                                                         |   |   |      |   |   |            |    |   |   |   |
|                                                                                                                                              |   |   |      |   |   |            |    |   |   |   |
| Net                  earnings (loss) per share from continuing operations -                  diluted                                              |   | $      | 0.81      |   | $      | (1.87           | )       | $ | 0.72 |   |
| Net                  loss per share from discontinued operations - diluted                                                                        |   |   | -         |   |   | (0.48           | )       |   | (0.57 | ) |
| Net                  earnings (loss) per share - diluted                                                                                          |   | $      | 0.81      |   | $      | (2.35           | )       | $ | 0.15 |   |
|                                                                                                                                              |   |   |      |   |   |            |    |   |   |   |
| Net                  earnings (loss) per share from continuing operations -                  basic                                                |   | $      | 0.81      |   | $      | (1.87           | )       | $ | 0.72 |   |
| Net                  loss per share from discontinued operations - basic                                                                          |   |   | -         |   |   | (0.48           | )       |   | (0.57 | ) |
| Net                  earnings (loss) per share - basic                                                                                            |   | $      | 0.81      |   | $      | (2.35           | )       | $ | 0.15 |   |
|                                                                                                                                              |   |   |      |   |   |            |    |   |   |   |
| Dividends                  per share                                                                                                              |   | $      | 0.64      |   | $      | 0.64            |    | $ | 0.60 |   |
|                                                                                                                                              |   |   |      |   |   |            |    |   |   |   |
| Weighted                  average number of common and common equivalent shares                  outstanding-diluted                              |   |   | 7,881,060 |   |   | 7,888,404       |    |   | 8,148,164 |   |
| Weighted                  average number of common and common equivalent shares                  outstanding-basic                                |   |   | 7,854,192 |   |   |  7,888,404 |    |   | 8,081,619 |   |
|                                                                                                                                              |   |   |      |   |   |            |    |   |   |   |
| *See                  accompanying notes to consolidated financial                  statements.*                                                  |   |   |      |   |   |            |    |   |   |   |

**CPI      CORP.**

**Consolidated      Statements of Changes in Stockholders' Equity**

|                                                                                                                                                                                          |   |   |   | Additional |   |     |   | Accumulatedother               |    | Treasury                 |   | Deferredcompensation                  - |   |   |     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|------------|--------|----------|--------|--------------------------------|---------|--------------------------|--------|-----------------------------------------|--------|--------|----------|
| *thousands,                  except share and per share data*                                                                                                                                 |   | Common |   | paid-in    |   | Retained |   | comprehensive                  |    | stock,                   |   | restricted                              |   |   |     |
|                                                                                                                                                                                          |   | stock  |   | capital    |   | earnings |   | income                  (loss) |    | at                  cost |   | stock                                   |   | Total  |     |
|                                                                                                                                                                                          |   |   |   |       |   |     |   |                           |    |                     |   |                                    |   |   |     |
| Balance                  at February 1, 2003                                                                                                                                                  |   | $      | 7,315  |       | $      | 51,211   |   | $                              | 234,022 |                     | $      | (10,703                                 | )      | $      | (227,642 | ) | $ | (20 | ) | $ | 54,183 |   |
|                                                                                                                                                                                          |   |   |   |       |   |     |   |                           |    |                     |   |                                    |   |   |     |   |   |   |   |   |   |   |
| Net                  earnings                                                                                                                                                                 |   |   | -      |       |   | -        |   |                           | 1,218   |                     |   | -                                       |   |   | -        |   |   | - |   |   | 1,218 |   |
| Total                  other comprehensive income, net of tax effect                                                                                                                          |   |   | -      |       |   | -        |   |                           | -       |                     |   | 1,104                                   |   |   | -        |   |   | - |   |   | 1,104 |   |
|     Total                  comprehensive income                                                                                                                           |   |   |   |       |   |     |   |                           |    |                     |   |                                    |   |   |     |   |   |   |   |   | 2,322 |   |
| Issuance                  of common stock to employee stock plans and option                                                                                                                  |   |   |   |       |   |     |   |                           |    |                     |   |                                    |   |   |     |   |   |   |   |   |   |   |
|     exercises                  (72,232 shares)                                                                                                                            |   |   | 29     |       |   | 1,061    |   |                           | -       |                     |   | -                                       |   |   | -        |   |   | - |   |   | 1,090 |   |
| Dividends                  ($0.60 per common share)                                                                                                                                           |   |   | -      |       |   | -        |   |                           | (4,846  | )                        |   | -                                       |   |   | -        |   |   | - |   |   | (4,846 | ) |
| Purchase                  of treasury stock (54,200 shares)                                                                                                                                   |   |   | -      |       |   | -        |   |                           | -       |                     |   | -                                       |   |   | (935     | ) |   | - |   |   | (935 | ) |
| Amortization                  of deferred compensation - restricted stock                                                                                                                     |   |   | -      |       |   |  -  |   |                           |  - |                     |   | -                                       |   |   | -        |   |   | 12 |   |   | 12 |   |
|                                                                                                                                                                                          |   |   |   |       |   |     |   |                           |    |                     |   |                                    |   |   |     |   |   |   |   |   |   |   |
| Balance                  at February 7, 2004                                                                                                                                                  |   | $      | 7,344  |       | $      | 52,272   |   | $                              | 230,394 |                     | $      | (9,599                                  | )      | $      | (228,577 | ) | $ | (8 | ) | $ | 51,826 |   |
|                                                                                                                                                                                          |   |   |   |       |   |     |   |                           |    |                     |   |                                    |   |   |     |   |   |   |   |   |   |   |
| Net                  loss                                                                                                                                                                     |   |   | -      |       |   | -        |   |                           | (18,508 | )                        |   | -                                       |   |   | -        |   |   | - |   |   | (18,508 | ) |
| Total                  other comprehensive loss, net of tax effect                                                                                                                            |   |   | -      |       |   | -        |   |                           | -       |                     |   | (906                                    | )      |   | -        |   |   | - |   |   | (906 | ) |
|     Total                  comprehensive loss                                                                                                                             |   |   |   |       |   |     |   |                           |    |                     |   |                                    |   |   |     |   |   |   |   |   | (19,414 | ) |
| Issuance                  of common stock to employee benefit plans, restricted                                                                                                               |   |   |   |       |   |     |   |                           |    |                     |   |                                    |   |   |     |   |   |   |   |   |   |   |
|     stock                  awards and option                  exercises (99,588 shares),                                                                                  |   |   |   |       |   |     |   |                           |    |                     |   |                                    |   |   |     |   |   |   |   |   |   |   |
|     net                  of                  tax effect                                                                                                                   |   |   | 29     |       |   | 1,029    |   |                           | -       |                     |   | -                                       |   |   | 554      |   |   | (70 | ) |   | 1,542 |   |
| Dividends                  ($0.64 per common share)                                                                                                                                           |   |   | -      |       |   | -        |   |                           | (5,074  | )                        |   | -                                       |   |   | -        |   |   | - |   |   | (5,074 | ) |
| Purchase                  of treasury stock, at cost                  (406,780 shares)                                                                                                        |   |   | -      |       |   | -        |   |                           | -       |                     |   | -                                       |   |   | (6,008   | )  |   | - |   |   | (6,008 | ) |
| Amortization                  of deferred compensation - restricted stock                                                                                                                     |   |   | -      |       |   | -        |   |                           | -       |                     |   | -                                       |   |   | -        |   |   | 14 |   |   | 14 |   |
|                                                                                                                                                                                          |   |   |   |       |   |     |   |                           |    |                     |   |                                    |   |   |     |   |   |   |   |   |   |   |
| Balance                  at February 5, 2005                                                                                                                                                  |   | $      | 7,373  |       | $      | 53,301   |   | $                              | 206,812 |                     | $      | (10,505                                 | )      | $      | (234,031 | ) | $ | (64 | ) | $ | 22,886 |   |
|                                                                                                                                                                                          |   |   |   |       |   |     |   |                           |    |                     |   |                                    |   |   |     |   |   |   |   |   |   |   |
| Net                  earnings                                                                                                                                                                 |   |   | -      |       |   | -        |   |                           | 6,389   |                     |   | -                                       |   |   | -        |   |   | - |   |   | 6,389 |   |
| Total                  other comprehensive loss, net of tax effect                                                                                                                            |   |   | -      |       |   | -        |   |                           | -       |                     |   | (666                                    | )      |   | -        |   |   | - |   |   | (666 | ) |
|     Total                  comprehensive income                                                                                                                           |   |   |   |       |   |     |   |                           |    |                     |   |                                    |   |   |     |   |   |   |   |   | 5,723 |   |
| Issuance                  of common stock to employee benefit plans,                                                                                                                          |   |   |   |       |   |     |   |                           |    |                     |   |                                    |   |   |     |   |   |   |   |   |   |   |
|     restricted                    stock awards and option                    exercises (169,878     shares),net                    of tax effect |   |   | 55     |       |   | 2,287    |   |                           | -       |                     |   | -                                       |   |   | 490      |   |   | (1,041 | ) |   | 1,791 |   |
| Dividends                  ($0.64 per common share)                                                                                                                                           |   |   | -      |       |   | -        |   |                           | (5,018  | )                        |   | -                                       |   |   | -        |   |   | - |   |   | (5,018 | ) |
| Amortization                  of deferred compensation - restricted stock                                                                                                                     |   |   | -      |       |   | -        |   |                           | -       |                     |   | -                                       |   |   | -        |   |   | 728 |   |   | 728 |   |
| Balance                  at February 4, 2006                                                                                                                                                  |   | $      | 7,428  |       | $      | 55,588   |   | $                              | 208,183 |                     | $      | (11,171                                 | )      | $      | (233,541 | ) | $ | (377 | ) | $ | 26,110 |   |
|                                                                                                                                                                                          |   |   |   |       |   |     |   |                           |    |                     |   |                                    |   |   |     |   |   |   |   |   |   |   |
| *See                  accompanying notes to consolidated financial                  statements.*                                                                                              |   |   |   |       |   |     |   |                           |    |                     |   |                                    |   |   |     |   |   |   |

**CPI      CORP.**

**Consolidated      Statements of Cash Flows**

| *thousands*                                                                                                                 |   | 2005   |   |   |   | 2004      |   | 2003      |   |
|-----------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|-----------|--------|-----------|--------|
|                                                                                                                        |   |   |   |   |   | (Revised) |   | (Revised) |   |
| Reconciliation                  of net earnings (loss) to cash flows provided by operating                  activities:     |   |   |   |   |   |      |   |      |   |
|                                                                                                                        |   |   |   |   |   |      |   |      |   |
| Net                  earnings (loss)                                                                                        |   | $      | 6,389  |   |   |      | $      | (18,508   | )      | $ | 1,218 |   |
|                                                                                                                        |   |   |   |   |   |      |   |      |   |   |   |   |
| Adjustments                  for items not requiring cash:                                                                  |   |   |   |   |   |      |   |      |   |   |   |   |
|     Depreciation                  and amortization                                                      |   |   | 19,952 |   |   |      |   | 16,377    |   |   | 16,793 |   |
|     Loss                  from discontinued operations                                                  |   |   | -      |   |   |      |   | 3,746     |   |   | 4,624 |   |
|     Stock-based                  compensation expense                                                   |   |   | 811    |   |   |      |   | 190       |   |   | 12 |   |
|     Loss                  from extinguishment of debt                                                   |   |   | 529    |   |   |      |   | -         |   |   | - |   |
|     Loss                  on                  disposition of property, plant and equipment              |   |   | 507    |   |   |      |   | 1,437     |   |   | 303 |   |
|     Gain                  on                  sale of assets held for sale                              |   |   | (9     | )      |   |      |   | (391      | )      |   | - |   |
|     Deferred                  income                  tax provision                                     |   |   | 2,353  |   |   |      |   | (5,653    | )      |   | 242 |   |
|     Pension,                  supplemental retirement plan and profit sharing expense                   |   |   | 2,198  |   |   |      |   | 2,457     |   |   | 4,026 |   |
|     Accrued                  interest on Preferred Security                                             |   |   | -      |   |   |      |   | (629      | )      |   | 5 |   |
|     Impairment                  and                  related obligations of preferred security interest |   |   | -      |   |   |      |   | 9,789     |   |   | - |   |
|     Accelerated                  vesting of supplemental retirement plan benefits                       |   |   | -      |   |   |      |   | 3,338     |   |   | - |   |
|     Other                  impairment charges                                                           |   |   | -      |   |   |      |   | 5,083     |   |   | - |   |
|     Pension                  plan curtailment expense                                                   |   |   | -      |   |   |      |   | -         |   |   | 2,385 |   |
|     Other                                                                                               |   |   | 323    |   |   |      |   | 40        |   |   | 53 |   |
|                                                                                                                        |   |   |   |   |   |      |   |      |   |   |   |   |
| Increase                  (decrease) in cash flow from operating assets and                  liabilities:                   |   |   |   |   |   |      |   |      |   |   |   |   |
|     Receivables                  and                  inventories                                       |   |   | 709    |   |   |      |   | 683       |   |   | 1,519 |   |
|     Refundable                  income taxes                                                            |   |   | -      |   |   |      |   | 2,166     |   |   | 4,646 |   |
|     Prepaid                  expenses and other current assets                                          |   |   | 1,436  |   |   |      |   | (345      | )      |   | (880 | ) |
|     Accounts                  payable                                                                   |   |   | (3,943 | )      |   |      |   | (2,425    | )      |   | 5,146 |   |
|     Contribution                  to                  pension plan                                      |   |   | (2,050 | )      |   |      |   | -         |   |   | - |   |
|     Supplemental                  retirement plan payments                                              |   |   | (989   | )      |        |      |   | (1,517    | )      |   | (3,574 | ) |
|     Accrued                  expenses and other liabilities                                             |   |   | (4,098 | )      |   |      |   | 952       |   |   | (3,112 | ) |
|     Income                  taxes payable                                                               |   |   | (1,609 | )      |   |      |   | 2,872     |   |   | - |   |
|     Deferred                  revenues and related costs                                                |   |   | (3,856 | )      |   |      |   | (2,899    | )      |   | (2,887 | ) |
|     Other                                                                                               |   |   | 44     |   |   |      |   | (286      | )      |   | 1,599 |   |
|                                                                                                                        |   |   |   |   |   |      |   |      |   |   |   |   |
| Cash                  flows provided by continuing operations                                                               |   |   | 18,697 |   |   |      |   | 16,477    |   |   | 32,118 |   |
| Cash                  flows used in discontinued operations                                                                 |   |   | -      |   |   |      |   | (2,739    | )      |   | (7,495 | ) |
| Cash                  flows provided by operating activities                                                                |   | $      | 18,697 |   |   |      | $      | 13,738    |   | $ | 24,623 |   |
|                                                                                                                        |   |   |   |   |   |      |   |      |   |   |   |   |
| *See                  accompanying notes to consolidated financial                  statements.*                            |   |   |   |   |   |      |   |      |   |   |   |   |

**CPI      CORP.**

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

|                                                                                                                               |   | 2005   |    | 2004      |   | 2003      |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|-----------|--------|-----------|--------|
| *thousands*                                                                                                                        |   |   |    | (Revised) |   | (Revised) |   |
|                                                                                                                               |   |   |    |      |   |      |   |
| Cash                  flows provided by operating activities                                                                       |   | $      | 18,697  |      | $      | 13,738    |   | $ | 24,623 |   |
|                                                                                                                               |   |   |    |      |   |      |   |   |   |   |
| Cash                  flows provided by (used in) financing activities:                                                            |   |   |    |      |   |      |   |   |   |   |
|     Repayment                  of                  long-term obligations                                       |   |   | (25,680 | )         |   | (8,580    | )      |   | (8,580 | ) |
|     Proceeds                  from                  long-term borrowings                                       |   |   | 25,000  |      |   | -         |   |   | - |   |
|     Payment                  of debt issuance costs                                                            |   |   | (1,087  | )         |   | -         |   |   | - |   |
|     Make-whole                  payment to extinguish long-term debt                                           |   |   | (457    | )         |   | -         |   |   | - |   |
|     Restricted                  cash                  - collateral for outstanding letters of credit           |   |   | 6,154   |      |   | (6,154    | )      |   | - |   |
|     Restricted                  cash                  - compensating balance under Credit Agreement            |   |   | (1,000  | )         |   | -         |   |   | - |   |
|     Proceeds                  from                  borrowings against cash surrender value of life insurance  |   |   | -       |      |   | -         |   |   | 289 |   |
|     Repayment                  of                  borrowings against cash surrender value of life insurance   |   |   | -       |      |   | -         |   |   | (337 | ) |
|     Issuance                  of                  common stock to employee stock plans and option exercises    |   |   | 865     |      |   | 989       |   |   | 480 |   |
|     Cash                  dividends                                                                            |   |   | (5,018  | )         |   | (5,074    | )      |   | (4,846 | ) |
|     Purchase                  of                  treasury stock                                               |   |   | -       |      |   | (6,008    | )      |   | (935 | ) |
|                                                                                                                               |   |   |    |      |   |      |   |   |   |   |
|     Cash                  flows used in financing activities                                                   |   |   | (1,223  | )         |   | (24,827   | )      |   | (13,929 | ) |
|                                                                                                                               |   |   |    |      |   |      |   |   |   |   |
| Cash                  flows (used in) provided by investing activities:                                                            |   |   |    |      |   |      |   |   |   |   |
|     Additions                  to                  property and equipment                                      |   |   | (20,235 | )         |   | (15,157   | )      |   | (19,405 | ) |
|     Proceeds                  from                  sale of property and equipment                             |   |   | 118     |      |   | 362       |   |   | - |   |
|     Proceeds                  from                  sale of assets held for sale                               |   |   | 49      |      |   | 932       |   |   | - |   |
|     Redemptions                  of                  preferred security                                        |   |   | -       |      |   | -         |   |   | 2,500 |   |
|     Changes                  in loan receivable:                                                               |   |   |    |      |   |      |   |   |   |   |
|         Borrowings                                                                         |   |   | -       |      |   | (43,380   | )      |   | (61,079 | ) |
|         Repayments                                                                         |   |   | -       |      |   | 45,295    |   |   | 59,639 |   |
|     Increase                  in                  assets held by Rabbi Trust                                   |   |   | (286    | )         |   | (455      | )      |   | (2,843 | ) |
|     Proceeds                  from                  Rabbi Trust used for supplemental retirement plan payments |   |   | 891     |      |   | 2,006     |   |   | 6,348 |   |
|     Distribution                  of                  Rabbi Trust funds in excess of related obligations       |   |   | 1,830   |      |   | 3,800     |   |   | - |   |
|                                                                                                                               |   |   |    |      |   |      |   |   |   |   |
|     Cash                  flows used in investing activities - continuing operations                           |   |   | (17,633 | )         |   | (6,597    | )      |   | (14,840 | ) |
|                                                                                                                               |   |   |    |      |   |      |   |   |   |   |
|     Cash                  flows used in investing activities - discontinued                  operations        |   |   | -       |      |   | (29       | )      |   | (3,359 | ) |
|                                                                                                                               |   |   |    |      |   |      |   |   |   |   |
|     Cash                  flows used in investing activities                                                   |   |   | (17,633 | )         |   | (6,626    | )      |   | (18,199 | ) |
|                                                                                                                               |   |   |    |      |   |      |   |   |   |   |
| Effect                  of exchange rate changes on cash and cash equivalents                                                      |   |   | 545     |      |   | 587       |   |   | 594 |   |
|                                                                                                                               |   |   |    |      |   |      |   |   |   |   |
| Net                  increase (decrease) in cash and cash equivalents                                                              |   |   | 386     |      |   | (17,128   | )      |   | (6,911 | ) |
|                                                                                                                               |   |   |    |      |   |      |   |   |   |   |
| **Cash                  and cash equivalents at beginning of year**                                                                |   |   | 33,883  |      |   | 51,011    |   |   | 57,922 |   |
|                                                                                                                               |   |   |    |      |   |      |   |   |   |   |
| **Cash                  and cash equivalents at end of year**                                                                      |   | $      | 34,269  |      | $      | 33,883    |   | $ | 51,011 |   |
|                                                                                                                               |   |   |    |      |   |      |   |   |   |   |

**CPI      CORP.**

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

|                                                                                                                                                |   | 2005   |   | 2004      |   | 2003      |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|-----------|--------|-----------|--------|
| *thousands*                                                                                                                                         |   |   |   | (Revised) |   | (Revised) |   |
|                                                                                                                                                |   |   |   |      |   |      |   |
| Supplemental                  cash flow information:                                                                                                |   |   |   |      |   |      |   |
|     Interest                  paid                                                                                              |   | $      | 1,496  |      | $      | 2,236     |   | $ | 2,907 |   |
|     Income                  taxes paid                                                                                          |   | $      | 4,668  |      | $      | 321       |   | $ | 1,519 |   |
| Supplemental                  non-cash financing activities:                                                                                        |   |   |   |      |   |      |   |   |   |   |
|     Issuance                  of                  common stock under the employee Profit Sharing Plan                           |   | $      | -      |      | $      | -         |   | $ | 610 |   |
|     Issuance                  of                  treasury stock under the employee Profit Sharing Plan                         |   | $      | 490    |      | $      | 554       |   | $ | - |   |
|     Issuance                  of                  restricted and unrestricted stock to employees and                  directors |   | $      | 1,300  |      | $      | 70        |   | $ | - |   |
|     Repayment                  of                  borrowings against cash surrender value of life                              |   |   |   |      |   |      |   |   |   |   |
|         insurance                  via                  liquidation of related policies                     |   | $      | -      |      | $      | 1,548     |   | $ | - |   |
|     Executive                  retirement stock option modification                                                             |   | $      | 177    |      | $      | -         |   | $ | - |   |
|                                                                                                                                                |   |   |   |      |   |      |   |   |   |   |
| *See                  accompanying notes to consolidated financial                  statements.*                                                    |   |   |   |      |   |      |   |   |   |   |

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

**NOTE      1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**Description      of Business**

**Basis      of Presentation**

**Fiscal      Year**

| Fiscal                  year |   | Ended                             |   | Weeks  |
|------------------------------|--------|-----------------------------------|--------|--------|
|                         |   |                              |   |   |
| 2005                         |   | February                  4, 2006 |   | 52     |
| 2004                         |   | February                  5, 2005 |   | 52     |
| 2003                         |   | February                  7, 2004 |   | 53     |

**Business      Concentrations**

**CPI      CORP.**

**Notes      to Consolidated Financial Statements **

**Use      of Estimates**

**Foreign      Currency Translations **

**Cash      and Cash Equivalents**

**Accounts      Receivable**

**Inventories**

**Property      and Equipment**

|  Building improvements                           |   |  15 to 19 years |
|-------------------------------------------------------|--------|----------------------|
|  Leasehold improvements                          |   |  5 to 15 years  |
|  Photographic, sales and manufacturing equipment |   |  2 to 10 years  |

**CPI      CORP.**

**Notes      to Consolidated Financial Statements **

**Long-lived      Asset Recoverability**

**Self-Insurance      Reserves**

**Revenue      Recognition and Deferred Costs**

**Advertising      Costs**

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

**Defined      Benefit Plans**

**Income      Taxes**

**Stock-based      Compensation Plans**

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

| *thousands,                  except per share data*                                                                                                                                                                                                                           |   | 2005   |   | 2004   |   | 2003    |    |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|---------|---------|
|                                                                                                                                                                                                                                                                          |   |   |   |   |   |    |    |
| Net                  earnings (loss) - as reported                                                                                                                                                                                                                            |   | $      | 6,389  |   | $      | (18,508 | )       | $ | 1,218 |   |
| Less:   Additional                  stock-based employee compensation expense determined under                  fair                         value based method for all awards, net of  related                  taxes |   |   | (27    | )      |   | (621    | )  |   | (179 | )  |
| Net                  earnings (loss) - pro forma                                                                                                                                                                                                                              |   | $      | 6,362  |   | $      | (19,129 | )       | $ | 1,039 |   |
|                                                                                                                                                                                                                                                                          |   |   |   |   |   |    |    |   |   |   |
| Earnings                  (loss) per common share - basic                                                                                                                                                                                                                     |   |   |   |   |   |    |    |   |   |   |
| As                  reported                                                                                                                                                                                                                                                  |   | $      | 0.81   |   | $      | (2.35   | )       | $ | 0.15 |   |
| Pro                  forma                                                                                                                                                                                                                                                    |   | $      | 0.81   |   | $      | (2.42   | )       | $ | 0.13 |   |
| Earnings                  (loss) per common share - diluted                                                                                                                                                                                                                   |   |   |   |   |   |    |    |   |   |   |
| As                  reported                                                                                                                                                                                                                                                  |   | $      | 0.81   |   | $      | (2.35   | )       | $ | 0.15 |   |
| Pro                  forma                                                                                                                                                                                                                                                    |   | $      | 0.81   |   | $      | (2.42   | )       | $ | 0.13 |   |

**Per      Share Calculations**

**NOTE      2 - RECENTLY ISSUED ACCOUNTING STANDARDS**

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

**NOTE      3 - CHANGE OF CONTROL**

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

**NOTE      4 - DISCONTINUED OPERATIONS**

**Mexican      and Mobile Photography Operations**

**CPI      CORP.**
**Notes      to Consolidated Financial Statements**

|                                                   |   |                                                                |  **Mexican                Operation**               |   |   |
|--------------------------------------------------------|--------|---------------------------------------------------------------------|----------------------------------------------------------|--------|--------|
| *thousands*                                            |   | 2004                                                                |                                                     |   |   | 2003 |   |
|                                                   |   |                                                                |                                                     |   |   |   |   |
| Net                  Sales                             |   | $                                                                   | 781                                                      |   |   |   |   | $ | 731 |   |
|                                                   |   |                                                                |                                                     |   |   |   |   |   |   |   |
| Operating                  loss                        |   | $                                                                   | (948                                                     | )      |   |   |   | $ | (1,319 | ) |
| Loss                  on disposition                   |   |                                                                | (2,528                                                   | )      |   |   |   |   | - |   |
| Tax                  benefit                           |   |                                                                | 1,287                                                    |   |   |   |   |   | 462 |   |
|                                                   |   |                                                                |                                                     |   |   |   |   |   |   |   |
| Net                  loss from discontinued operations |   | $                                                                   | (2,189                                                   | )      |   |   |   | $ | (857 | ) |
|                                                   |   |                                                                |                                                     |   |   |   |   |   |   |   |
|                                                   |   |    **Mobile                  Photography Operation** |
|                                                   |   |                                                                | 2004                                                     |   |   |   |   |   | 2003 |   |
|                                                   |   |                                                                |                                                     |   |   |   |   |   |   |   |
| Net                  Sales                             |   | $                                                                   | 1,020                                                    |   |   |   |   | $ | 1,908 |   |
|                                                   |   |                                                                |                                                     |   |   |   |   |   |   |   |
| Operating                  loss                        |   | $                                                                   | (1,550                                                   | )      |   |   |   | $ | (5,823 | ) |
| Loss                  on disposition                   |   |                                                                | (921                                                     | )      |   |   |   |   | - |   |
| Tax                  benefit                           |   |                                                                | 914                                                      |   |   |   |   |   | 2,056 |   |
|                                                   |   |                                                                |                                                     |   |   |   |   |   |   |   |
| Net                  loss from discontinued operations |   | $                                                                   | (1,557                                                   | )      |   |   |   | $ | (3,767 | ) |
|                                                   |   |                                                                |                                                     |   |   |   |   |   |   |   |
|                                                   |   |                                                                |  **Total                  Discontinued Operations** |
|                                                   |   |                                                                | 2004                                                     |   |   |   |   |   | 2003 |   |
|                                                   |   |                                                                |                                                     |   |   |   |   |   |   |   |
| Net                  Sales                             |   | $                                                                   | 1,801                                                    |   |   |   |   | $ | 2,639 |   |
|                                                   |   |                                                                |                                                     |   |   |   |   |   |   |   |
| Operating                  loss                        |   | $                                                                   | (2,498                                                   | )      |   |   |   | $ | (7,142 | ) |
| Loss                  on disposition                   |   |                                                                | (3,449                                                   | )      |   |   |   |   | - |   |
| Tax                  benefit                           |   |                                                                | 2,201                                                    |   |   |   |   |   | 2,518 |   |
|                                                   |   |                                                                |                                                     |   |   |   |   |   |   |   |
| Net                  loss from discontinued operations |   | $                                                                   | (3,746                                                   | )      |   |   |   | $ | (4,624 | ) |
|                                                   |   |                                                                |                                                     |   |   |   |   |   |   |   |

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

|                                                         |   |  Non-cash                  Charges |   |  Accruals/Proceeds |   |  Total                  Loss on Disposition |   |
|--------------------------------------------------------------|--------|-----------------------------------------|--------|-------------------------|--------|--------------------------------------------------|--------|
| *thousands*                                                  |   |  Mexico                            |   | Mobile                  |   |  Mexico                                     |   | Mobile |   |  Mexico |   |  Mobile |   |
|                                                         |   |                               |   |                    |   |                                        |   |   |   |    |   |    |   |
| Asset                  disposals, impairments and write-offs |   | $                                       | 2,136  |                    | $      | 848                                              |   | $ | - |   | $ | - |   | $ | 2,136 |   | $ | 848 |   |
| Proceeds                  on sale of assets                  |   |                                    | -      |                    |   | -                                                |   |   | (120 | ) |   | (94 | ) |   | (120 | ) |   | (94 | ) |
| Lease                  settlements                           |   |                                    | -      |                    |   | -                                                |   |   | 92 |   |   | - |   |   | 92 |   |   | - |   |
| Employee                  severance                          |   |                                    | -      |                    |   | -                                                |   |   | 407 |   |   | 154 |   |   | 407 |   |   | 154 |   |
| Other                                                        |   |                                    | -      |                    |   | -                                                |   |   | 13 |   |   | 13 |   |   | 13 |   |   | 13 |   |
|                                                         |   |                                    |   |                    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  loss on disposition                   |   | $                                       | 2,136  |                    | $      | 848                                              |   | $ | 392 |   | $ | 73 |   | $ | 2,528 |   | $ | 921 |   |
|                                                         |   |                                    |   |                    |   |                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |

**NOTE      5 - INVENTORIES**

| *thousands*                                             |   | February                  4, 2006 |   | February                  5, 2005 |   |
|---------------------------------------------------------|--------|-----------------------------------|--------|-----------------------------------|--------|
|                                                    |   |                              |   |                              |   |
| Raw                  materials - film, paper, chemicals |   | $                                 | 4,110  |                              | $      | 3,750 |   |
| Portraits                  in process                   |   |                              | 939    |                              |   | 1,555 |   |
| Finished                  portraits pending delivery    |   |                              | 407    |                              |   | 496 |   |
| Frames                  and accessories                 |   |                              | 1,069  |                              |   | 1,286 |   |
| Studio                  supplies                        |   |                              | 2,143  |                              |   | 2,197 |   |
| Other                                                   |   |                              | 603    |                              |   | 1,237 |   |
|                                                    |   |                              |   |                              |   |   |   |
| Total                                                   |   | $                                 | 9,271  |                              | $      | 10,521 |   |
|                                                    |   |                              |   |                              |   |   |   |

**NOTE      6 - BORROWINGS**

**Short-term**

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

**Long-term**

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

| Outstanding                  debt obligations are as follows:                                                  |   |                              |   |                              |   |
|----------------------------------------------------------------------------------------------------------------|--------|-----------------------------------|--------|-----------------------------------|--------|
|                                                                                                           |   |                              |   |                              |   |
| *thousands*                                                                                                    |   | February                  4, 2006 |   | February                  5, 2005 |   |
|                                                                                                           |   |                              |   |                              |   |
| Senior                  notes, net of unamortized issuance costs                                               |   | $                                 | -      |                              | $      | 25,630 |   |
| Term                  loan portion of the Credit Agreement, net of unamortized issuance                  costs |   |                              | 24,080 |                              |   | - |   |
| Less:                  current maturities                                                                      |   |                              | 8,333  |                              |   | 8,580 |   |
|                                                                                                           |   | $                                 | 15,747 |                              | $      | 17,050 |   |
|                                                                                                           |   |                              |   |                              |   |   |   |

| *thousands*                                 |   |   |   |
|---------------------------------------------|--------|--------|--------|
|                                        |   |   |   |
| 2006                                        |   | $      | 8,333  |   |
| 2007                                        |   |   | 8,333  |   |
| 2008                                        |   |   | 8,334  |   |
|                                        |   | $      | 25,000 |   |
| Unamortized                  issuance costs |   |   | 920    |   |
|                                        |   | $      | 24,080 |   |
|                                        |   |   |   |   |

**NOTE      7 - STOCKHOLDERS’ EQUITY**

**Share      Repurchase Program**

**Shareholder      Rights Plan**

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

**Comprehensive        Income and Accumulated Other Comprehensive Loss**

|  *thousands*                                                    |   |        |   | 2005   |   | 2004   |   | 2003   |    |
|----------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|---------|
|                                                                 |   |   |   |   |   |   |   |   |    |
| Net                  earnings (loss)                                 |   |   |   |   | $      | 6,389  |   | $      | (18,508 | ) | $ | 1,218 |   |
| Other                  comprehensive (loss) income:                  |   |   |   |   |   |   |   |   |    |   |   |   |   |
| Foreign                  currency translation adjustments            |   |   |   |   |   | 947    |   |   | 620     |   |   | 1,668 |   |
| Minimum                  pension liability (1)                       |   |   |   |   |   | (1,613 | )      |   | (1,526  | ) |   | (564 | ) |
| Total                  accumulated other comprehensive (loss) income |   |   |   |   |   | (666   | )      |   | (906    | ) |   | 1,104 |   |
|                                                                 |   |   |   |   |   |   |   |   |    |   |   |   |   |
| Total                  comprehensive income (loss)                   |   |   |   |   | $      | 5,723  |   | $      | (19,414 | ) | $ | 2,322 |   |
|                                                                 |   |   |   |   |   |   |   |   |    |   |   |   |   |

----

----

| *thousands*                                                 |   | 2005   |   | 2004   |   | 2003   |   |
|-------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|
|                                                        |   |   |   |   |   |   |   |
| Foreign                    currency translation adjustments |   | $      | 638    |   | $      | 1,585  |   | $ | 2,205 |   |
| Minimum                    pension liability, net of taxes  |   |   | 10,533 |   |   | 8,920  |   |   | 7,394 |   |
| Accumulated                    other comprehensive loss     |   | $      | 11,171 |   | $      | 10,505 |   | $ | 9,599 |   |
|                                                        |   |   |   |   |   |   |   |   |   |   |

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

**NOTE      8 - OTHER CHARGES AND IMPAIRMENTS**

|  *thousands*                                                                                                                                                               |   |         |   | 2005   |   | 2004   |   | 2003   |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------|--------|--------|--------|--------|--------|--------|--------|
|                                                                                                                                                                            |   |    |   |   |   |   |   |   |   |
|  Recorded                as a component of income (loss) from operations:                                                                                                  |   |         |   |   |   |   |   |   |   |
| Accruals                  related to accelerated vesting of supplemental retirement     plan benefits                  and guaranteed bonuses for 2004 |   |         |   |   | $      | -      |   | $      | 3,656  |   | $ | - |   |
| Impairment                  charges                                                                                                                                             |   |         |   |   |   | 567    |   |   | 6,516  |   |   | - |   |
| Reserves                  for severance and related costs                                                                                                                       |   |         |   |   |   | 2,546  |   |   | 3,430  |   |   | 1,346 |   |
| Pension                  plan curtailment                                                                                                                                       |   |         |   |   |   | -      |   |   | -      |   |   | 2,385 |   |
| Consent                  solicitation costs                                                                                                                                     |   |         |   |   |   | -      |   |   | 816    |   |   | 1,663 |   |
| Production                  facility closure                                                                                                                                    |   |         |   |   |   | -      |   |   | -      |   |   | 121 |   |
| Contract                  terminations and settlements                                                                                                                          |   |         |   |   |   | (346   | )      |   | 1,261  |   |   | - |   |
|                                                                                                                                                                            |   |         |   |   |   | 2,767  |   |   | 15,679 |   |   | 5,515 |   |
| Recorded                  as a component of other expense following income (loss) from                  operations:                                                             |   |         |   |   |   |   |   |   |   |
| Impairment                  and related obligations of preferred security interest                                                                                              |   |         |   |   |   | -      |   |   | 9,789  |   |   | - |   |
|                                                                                                                                                                            |   |         |   |   |   |   |   |   |   |   |   |   |   |
| Total                  Other Charges and Impairments                                                                                                                            |   |         |   |   | $      | 2,767  |   | $      | 25,468 |   | $ | 5,515 |   |
|                                                                                                                                                                            |   |         |   |   |   |   |   |   |   |   |   |   |   |

**Accelerated      Vesting of Supplemental Retirement Plan Benefits and Guaranteed Bonuses for      2004**

**Impairment      Charges**

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

**Reserves      for Severance and Related Costs**

**Pension      Plan Curtailment**

**Consent      Solicitation Costs**

**Production      Facility Closure**

**Contract      Termination and Settlements**

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

**Impairment      and Related Obligations of Preferred Security Interest**

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

|                                                                                                                                                                                                                   |   |                             |   |    |   |         |   |     |    |                                     |   | Reclassify                    to   |   |                               |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|--------|---------|--------|--------------|--------|----------|---------|------------------------------------------|--------|------------------------------------|--------|------------------------------------|--------|
|                                                                                                                                                                                                                   |   |                                  |   |    |   | Asset        |   |     |    |                                     |   | Supplemental                       |   |                               |   |
|                    *thousands*                                                                                                                                                                                    |   | ReserveBalance                        |   | 2004    |   | Write-Downs/ |   | Cash     |    | Reclassify                    to Accrued |   | Retirement                    Plan |   | Reserve                    Balance |   |
|                                                                                                                                                                                                                   |   |  Feb.                    7, 2004 |   | Charges |   | Impairments  |   | Payments |    | Severance                                |   | Obligations                        |   | Feb.                    5, 2005    |   |
| Recorded                    as a component of income (loss) from operations:                                                                                                                                           |   |                             |   |    |   |         |   |     |    |                                     |   |                               |   |                               |   |
|    Accruals                  related to accelerated vesting of supplemental     retirement                    plan                    benefits and guaranteed bonuses for 2004 |   | $                                     | -      |    | $      | 3,656        |   | $        | -       |                                     | $      | -                                  |   | $                                  | (1,326 | ) | $ | (2,012 | ) | $ | 318 |   |
|     Impairment                    charges                                                                                                                                                          |   |                                  | -      |    |   | 6,516        |   |     | (6,516  | )                                        |   | -                                  |   |                               | -      |   |   | - |   |   | - |   |
|     Reserves                    for                    severance and related costs                                                                                                                 |   |                                  | 816    |    |   | 3,430        |   |     | -       |                                     |   | (1,269                             | )      |                               | 1,326  |   |   | - |   |   | 4,303 |   |
|     Consent                    solicitation costs                                                                                                                                                  |   |                                  | 467    |    |   | 816          |   |     | -       |                                     |   | (1,283                             | )      |                               | -      |   |   | - |   |   | - |   |
|     Production                    facility closure                                                                                                                                                 |   |                                  | 214    |    |   | -            |   |     | -       |                                     |   | (181                               | )      |                               | -      |   |   | - |   |   | 33 |   |
|     Contract                    terminations and settlements                                                                                                                                       |   |                                  | -      |    |   | 1,261        |   |     | -       |                                     |   | (981                               | )      |                               | -      |   |   | - |   |   | 280 |   |
|                                                                                                                                                                                                                   |   |                                  | 1,497  |    |   | 15,679       |   |     | (6,516  | )                                        |   | (3,714                             | )      |                               | -      |   |   | (2,012 | ) |   | 4,934 |   |
| Recorded                    as a component of other expense following income     (loss)                    from operations:                                                                        |   |                                  |   |    |   |         |   |     |    |                                     |   |                               |   |                               |   |   |   |   |   |   |   |   |
|         Impairment                    and                    related obligations of preferred         security interest           |   |                                  | 1,000  |    |   | 9,789        |   |     | (7,689  | )                                        |   | -                                  |   |                               | -      |   |   | - |   |   | 3,100 |   |
|                                                                                                                                                                                                                   |   |                                  |   |    |   |         |   |     |    |                                     |   |                               |   |                               |   |   |   |   |   |   |   |   |
| Total                    Other Charges and Impairments                                                                                                                                                                 |   | $                                     | 2,497  |    | $      | 25,468       |   | $        | (14,205 | )                                        | $      | (3,714                             | )      | $                                  | -      |   | $ | (2,012 | ) | $ | 8,034 |   |
|                                                                                                                                                                                                                   |   |                                  |   |    |   |         |   |     |    |                                     |   |                               |   |                               |   |   |   |   |   |   |   |   |

| *thousands*                                                                                                                                                                                                                                                                      |   | Reserve                       |   |                          |   | Asset        |   |                           |   |                           |       |                             |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|--------|-------------------------------|--------|--------------|--------|--------------------------------|--------|--------------------------------|------------|----------------------------------|--------|
|                                                                                                                                                                                                                                                                             |   | Balance                       |   | 2005                  Charges |   | Write-Downs/ |   |                           |   | Receipts                  from |       | Reserve                  Balance |   |
|                                                                                                                                                                                                                                                                             |   | Feb.                  5, 2005 |   | (Credits)                     |   | Impairments  |   | Cash                  Payments |   | Settlements                    |       | Feb.                  4, 2006    |   |
| Recorded                  as a component of income (loss) from                    operations:                                                                                                                                                                               |   |                          |   |                          |   |         |   |                           |   |                           |       |                             |   |
|     Reserves                  for                  severance, executive retirements/                                                                                                                                                                         |   |                          |   |                          |   |         |   |                           |   |                           |       |                             |
|         repositioning                  and related costs                                                                                                                                                                                 |   | $                             | 4,303  |                          | $      | 2,546        |   | $                              | -      |                           | $          | (6,306                           | )      | $ | - |   | $ | 543 |   |
|                                                                                                                                                                                                                                                                             |   |                          |   |                          |   |         |   |                           |   |                           |       |                             |   |   |   |   |   |   |   |
|     Accruals                  related to accelerated vesting of        supplemental                  retirement plan benefits and        guaranteed                  bonuses |   | 318                           |   |                          | -      |         |   | -                              |   |                           |  (318 | )                                |   | - |   |   | - |   |
|     Impairment                  charges                                                                                                                                                                                                                      |   |                          | -      |                          |   | 567          |   |                           | (567   | )                              |       | -                                |   |   | - |   |   | - |   |
|     Contract                  terminations and settlements                                                                                                                                                                                                   |   |                          | 280    |                          |   | (346         | )      |                           | -      |                           |       | (332                             | )      |   | 400 |   |   | 2 |   |
|     Production                  facility closure                                                                                                                                                                                                             |   |                          | 33     |                          |   | -            |   |                           | -      |                           |       | (33                              | )      |   | - |   |   | - |   |
|                                                                                                                                                                                                                                                                             |   |                          | 4,934  |                          |   | 2,767        |   |                           | (567   | )                              |       | (6,989                           | )      |   | 400 |   |   | 545 |   |
| Recorded                  as a component of other expense following                    income (loss) from operations:                                                                                                                                                       |   |                          |   |                          |   |         |   |                           |   |                           |       |                             |   |   |   |   |   |   |   |
|     Impairment                  and                  related obligations of         preferred security interest                                                                                            |   |                          | 3,100  |                          |   | -            |   |                           | -      |                           |       | (470                             | )      |   | - |   |   | 2,630 |   |
|                                                                                                                                                                                                                                                                             |   |                          |   |                          |   |         |   |                           |   |                           |       |                             |   |   |   |   |   |   |   |
| Total                  Other Charges and Impairments                                                                                                                                                                                                                             |   | $                             | 8,034  |                          | $      | 2,767        |   | $                              | (567   | )                              | $          | (7,459                           | )      | $ | 400 |   | $ | 3,175 |   |
|                                                                                                                                                                                                                                                                             |   |                          |   |                          |   |         |   |                           |   |                           |       |                             |   |   |   |   |   |   |   |

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

**NOTE      9 - STOCK-BASED COMPENSATION PLANS**

**Stock      Option Plan**

|                                      |   | 2005   |                    | 2004   |   | 2003                     |   |
|-------------------------------------------|--------|--------|-------------------------|--------|--------|--------------------------|--------|
| Dividend                  yield           |   |   | 3.6                     | %      |   | 2.9                      | %      |   | 3.4%-4.6 | % |
| Stock                  volatility factor  |   |   | 31.0                    | %      |   | 24.0                     | %      |   | 35.1 | % |
| Risk-free                  interest rate  |   |   | 3.0                     | %      |   | 3.0                      | %      |   | 3.0 | % |
| Expected                  life of options |   |   | 1                  year |   |   | 8                  years |   |   | 8                  years |   |

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

|                                                           |   | 2005   |    | 2004      |   | 2003   |   |
|----------------------------------------------------------------|--------|--------|---------|-----------|--------|--------|--------|
|                                                           |   |   |    | Weighted- |   |   |   | Weighted- |   |   |   | Weighted- |   |
|                                                           |   |   |    | Average   |   |   |   | Average |   |   |   | Average |   |
|                                                           |   |   |    | Exercise  |   |   |   | Exercise |   |   |   | Exercise |   |
|                                                           |   | Shares |    | Price     |   | Shares |   | Price |   | Shares |   | Price |   |
| Balance                  at beginning of year                  |   |   | 229,470 |      | $      | 19.28  |   |   | 530,206 |   | $ | 19.17 |   |   | 1,066,713 |   | $ | 24.60 |   |
| Granted                                                        |   |   | -       |      |   | -      |   |   | 4,968 |   |   | 22.14 |   |   | 83,240 |   |   | 14.44 |   |
| Cancelled                  or expired                          |   |   | (45,464 | )         |   | 23.73  |   |   | (239,259 | ) |   | 20.76 |   |   | (596,526 | ) |   | 28.36 |   |
| Exercised                                                      |   |   | (57,986 | )         |   | 14.18  |   |   | (66,445 | ) |   | 13.29 |   |   | (23,221 | ) |   | 15.57 |   |
| End                  of year balance                           |   |   | 126,020 |      | $      | 20.02  |   |   | 229,470 |   | $ | 19.28 |   |   | 530,206 |   | $ | 19.17 |   |
|                                                           |   |   |    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reserved                  for future grant at year-end         |   |   | 966,706 |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Exercisable                                                    |   |   | 126,020 |      | $      | 20.02  |   |   | 229,470 |   | $ | 19.28 |   |   | 267,770 |   | $ | 22.74 |   |
| Fair                  value of options granted during the year |   |   |    |      |   |   |   |   |   |   | $ | 4.29 |   |   |   |   | $ | 3.66 |   |
|                                                           |   |   |    |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                      |   | Options                  Outstanding and Exercisable |    |
|-------------------------------------------|--------|------------------------------------------------------|---------|
|                                      |   |                                                 |    |   |   |   |   |
|                                      |   |                                                 |    |  Weighted-Average |   |   |   |
|                                      |   |                                                 |    | Remaining Contractual |   | Weighted-Average |   |
| Range                  of Exercise Prices |   | Shares                                               |    | Life                  (Years) |   | Exercise                  Price |   |
|                                      |   |                                                 |    |   |   |   |   |
| $12.96                  - $13.99          |   |                                                 | 32,212  |   |   | 4.76 |   | $ | 13.01 |   |
| $16.50                  - $20.45          |   |                                                 | 38,498  |   |   | 3.61 |   |   | 17.47 |   |
| $24.87                  - $25.94          |   |                                                 | 55,310  |   |   | 0.39 |   |   | 25.88 |   |
|                                      |   |                                                 |    |   |   |   |   |   |   |   |
| Total                                     |   |                                                 | 126,020 |   |   | 2.49 |   | $ | 20.02 |   |
|                                      |   |                                                 |    |   |   |   |   |   |   |   |

**Restricted      Stock Plan**

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

|                                                                                                                                                      |   | 2005   |    | 2004   |   | 2003                              |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|-----------------------------------|--------|
|                                                                                                                                                      |   | Shares |    |   |   | Grant-date                  Value |   | Shares |   |   |   | Grant-date                  Value |   | Shares |   |   |   | Grant-date                  Value |   |
| Nonvested                  stock, beginning of year                                                                                                       |   |   | 5,205   |   |   |                              |   | $ | 13.45 |   |   | 577 |   |   |   |   | $ | 14.37 |   |   | 1,410 |   |   |   |   | $ | 14.37 |   |
| Granted                                                                                                                                                   |   |   | 64,730  |   |   |                              |   |   | 16.67 |   |   | 5,205 |   |   |   |   |   | 13.45 |   |   | - |   |   |   |   |   | - |   |
| Vested                                                                                                                                                    |   |   | (37,396 | )      |   |                              |   |   | 16.02 |   |   | (577 | ) |   |   |   |   | 14.37 |   |   | (833 | ) |   |   |   |   | 14.37 |   |
| Forfeited                                                                                                                                                 |   |   | (2,812  | )      |   |                              |   |   | 13.66 |   |   | - |   |   |   |   |   | - |   |   | - |   |   |   |   |   | - |   |
| Nonvested                  stock, end of year                                                                                                             |   |   | 29,727  |   |   |                              |   | $ | 17.20 |   |   | 5,205 |   |   |   |   | $ | 13.45 |   |   | 577 |   |   |  |   | $ | 14.37 |   |
|                                                                                                                                                      |   |   |    |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Reserved                  for future grant at year-end                                                                                                    |   |   | 267,853 |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                      |   |   |    |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock-based                  compensation expense related to restricted stock                                                                             |   |   |    |   |   |                              |   | $ | 727,532 |   |   |   |   |   |   |   | $ | 13,803 |   |   |   |   |   |   |   | $ | 11,975 |   |
|                                                                                                                                                      |   |   |    |   |   |                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| The                  weighted average remaining vesting period of nonvested stock as                  of                  February 4, 2006 is 1.78 years. |   |   |    |   |   |                              |   |   |   |   |   |   |   |   |   |

**NOTE      10 - EMPLOYEE BENEFIT PLANS**

| Expenses                  for retirement and savings-related benefit plans were as                  follows: |   |         |   |         |   |
|--------------------------------------------------------------------------------------------------------------|--------|--------------|--------|--------------|--------|
|                                                                                                         |   |    |   |    |   |   |   |   |   |
|  *thousands*                                                                                            |   |         |   |  2005   |   | 2004 |   | 2003 |   |
|                                                                                                         |   |    |   |    |   |   |   |   |   |
|  Profit                  sharing                                                                        |   |         |   |         | $      | 506 |   | $ | 405 |   | $ | 659 |   |
|  Pension                  plan expense                                                                  |   |         |   |         |   | 1,412 |   |   | 1,211 |   |   | 1,764 |   |
|  Pension                  plan curtailment loss                                                         |   |         |   |         |   | - |   |   | - |   |   | 2,385 |   |
|  Supplemental                  retirement plan expense                                                  |   |         |   |         |   | 280 |   |   | 841 |   |   | 1,545 |   |
|  Supplemental                  retirement plan expense -                                                |   |         |   |         |   |   |   |   |   |   |   |   |   |
|  accelerated                  vesting from change of control                                            |   |         |   |         |   | - |   |   | 3,338 |   |   | - |   |
|  Supplemental                  retirement plan curtailment loss                                         |   |         |   |         |   | - |   |   | - |   |   | 58 |   |
|  Total                                                                                                  |   |         |   |         | $      | 2,198 |   | $ | 5,795 |   | $ | 6,411 |   |
|                                                                                                         |   |         |   |         |   |   |   |   |   |   |   |   |   |

**Profit      Sharing**

**Defined      Benefit Plans**

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

|                               |   |   |   |       |   | Plan                  Assets at December 31 |   |
|------------------------------------|--------|--------|--------|------------|--------|---------------------------------------------|--------|
|                               |   |   |   | Target     |   |                                        |   |   |   |
| Asset                    Category  |   |   |   | Allocation |   | 2005                                        |   | 2004 |   |
| Equity                  securities |   | 60     | %      |       | 63     | %                                           |   | 61 | % |
| Debt                  securities   |   | 40     | %      |       | 37     | %                                           |   | 39 | % |
| Total                              |   |   |   |       |   | 100                                         | %      |   | 100 | % |   | 100 | % |
|                               |   |   |   |       |   |                                        |   |   |   |   |   |   |   |

|        |   | Pension  |   | Supplemental |   |
|-------------|--------|----------|--------|--------------|--------|
| *thousands* |   | Benefits |   | Benefits     |   |
|        |   |     |   |         |   |
| 2006        |   | $        | 2,000  |         | $      | 290 |   |
| 2007        |   |     | 2,100  |         |   | 290 |   |
| 2008        |   |     | 2,200  |         |   | 180 |   |
| 2009        |   |     | 2,400  |         |   | 150 |   |
| 2010        |   |     | 2,600  |         |   | 250 |   |
| 2011-2015   |   |     | 13,500 |         |   | 750 |   |

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

|                                                          |   |   |   |  Defined                  Benefit Plans |
|---------------------------------------------------------------|--------|--------|--------|----------------------------------------------|
|  *thousands*                                             |   |   |   | Pension                  Plan                |   | Supplemental                  Retirement Plan |   |
|                                                          |   |   |   |                                         |   |   |   |   |   |   |   |
|                                                          |   |   |   | 2005                                         |   | 2004 |   | 2005 |   | 2004 |   |
|                                                          |   |   |   |                                         |   |   |   |   |   |   |   |
| **Projected                  benefit obligation**             |   |   |   |                                         |   |   |   |   |   |
| Benefit                  obligation at beginning of year      |   |   |   |                                         | $ | 49,898 |   | $ | 45,307 |   | $ | 4,491 |   | $ | 4,428 |   |
| Service                  cost                                 |   |   |   |                                         |   | 468 |   |   | 745 |   |   | 112 |   |   | 190 |   |
| Interest                  cost                                |   |   |   |                                         |   | 2,796 |   |   | 2,702 |   |   | 249 |   |   | 358 |   |
| Actuarial                  losses (gains)                     |   |   |   |                                         |   | 1,858 |   |   | 2,785 |   |   | (86 | ) |   | (988 | ) |
| Benefit                  payments                             |   |   |   |                                         |   | (2,072 | ) |   | (1,641 | ) |   | (989 | ) |   | (2,833 | ) |
| Plan                  amendments                              |   |   |   |                                         |   | - |   |   | - |   |   | - |   |   | 247 |   |
| Change                  of control - accelerated vesting      |   |   |   |                                         |   | - |   |   | - |   |   | - |   |   | 3,089 |   |
|                                                          |   |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Benefit                  obligation at end of year (1) (2)    |   |   |   |                                         | $ | 52,948 |   | $ | 49,898 |   | $ | 3,777 |   | $ | 4,491 |   |
|                                                          |   |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| **Fair                  value of plan assets**                |   |   |   |                                         |   |   |   |   |   |   |   |   |
| Fair                  value at beginning of year              |   |   |   |                                         | $ | 32,412 |   | $ | 31,546 |   | $ | - |   | $ | - |   |
| Actual                  return on plan assets                 |   |   |   |                                         |   | 1,403 |   |   | 2,507 |   |   | - |   |   | - |   |
| Employer                  contributions (3)                   |   |   |   |                                         |   | 2,050 |   |   | - |   |   | 989 |   |   | 2,833 |   |
| Benefit                  payments                             |   |   |   |                                         |   | (2,072 | ) |   | (1,641 | ) |   | (989 | ) |   | (2,833 | ) |
|                                                          |   |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Fair                  value at end of year                    |   |   |   |                                         | $ | 33,793 |   | $ | 32,412 |   | $ | - |   | $ | - |   |
|                                                          |   |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| **Funded                  status**                            |   |   |   |                                         |   |   |   |   |   |   |   |   |
| Funded                  status at end of year                 |   |   |   |                                         | $ | (19,155 | ) | $ | (17,486 | ) | $ | (3,777 | ) | $ | (4,491 | ) |
| Unrecognized                  prior service cost              |   |   |   |                                         |   | 177 |   |   | 221 |   |   | 184 |   |   | 215 |   |
| Unrecognized                  net loss (gain)                 |   |   |   |                                         |   | 18,305 |   |   | 15,954 |   |   | (530 | ) |   | (556 | ) |
|                                                          |   |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  amount recognized                        |   |   |   |                                         | $ | (673 | ) | $ | (1,311 | ) | $ | (4,123 | ) | $ | (4,832 | ) |
|                                                          |   |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| **Components                  of consolidated balance sheet** |   |   |   |                                         |   |   |   |   |   |   |   |   |
| Accrued                  benefit liability                    |   |   |   |                                         | $ | (17,810 | ) | $ | (15,890 | ) | $ | (4,123 | ) | $ | (4,832 | ) |
| Intangible                  asset                             |   |   |   |                                         |   | 177 |   |   | 221 |   |   | - |   |   |   |   |
| Accumulated                  other comprehensive loss         |   |   |   |                                         |   | 16,960 |   |   | 14,358 |   |   | - |   |   | - |   |
|                                                          |   |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  amount recognized                        |   |   |   |                                         | $ | (673 | ) | $ | (1,311 | ) | $ | (4,123 | ) | $ | (4,832 | ) |
|                                                          |   |   |   |                                         |   |   |   |   |   |   |   |   |   |   |   |   |

----

| (1)   | At                February 4, 2006 and February 5, 2005, the accumulated benefit obligation                for the pension plan was $51.6 million and $48.3 million,                respectively. |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)   | At                February 4, 2006 and February 5, 2005, the accumulated benefit obligation                for the supplemental retirement plan was $3.7 million and $4.4 million,                respectively. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3)   | For                the supplemental retirement plan for the fiscal years ended February                4,                2006 and February 5, 2005, the employer contributions were financed                through the liquidation of investments in the Company’s Rabbi                Trust. |
|-----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

|                                                              |   |         |   |  Pension                  Plan |   | Supplemental                  Retirement Plan |   |
|-------------------------------------------------------------------|--------|--------------|--------|-------------------------------------|--------|-----------------------------------------------|--------|
|  *thousands*                                                 |   |         |   |  2005                          |   | 2004                                          |   | 2003 |   | 2005 |   | 2004 |   | 2003 |   |
|                                                              |   |         |   |                           |   |                                          |   |   |   |   |   |   |   |   |   |
| Components                  of net periodic benefit cost          |   |    |   |                                |   |                                          |   |   |   |   |   |   |   |
| Service                  cost                                     |   |         |   |                                | $      | 468                                           |   | $ | 745 |   | $ | 1,520 |   | $ | 112 |   | $ | 190 |   | $ | 462 |   |
| Interest                  cost                                    |   |         |   |                                |   | 2,796                                         |   |   | 2,702 |   |   | 2,626 |   |   | 249 |   |   | 358 |   |   | 410 |   |
| Expected                  return on plan assets                   |   |         |   |                                |   | (2,831                                        | )      |   | (2,934 | ) |   | (3,078 | ) |   | - |   |   | - |   |   | - |   |
| Amortization                  of transition obligation            |   |         |   |                                |   | -                                             |   |   | - |   |   | - |   |   | - |   |   | - |   |   | 71 |   |
| Amortization                  of prior service cost               |   |         |   |                                |   | 44                                            |   |   | 44 |   |   | 441 |   |   | 31 |   |   | 31 |   |   | - |   |
| Amortization                  of net (gain) loss                  |   |         |   |                                |   | 935                                           |   |   | 654 |   |   | 255 |   |   | (18 | ) |   | - |   |   | 17 |   |
| Change                  of control - accelerated vesting          |   |         |   |                                |   | -                                             |   |   | - |   |   | - |   |   | - |   |   | 3,089 |   |   | - |   |
| Net                  (gain) loss due to settlements               |   |         |   |                                |   | -                                             |   |   | - |   |   | - |   |   | (94 | ) |   | 31 |   |   | 372 |   |
| Curtailment                  reduction in transition obligation   |   |         |   |                                |   | -                                             |   |   | - |   |   | - |   |   | - |   |   | 480 |   |   | 213 |   |
|                                                              |   |         |   |                                |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  periodic benefit cost                        |   | 1,412        |   |                                | 1,211  |                                          |   | 1,764 |   |   | 280 |   |   | 4,179 |   |   | 1,545 |   |
| Curtailment                  loss                                 |   |         |   |                                |   | -                                             |   |   | - |   |   | 2,385 |   |   | - |   |   | - |   |   | 58 |   |
|                                                              |   |         |   |                                |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net                  periodic benefit cost after curtailment loss | $      | 1,412        |   | $                                   | 1,211  |                                          | $      | 4,149 |   | $ | 280 |   | $ | 4,179 |   | $ | 1,603 |   |
|                                                              |   |         |   |                                |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|                                                            |   |  Pension                  Plan |   | Supplemental                  Retirement Plan |   |
|-----------------------------------------------------------------|--------|-------------------------------------|--------|-----------------------------------------------|--------|
|                                                            |   |  2005                          |   | 2004                                          |   | 2003 |   | 2005 |   | 2004 |   | 2003 |   |
|                                                            |   |                           |   |                                          |   |   |   |   |   |   |   |   |   |
| Weighted-average                  assumptions used to determine |   |                                |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| benefit                  obligations at fiscal year end         |   |                                |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount                  rate                                  |   |                                | 5.50   | %                                             |   | 5.75 | % |   | 6.00 | % |   | 5.50 | % |   | 5.75 | % |   | 6.00 | % |
| Rate                  of increase in future compensation        |   |                                | 3.75   | %                                             |   | 3.75 | % |   | 3.75 | % |   | 2.00 | % |   | 2.00 | % |   | 4.00 | % |
| Weighted-average                  assumptions used to determine |   |                                |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| net                  periodic benefit cost                      |   |                                |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Discount                  rate                                  |   |                                | 5.75   | %                                             |   | 5.75 | % |   | 6.50 | % |   | 5.75 | % |   | 6.00 | % |   | 6.50 | % |
| Expected                  long-term return on plan assets       |   |                                | 8.50   | %                                             |   | 8.75 | % |   | 8.75 | % |   | N/A |   |   | N/A |   |   | N/A |   |
| Rate                  of increase in future compensation        |   |                                | 3.75   | %                                             |   | 3.75 | % |   | 4.00 | % |   | 2.00 | % |   | 4.00 | % |   | 4.00 | % |
|                                                            |   |                                |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

|  *thousands*                               |   |   |   | Pension                  Plan |   | Supplemental                  Retirement Plan |   |
|-------------------------------------------------|--------|--------|--------|-------------------------------|--------|-----------------------------------------------|--------|
|                                            |   |   |   |  2005                    |   |                                          |   | 2004 |   | 2005 |   | 2004 |   |
|                                            |   |   |   |                     |   |                                          |   |   |   |   |   |   |   |
| Projected                  benefit obligation   |   |   |   |                          | $      | 52,948                                        |   |   |   |   | $ | 49,898 |   | $ | 3,777 |   | $ | 4,491 |   |
| Accumulated                  benefit obligation |   |   |   |                          |   | 51,603                                        |   |   |   |   |   | 48,303 |   |   | 3,681 |   |   | 4,351 |   |
| Fair                  value of plan assets      |   |   |   |                          |   | 33,793                                        |   |   |   |   |   | 32,412 |   |   | - |   |   | - |   |

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

**NOTE      11- INCOME TAXES **

|  *thousands*                                     |   |        |   |   |   |   |   |   |   |
|-------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                  |   |   |   | 2005   |   | 2004   |   | 2003   |   |
| Total                  income tax provision (benefit) |   |   |   |   |   |   |   |
| Continuing                  operations                |   |   |   |   | $      | 4,388  |   | $      | (2,189 | ) | $ | 3,183 |   |
| Discontinued                  operations              |   |   |   |   |   | -      |   |   | (2,201 | ) |   | (2,518 | ) |
| Total                  income tax provision (benefit) |   |   |   |   | $      | 4,388  |   | $      | (4,390 | ) | $ | 665 |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |

|  *thousands*                                     |   |        |   |   |   |   |   |   |   |
|-------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                  |   |   |   | 2005   |   | 2004   |   | 2003   |   |
| **Federal**                                           |   |   |   |   |   |   |   |
| Current                                               |   |   |   |   | $      | 1,631  |   | $      | 2,801  |   | $ | 2,841 |   |
| Deferred                                              |   |   |   |   |   | 1,793  |   |   | (5,121 | ) |   | 104 |   |
| Federal                  income tax                   |   |   |   |   |   | 3,424  |   |   | (2,320 | ) |   | 2,945 |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **State**                                             |   |   |   |   |   |   |   |   |   |
| Current                                               |   |   |   |   |   | 51     |   |   | 276    |   |   | 100 |   |
| Deferred                                              |   |   |   |   |   | 375    |   |   | (648   | ) |   | 423 |   |
| State                  income tax                     |   |   |   |   |   | 426    |   |   | (372   | ) |   | 523 |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Foreign**                                           |   |   |   |   |   |   |   |   |   |
| Current                                               |   |   |   |   |   | 353    |   |   | 387    |   |   | - |   |
| Deferred                                              |   |   |   |   |   | 185    |   |   | 116    |   |   | (285 | ) |
| Foreign                  income tax                   |   |   |   |   |   | 538    |   |   | 503    |   |   | (285 | ) |
|                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                  income tax provision (benefit) |   |   |   |   | $      | 4,388  |   | $      | (2,189 | ) | $ | 3,183 |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

|  *thousands*                                                                                           |   |        |   | 2005   |       | 2004    |   | 2003   |   |
|-------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|------------|---------|--------|--------|--------|
|                                                                                                        |   |   |   |   |       |    |   |   |   |
| Tax                  at statutory rate                                                                      | $      | 3,664  |   | $      | (5,763     | )       | $      | 3,068  |   |
| State                  income tax, at statutory rate, net of federal tax expense                  (benefit) |   | 281    |   |   |  (246 | )  |   | 434    |   |
| Tax                  effect of:                                                                             |   |   |   |   |       |    |   |   |   |
| Nondeductible                  expenses                                                                     |   |   |   |   |       | 158     |   |   | 270    |   |   | 123 |   |
| Tax                  credits and exclusions                                                                 |   |   |   |   |       | (381    | )      |   | (562   | ) |   | (384 | ) |
| Officers                  life insurance                                                                    |   |   |   |   |       | -       |   |   | 784    |   |   | (110 | ) |
| Valuation                  allowance                                                                        |   |   |   |   |       | (289    | )      |   | 3,296  |   |   | - |   |
| Foreign                  taxes                                                                              |   |   |   |   |       | 372     |   |   | 308    |   |   |   |   |
| Tax                  settlements                                                                            |   |   |   |   |       | 376     |   |   | (228   | ) |   | - |   |
| Tax                  on earnings repatriation                                                               |   |   |   |   |       | 242     |   |   | -      |   |   | - |   |
| Tax                  benefit of foreign tax deduction                                                       |   |   |   |   |       | (35     | )      |   | (48    | ) |   | - |   |
| Other                  items                                                                                |   |   |   |   |       | -       |   |   | -      |   |   | 52 |   |
| Applicable                  income taxes (benefit)                                                          | $      | 4,388  |   | $      | (2,189     | )       | $      | 3,183  |   |
|                                                                                                        |   |   |   |   |       |    |   |   |   |   |   |   |   |

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

| *thousands*                                                                                              |   | 2005   |   | 2004   |   |
|----------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|
|                                                                                                     |   |   |   |   |   |
| **Deferred                  tax assets**                                                                 |   |   |   |   |   |
| Federal,                  state and foreign operating and capital loss carryforwards                     |   | $      | 11,718 |   | $      | 15,659 |   |
| Pension                  and supplemental retirement benefits                                            |   |   | 8,008  |   |   | 7,568 |   |
| Reserves,                  principally due to accrual for financial reporting                  purposes  |   |   | 4,128  |   |   | 5,527 |   |
| Revenue                  recognition, principally due to SAB 101                                         |   |   | 759    |   |   | 773 |   |
| Federal                  and foreign tax credit carry forwards                                           |   |   | 3,229  |   |   | 3,475 |   |
|                                                                                                     |   |   |   |   |   |   |   |
| **Gross                  deferred tax assets**                                                           |   |   | 27,842 |   |   | 33,002 |   |
|                                                                                                     |   |   |   |   |   |   |   |
| **Deferred                  tax liabilities**                                                            |   |   |   |   |   |   |   |
|                                                                                                     |   |   |   |   |   |   |   |
| Property                  and equipment, principally due to differences in                  depreciation |   |   | (5,470 | )      |   | (8,697 | ) |
| Other                                                                                                    |   |   | (87    | )      |   | (87 | ) |
|                                                                                                     |   |   |   |   |   |   |   |
| **Gross                  deferred tax liabilities**                                                      |   |   | (5,557 | )      |   | (8,784 | ) |
|                                                                                                     |   |   |   |   |   |   |   |
| Valuation                  allowance                                                                     |   |   | (2,660 | )      |   | (3,689 | ) |
|                                                                                                     |   |   |   |   |   |   |   |
| **Net                  deferred tax asset**                                                              |   | $      | 19,625 |   | $      | 20,529 |   |
|                                                                                                     |   |   |   |   |   |   |   |

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

**NOTE      12 - COMMITMENTS AND CONTINGENCIES**

**Operating      Lease Commitments**

| 2006                                    |   | $      | 1,178  |   |
|-----------------------------------------|--------|--------|--------|--------|
| 2007                                    |   |   | 774    |   |
| 2008                                    |   |   | 343    |   |
| 2009                                    |   |   | 201    |   |
| 2010                                    |   |   | 74     |   |
|                                    |   |   |   |   |
| Total                  minimum payments |   | $      | 2,570  |   |
|                                    |   |   |   |   |

**Standby      Letters of Credit**

**Purchase      Commitments**

**Contingent      Lease Obligations**

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

**Contingent      Commission Payments**

**Legal      Proceedings**

**NOTE      13 - ASSETS OF BUSINESS TRANSFERRED UNDER CONTRACTUAL      ARRANGEMENTS**

**NOTE      14- FAIR VALUE OF FINANCIAL INSTRUMENTS**

**Current      Assets and Current Liabilities**

**Deferred      Tax Assets, Customer Deposit Liability and Other Long-Term      Liabilities**

**Property      and Equipment**

**Other      Investments-Supplemental Retirement Plan**

**Long-Term      Debt **

**CPI      CORP.**

**Notes      to Consolidated Financial Statements**

**NOTE      15 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)**

| *thousands,                  except per share data*                                                |   |                            |                                                                                                                                                                                                                                 |                                |   |                               |   |                              |                               |
|----------------------------------------------------------------------------------------------------|--------|---------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------|--------|------------------------------------|--------|-----------------------------------|------------------------------------|
|                                                                                               |   |                            |                                                                                                                                                                                                                                 | **QUARTER                  ENDED:** |   |                               |   |
| FISCAL                  YEAR 2005                                                                  |   | April                  30, 2005 |                                                                                                                                                                                                                                 | July                  23, 2005      |   | November                  12, 2005 |   | February                  4, 2006 |                               |
|                                                                                               |   | (12                  weeks)     |                                                                                                                                                                                                                                 | (12                  weeks)         |   | (16                  weeks)        |   | (12                  weeks)       |                               |
| Net                  sales                                                                         |   | $                               | 55,804                                                                                                                                                                                                                               |                                | $      | 54,724                             |   | $                                 | 78,470                             |   | $ | 102,985 |   |
| Gross                  margin                                                                      |   |                            | 48,339                                                                                                                                                                                                                               |                                |   | 46,844                             |   |                              | 68,637                             |   |   | 93,033 |   |
|                                                                                               |   |                            |                                                                                                                                                                                                                                 |                                |   |                               |   |                              |                               |   |   |   |   |
| Net                  (loss) earnings                                                               |   |                            | (2,058                                                                                                                                                                                                                               | )                                   |   | (3,017                             | )      |                              | (3,098                             | ) |   | 14,561 |   |
|                                                                                               |   |                            |                                                                                                                                                                                                                                 |                                |   |                               |   |                              |                               |   |   |   |   |
| Net                  (loss) earnings per share - diluted                                           |   | $                               | (0.26                                                                                                                                                                                                                                | )                                   | $      | (0.38                              | )      | $                                 | (0.39                              | ) | $ | 1.84 |   |
|                                                                                               |   |                            |                                                                                                                                                                                                                                 |                                |   |                               |   |                              |                               |   |   |   |   |
| Net                  (loss) earnings per share - basic                                             |   | $                               | (0.26                                                                                                                                                                                                                                | )                                   | $      | (0.38                              | )      | $                                 | (0.39                              | ) | $ | 1.85 |   |
|                                                                                               |   |                            |                                                                                                                                                                                                                                 |                                |   |                               |   |                              |                               |   |   |   |   |
| Weighted                  average number of common and equivalent shares - diluted                 |   |                            | 7,810                                                                                                                                                                                                                                |                                |   | 7,850                              |   |                              | 7,871                              |   |   | 7,905 |   |
| Weighted                  average number of common and equivalent shares - basic                   |   |                            | 7,810                                                                                                                                                                                                                                |                                |   | 7,850                              |   |                              | 7,871                              |   |   | 7,880 |   |
|                                                                                               |   |                            |                                                                                                                                                                                                                                 |                                |   |                               |   |                              |                               |   |   |   |   |
|                                                                                               |   |                            |                                                                                                                                                                                                                                 |                                |   |                               |   |                              |                               |   |   |   |   |
|                                                                                                    |   |                            | **                                                  QUARTER ENDED:** |                                |   |
| FISCAL                  YEAR 2004                                                                  |   |                            | May                  1, 2004                                                                                                                                                                                                         |                                |   | July                  24, 2004     |   |                              | November                  13, 2004 |   |   | February                  5, 2005 |   |
|                                                                                               |   |                            | (12 weeks)                                                                                                                                                                                                                 |                                |   | (12                  weeks)        |   |                              | (16                  weeks)        |   |   | (12                  weeks) |   |
| Net                  sales                                                                         |   | $                               | 54,925                                                                                                                                                                                                                               |                                | $      | 48,621                             |   | $                                 | 78,821                             |   | $ | 99,498 |   |
| Gross                  margin                                                                      |   |                            | 47,234                                                                                                                                                                                                                               |                                |   | 41,950                             |   |                              | 68,245                             |   |   | 87,537 |   |
| Net                  (loss) earnings from continuing operations                                    |   |                            | (7,649                                                                                                                                                                                                                               | )                                   |   | (6,519                             | )      |                              | (13,438                            | ) |   | 12,844 |   |
| Net                  loss from discontinued operations                                             |   |                            | (1,149                                                                                                                                                                                                                               | )                                   |   | (2,588                             | )      |                              | (6                                 | ) |   | (3 | ) |
| Net                  (loss) earnings                                                               |   |                            | (8,798                                                                                                                                                                                                                               | )                                   |   | (9,107                             | )      |                              | (13,444                            | ) |   | 12,841 |   |
|                                                                                               |   |                            |                                                                                                                                                                                                                                 |                                |   |                               |   |                              |                               |   |   |   |   |
| Net                  (loss) earnings per share from continuing operations - diluted                |   | $                               | (0.95                                                                                                                                                                                                                                | )                                   | $      | (0.82                              | )      | $                                 | (1.73                              | ) | $ | 1.65 |   |
| Net                  loss per share from discontinued operations - diluted                         |   | $                               | (0.14                                                                                                                                                                                                                                | )                                   | $      | (0.32                              | )      | $                                 | -                                  |   | $ | - |   |
| Net                  (loss) earnings per share - diluted                                           |   | $                               | (1.09                                                                                                                                                                                                                                | )                                   | $      | (1.14                              | )      | $                                 | (1.73                              | ) | $ | 1.65 |   |
|                                                                                               |   |                            |                                                                                                                                                                                                                                 |                                |   |                               |   |                              |                               |   |   |   |   |
| Net                  (loss) earnings per share from continuing operations -                  basic |   | $                               | (0.95                                                                                                                                                                                                                                | )                                   | $      | (0.82                              | )      | $                                 | (1.73                              | ) | $ | 1.66 |   |
| Net                  loss per share from discontinued operations - basic                           |   | $                               | (0.14                                                                                                                                                                                                                                | )                                   | $      | (0.32                              | )      | $                                 | -                                  |   | $ | - |   |
| Net                  (loss) earnings per share - basic                                             |   | $                               | (1.09                                                                                                                                                                                                                                | )                                   | $      | (1.14                              | )      | $                                 | (1.73                              | ) | $ | 1.66 |   |
|                                                                                               |   |                            |                                                                                                                                                                                                                                 |                                |   |                               |   |                              |                               |   |   |   |   |
| Weighted                  average number of common and equivalent shares - diluted                 |   |                            | 8,101                                                                                                                                                                                                                                |                                |   | 7,988                              |   |                              | 7,752                              |   |   | 7,797 |   |
| Weighted                  average number of common and equivalent shares - basic                   |   |                            | 8,101                                                                                                                                                                                                                                |                                |   | 7,988                              |   |                              | 7,752                              |   |   | 7,759 |   |

*Item      9.*
*Change      in and Disagreements with Accountants on Accounting and      Financial Disclosure*

*Item      9A.*
*Controls      and Procedures*

*Internal      Control—Integrated Framework *

*Internal      Control — Integrated Framework *
*Internal      Control — Integrated Framework *

*Item      9B.    *
*Other      Information*

**PART      III**

*Item      10.*
*Directors      and Executive Officers of the      Registrant*

*Item      11.*
*Executive      Compensation*

| *Item                12.* |   | *Security                Ownership of Certain Beneficial Owners and                Management and Related Stockholder                Matters* |
|---------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| Plan                Category                                                  |   | Number                of securities to be issued upon exercise of outstanding options,                warrants                and rights |    | Weighted-average                exercise price of outstanding options, warrants and rights |   | Number                of securities remaining available for future issuance under equity                compensation plans (excluding securities reflected in the first                column) |   |
|-------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------|---------|--------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                          |   |                                                                                                                                     |    |                                                                                       |   |                                                                                                                                                                                           |   |
| Equity                compensation plans approved by security holders         |   |                                                                                                                                     | 126,020 |                                                                                       | $      | 20.02                                                                                                                                                                                          |   |   | 1,243,998                (1 | ) |
|                                                                          |   |                                                                                                                                     |    |                                                                                       |   |                                                                                                                                                                                           |   |   |   |   |
| Equity                compensation plans not approved by security holders (2) |   |                                                                                                                                     | 0       |                                                                                       |   | 0                                                                                                                                                                                              |   |   | 80,232                (3 | ) |
|                                                                          |   |                                                                                                                                     |    |                                                                                       |   |                                                                                                                                                                                           |   |   |   |   |
| Total                                                                         |   |                                                                                                                                     | 126,020 |                                                                                       | $      | 20.02                                                                                                                                                                                          |   |   | 1,324,230 |   |

| (1)   | Includes                966,706 shares reserved for issuance under the Company’s stock option                plan, 267,853 shares reserved for issuance under the Company’s restricted                stock plan and 9,439 shares reserved for issuance under the Company’s                employees’ profit sharing plan. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The                only plan not approved by security holders is the Company’s stock bonus                plan. This plan was enacted in fiscal 1982 and is no longer active.                The                remaining awards granted under this plan vested in fiscal                2003. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Represents                80,232 shares reserved for issuance under the Company’s inactive stock                bonus plan. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------|

*Item      13.*
*Certain      Relationships and Related      Transactions*

*Item      14.*
*Principal      Accounting Fees and Services*

**PART      IV**

*Item      15.*
*Exhibits      and Financial Statement Schedules*

| (1.)   |   | FINANCIAL                  STATEMENTS |   |   |                                                                                                                                                                                                                                                       | PAGES  |
|--------|--------|---------------------------------------|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|   |   |                                  | -      |   | Report                  of Independent Registered Public Accounting Firm                                                                                                                                                                                   | 33     |
|   |   |                                  | -      |   | Consolidated                  Balance Sheets as of February 4, 2006 and February 5, 2005                                                                                                                                                                   | 34-35  |
|   |   |                                  | -      |   | Consolidated                  Statements of Operations for the fiscal years ended February 4,                  2006,    February                  5, 2005 and February 7, 2004                                                         | 36     |
|   |   |                                  | -      |   | Consolidated                  Statements of Changes in Stockholders' Equity for the fiscal years                      ended                  February 4, 2006, February 5, 2005 and February                  7,                  2004 | 37     |
|   |   |                                  | -      |   | Consolidated                  Statements of Cash Flows for the fiscal years ended February 4,                  2006,    February                  5,                  2005 and February 7, 2004                                   | 38-40  |
|   |   |                                  | -      |   | Notes                  to Consolidated Financial Statements                                                                                                                                                                                                |   | 41-69 |

| (a)                  EXHIBIT INDEX |   |                                                                                                                                                      |   |   |                           |   |
|------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------------------------------|--------|
|                               |   |                                                                                                                                                      |   |   | 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, Exhibit 3.1, filed 4/30/90.                                                                           |   |   |
|                               |   |                                                                                                                                                      |   |   |                           |   |   |   |
| (3.2)                              |   | Amended                  and Restated Bylaws of the Company.                                                                                              |   |   |                           |
|                               |   |                                                                                                                                                      |   |   |                           |   |   |   |
| (4.1)                              |   | Form                  of Rights Agreement, Dated as of March 13, 2000 between CPI Corp.                  and                  Harris Trust and            |
|                               |   | Savings                  Bank, incorporated by reference to CPI Corp.'s Form 8-A, Exhibit                  4.5,                  dated March 14, 2000     |
|                               |   |                                                                                                                                                      |   |   |                           |   |   |   |
| (10.1)                             |   | License                  Agreement Sears, Roebuck & Co.dated 1/1/99, incorporated by reference                  to CPI Corp.'s                        |
|                               |   | Annual                  Report for fiscal year 1998 on Form 10-K, Exhibit 10.28, filed                  5/5/99.                                           |   |
|                               |   |                                                                                                                                                      |   |   |                           |   |   |   |
| (10.2)                             |   | Second                  Amendment dated 11/10/99 to License Agreement Sears, Roebuck & Co.,                  incorporated                             |
|                               |   | by                  reference to CPI Corp.'s Form 10-Q, Exhibit 5.1, filed                  12/23/99.                                                     |   |
|                               |   |                                                                                                                                                      |   |   |                           |   |   |   |
| (10.3)                             |   | License                  Agreement Sears, Roebuck & Co. (Off Mall) dated 1/1/99, incorporated                  by reference to                        |
|                               |   | CPI                  Corp.'s Annual Report for fiscal year 1998 on Form 10-K, Exhibit                  10.29,                  filed 5/5/99.              |
|                               |   |                                                                                                                                                      |   |   |                           |   |   |   |
| (10.4)                             |   | Second                  Amendment dated 11/10/99 to License Agreement Sears, Roebuck & Co.                  (Off Mall),                               |
|                               |   | incorporated                  by reference to CPI Corp.'s Form 10-Q, Exhibit 5.2, filed                  12/23/99.                                        |
|                               |   |                                                                                                                                                      |   |   |                           |   |   |   |
| (10.5)                             |   | License                  Agreement Sears, Roebuck De Puerto Rico, Inc. dated 1/1/99, incorporated                  by reference                           |
|                               |   | to                  CPI Corp.'s Annual Report for fiscal year 1998 on Form 10-K, Exhibit                  10.30, filed 5/5/99.                            |
|                               |   |                                                                                                                                                      |   |   |                           |   |   |   |
| (10.6)                             |   | Development                  and License Agreement dated 1/31/01 between Sears, Roebuck and                  Co. and                  Consumer            |
|                               |   | Consumer                  Programs, Incorporated, incorporated by reference to CPI Corp.'s                  Annual                  Report for            |
|                               |   | fiscal                  year 2000 on Form 10-K, Exhibit 10.15, filed 5/3/01.                                                                              |   |   |
|                               |   |                                                                                                                                                      |   |   |                           |   |   |   |
| (10.7)*                            |   | Employment                  Contract Jane E. Nelson dated 2/6/00, incorporated by reference                  to CPI                  Corp.'s              |
|                               |   | Annual                  Report for fiscal year 1999 on Form 10-K, Exhibit 10.36, filed                  4/26/00.                                          |   |
|                               |   |                                                                                                                                                      |   |   |                           |   |   |   |
| (10.8)*                            |   | 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, Exhibit 10.32, filed 5/5/99.                                                                                               |   |   |                           |
|                               |   |                                                                                                                                                      |   |   |                           |   |   |   |
| (10.9)*                            |   | 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, Exhibit 10.33, filed                  5/5/99.                                           |
|                               |   |                                                                                                                                                      |   |   |                           |   |   |   |
| (10.10)*                           |   | 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,                  Exhibit                  10.29, filed 5/5/93. |
|                               |   |                                                                                                                                                      |   |   |                           |   |   |   |
| (10.11)*                           |   | 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, Exhibit 10.30, filed 5/3/01.                                                                   |   |
|                               |   |                                                                                                                                                      |   |   |                           |   |   |   |
| (10.12)*                           |   | 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, Exhibit 10.31, filed 5/3/01.                                                                   |   |

|     |   |                                                                                                                                            |   |   | EXHIBIT                  INDEX (…continued) |   |
|----------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------|--------|
|     |   |                                                                                                                                            |   |   |                                              |   |   |   |
| EXHIBIT  |   |                                                                                                                                            |   |   |                                              |   |   |   |
| NUMBER   |   |                                                                                                                                            |   |   | DESCRIPTION                                       |   |   |
|     |   |                                                                                                                                            |   |   |                                              |   |   |   |
| (10.13)* |   | 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, Exhibit 10.32, filed 5/3/01.                                                                                     |   |   |                                              |
|     |   |                                                                                                                                            |   |   |                                              |   |   |   |
| (10.14)* |   | 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,    |
|     |   | Exhibit                  10.34, filed 5/3/01.                                                                                                   |   |   |                                              |   |
|     |   |                                                                                                                                            |   |   |                                              |   |   |   |
| (10.15)* |   | 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,    |
|     |   | Exhibit                  10.36, filed 5/3/01.                                                                                                   |   |   |                                              |   |
|     |   |                                                                                                                                            |   |   |                                              |   |   |   |
| (10.16)* |   | Employment                  Agreement dated 9/5/01 by and between Jack Krings and CPI Corp.,                  incorporated by                   |
|     |   | reference                  to CPI Corp.'s Form 10-Q, Exhibit 10.42, filed 12/21/01.                                                             |   |
|     |   |                                                                                                                                            |   |   |                                              |   |   |   |
| (10.17)* |   | Employment                  Agreement dated 4/8/02 by and between Gary W. Douglass and CPI                  Corp.,                              |
|     |   | incorporated                  by reference to CPI Corp.'s Annual Report for fiscal year 2001                  on Form                  10-K,    |
|     |   | Exhibit                  10.50, filed 5/1/02.                                                                                                   |   |   |                                              |   |
|     |   |                                                                                                                                            |   |   |                                              |   |   |   |
| (10.18)  |   | Third                  Amendment dated 6/5/02 to Sears License Agreement, incorporated                  by                  reference to        |
|     |   | CPI                  Corp.'s Form 10-Q, Exhibit 10.51, filed 6/7/02.                                                                            |   |   |
|     |   |                                                                                                                                            |   |   |                                              |   |   |   |
| (10.19)* |   | First                  Amendment to CPI Corp. Deferred Compensation and Retirement Plan                  for                  Non-management    |
|     |   | Directors                  (As Amended and Restated as of January 28, 2002), incorporated                  by                  reference to     |
|     |   | CPI                  Corp.'s Form 10-Q, Exhibit 10.52, filed 6/7/02.                                                                            |   |   |
|     |   |                                                                                                                                            |   |   |                                              |   |   |   |
| (10.20)  |   | Sixth                  Amendment dated 11/20/02 to Sears License Agreement, incorporated                  by                  reference to      |
|     |   | CPI                  Corp.'s Form 10-Q, Exhibit 10.54, filed 12/11/02.                                                                          |   |   |
|     |   |                                                                                                                                            |   |   |                                              |   |   |   |
| (10.21)  |   | Third                  Amendment to Sears License Agreement (Off Mall) dated 11/20/02,                  incorporated by                         |
|     |   | reference                  to CPI Corp.'s Form 10-Q, Exhibit 10.55, filed 12/11/02.                                                             |   |
|     |   |                                                                                                                                            |   |   |                                              |   |   |   |
| (10.22)  |   | Fourth                  Amendment to Sears License Agreement (Off Mall) dated 11/20/02,                  incorporated by                        |
|     |   | reference                  to CPI Corp.'s Form 10-Q, Exhibit 10.56, filed 12/11/02.                                                             |   |
|     |   |                                                                                                                                            |   |   |                                              |   |   |   |
| (10.23)  |   | Fifth                  Amendment to Sears License Agreement (Off Mall) dated 11/20/02,                  incorporated by                         |
|     |   | reference                  to CPI Corp.'s Form 10-Q, Exhibit 10.57, filed 12/11/02.                                                             |   |
|     |   |                                                                                                                                            |   |   |                                              |   |   |   |
| (10.24)* |   | Employment                  Agreement dated 10/21/02 by and between Peggy J. Deal and CPI Corp.,                                                |
|     |   | incorporated                  by reference to CPI Corp.'s Form 10-Q, Exhibit 10.58, filed 12/11/02.                                             |
|     |   |                                                                                                                                            |   |   |                                              |   |   |   |
| (10.25)* |   | Employment                  Agreement dated 11/15/02 by and between Thomas Gallahue and CPI                  Corp.,                             |
|     |   | incorporated                  by reference to CPI Corp.'s Form 10-Q, Exhibit 10.59, filed 12/11/02.                                             |
|     |   |                                                                                                                                            |   |   |                                              |   |   |   |
| (10.30)  |   | Sears                  License Agreement dated 1/1/03 by and between Sears, Canada, Inc.,                  Sears                  Roebuck       |
|     |   | and                  Co. and CPI Corp.incorporated, by reference to CPI Corp.'s Annual                  Report                  for fiscal year |
|     |   | 2002                  on Form 10-K, Exhibit 10.64, filed 5/16/03.                                                                               |   |   |                                              |

|     |   |                                                                                                                                                 |   |   | EXHIBIT                  INDEX (…continued) |   |
|----------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------|--------|
|     |   |                                                                                                                                                 |   |   |                                              |   |   |   |
| EXHIBIT  |   |                                                                                                                                                 |   |   |                                              |   |   |   |
| NUMBER   |   |                                                                                                                                                 |   |   | DESCRIPTION                                       |   |   |
|     |   |                                                                                                                                                 |   |   |                                              |   |   |   |
| (10.31)  |   | First                  Amendment dated 9/30/02 to CPI Corp. Retirement Plan and Trust,                  incorporated by                              |
|     |   | reference                  to CPI Corp.'sAnnual Report for fiscal year 2002 on Form 10-K,                  Exhibit                  10.65,           |
|     |   | filed                  5/16/03.                                                                                                                      |   |   |                                              |   |   |
|     |   |                                                                                                                                                 |   |   |                                              |   |   |   |
| (10.32)  |   | Second                  Amendment dated 11/29/02 to CPI Corp. Retirement Plan and Trust,                  incorporated by                            |
|     |   | reference                  to CPI Corp.'s Annual Report for fiscal year 2002 on Form 10-K,                  Exhibit                  10.66,          |
|     |   | filed                  5/16/03.                                                                                                                      |   |   |                                              |   |   |
|     |   |                                                                                                                                                 |   |   |                                              |   |   |   |
| (10.33)  |   | Third                  Amendment dated 11/29/02 to CPI Corp. Employees Profit Sharing                  Plan and                  Trust,              |
|     |   | incorporated                  by reference to CPI Corp.'s Annual Report for fiscal year 2002                  on Form                  10-K,         |
|     |   | Exhibit                  10.67, filed 5/16/03.                                                                                                       |   |   |                                              |   |
|     |   |                                                                                                                                                 |   |   |                                              |   |   |   |
| (10.34)  |   | Seventh                  Amendment dated 8/11/03 to Sears License Agreement, incorporated                  by                  reference             |
|     |   | to                  CPI Corp.'s Form 10-Q, Exhibit 10.69, filed 8/27/03.                                                                             |   |   |
|     |   |                                                                                                                                                 |   |   |                                              |   |   |   |
| (10.35)  |   | Eighth                  Amendment dated 9/1/03 to Sears License Agreement, incorporated                  by                  reference to            |
|     |   | CPI                  Corp.'s Form 10-Q, Exhibit 10.70, filed 12/18/03.                                                                               |   |   |
|     |   |                                                                                                                                                 |   |   |                                              |   |   |   |
| (10.36)  |   | Third                  Amendment dated 2/6/04 to CPI Corp. Retirement Plan and Trust,                  incorporated by                               |
|     |   | reference                  to CPI Corp.'s Annual Report for fiscal year 2003 on Form 10-K,                  Exhibit                  10.73,          |
|     |   | filed                  4/21/04.                                                                                                                      |   |   |                                              |   |   |
|     |   |                                                                                                                                                 |   |   |                                              |   |   |   |
| (10.37)  |   | Fourth                  Amendment dated 6/5/02 to License Agreement by and between Sears,                  Roebuck                  and Co.          |
|     |   | and                  CPI Corp., incorporated by reference to CPI Corp.'s Annual Report                  for                  fiscal year 2003        |
|     |   | on                  Form 10-K, Exhibit 10.74, filed 4/22/04.                                                                                         |   |   |                                              |
|     |   |                                                                                                                                                 |   |   |                                              |   |   |   |
| (10.38)  |   | Sixth                  Amendment dated 4/29/04 to License Agreement (Off Mall) by and                  between                  Sears,               |
|     |   | Roebuck                  and Co. and CPI Corp., incorporated by reference to CPI Corp.'s                  Form                  10-Q,                |
|     |   | Exhibit                  10.83, filed 6/10/04.                                                                                                       |   |   |                                              |   |
|     |   |                                                                                                                                                 |   |   |                                              |   |   |   |
| (10.39)* |   | CPI                  Corp. Restricted Stock Plan as Amended and Restated Effective as                  of April                  14, 2005,           |
|     |   | incorporated                  by reference to CPI Corp.'s Annual Report for fiscal year 2004                  on Form                  10-K,         |
|     |   | Exhibit                  10.86, filed 4/21/05.                                                                                                       |   |   |                                              |   |
|     |   |                                                                                                                                                 |   |   |                                              |   |   |   |
| (10.40)* |   | Stock                  Award and Restriction Agreement by and between CPI Corp. and David                  M.                  Meyer effective       |
|     |   | as                  of April 14, 2005, incorporated by reference to CPI Corp.'s Annual                  Report                  for fiscal year 2004 |
|     |   | on                  Form 10-K, Exhibit 10.88, filed 4/21/05.                                                                                         |   |   |                                              |
|     |   |                                                                                                                                                 |   |   |                                              |   |   |   |
| (10.41)* |   | CPI                  Corp. Performance Plan Adopted Effective as of April 14, 2005,                  incorporated by reference                       |
|     |   | to                  CPI Corp.'s Annual Report for fiscal year 2004 on Form 10-K, Exhibit                  10.90, filed 4/21/05.                      |
|     |   |                                                                                                                                                 |   |   |                                              |   |   |   |
| (10.42)* |   | CPI                  Corp. Non-Employee Directors Restricted Stock Policy Pursuant to                  the CPI                  Corp.                |
|     |   | Restricted                  Stock Plan Adopted Effective as of April 14, 2005, incorporated                  by                  reference           |
|     |   | to                  CPI Corp.'s Annual Report for fiscal year 2004 on Form 10-K, Exhibit                  10.91, filed 4/21/05.                      |
|     |   |                                                                                                                                                 |   |   |                                              |   |   |   |
| (10.43)* |   | CPI                  Corp. Non-Employee Directors Restricted Stock Policy (Restricted                  Stock                  Election)              |
|     |   | Adopted                  by the Company April 14, 2005, incorporated by reference to CPI                  Corp.'s                  Annual Report     |
|     |   | for                  fiscal year 2004 on Form 10-K, Exhibit 10.92, filed 4/21/05.                                                                    |   |   |
|     |   |                                                                                                                                                 |   |   |                                              |   |   |   |
| (10.44)* |   | Restricted                  Stock Award Agreement, incorporated by reference to CPI Corp.'s                  Annual                  Report for      |
|     |   | fiscal                  year 2004 on Form 10-K, Exhibit 10.93, filed 4/21/05.                                                                        |   |   |

|     |   |                                                                                                                                                    |   |   | EXHIBIT                  INDEX (…continued) |   |
|----------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------------------|--------|
|     |   |                                                                                                                                                    |   |   |                                              |   |   |   |
| EXHIBIT  |   |                                                                                                                                                    |   |   |                                              |   |   |   |
| NUMBER   |   |                                                                                                                                                    |   |   | DESCRIPTION                                       |   |   |
|     |   |                                                                                                                                                    |   |   |                                              |   |   |   |
| (10.45)* |   | First                  Amendment to Employment Agreement by and between Consumer Programs                  Incorprated                                  |
|     |   | and                  Thomas Gallahue, incorporated by reference to CPI Corp.'s Annual                  Report                  for fiscal year          |
|     |   | 2004                  on Form 10-K, Exhibit 10.95, filed 4/21/05.                                                                                       |   |   |                                              |
|     |   |                                                                                                                                                    |   |   |                                              |   |   |   |
| (10.46)* |   | Retirement                  and Release Agreement by and between CPI Corp.and Stephen A.                  Glickman,                                     |
|     |   | incorporated                  by reference to CPI Corp.'s Form 10-Q, Exhibit 10.98, filed 9/1/05.                                                       |
|     |   |                                                                                                                                                    |   |   |                                              |   |   |   |
| (10.47)* |   | Retirement                  and Release Agreement by and between CPI Corp. and Jack Krings,                  incorporated by                            |
|     |   | by                  reference to CPI Corp.'s Form 10-Q, Exhibit 10.100, filed 9/1/05.                                                                   |   |
|     |   |                                                                                                                                                    |   |   |                                              |   |   |   |
| (10.48)* |   | Employment                  Agreement by and between CPI Corp. and Renato Cataldo, incorporated                  by                  reference          |
|     |   | to                  CPI Corp.'s Form 10-Q, Exhibit 10.102, filed 9/1/05. File No.                  1-10204                                              |   |
|     |   |                                                                                                                                                    |   |   |                                              |   |   |   |
| (10.49)* |   | Stock                  Award and Restriction Agreement by and between CPI Corp. and Renato                  Cataldo,                                    |
|     |   | incorporated                  by reference to CPI Corp.'s Form 10-Q, Exhibit 10.103, filed 9/1/05.                                                      |
|     |   |                                                                                                                                                    |   |   |                                              |   |   |   |
| (10.50)* |   | Confidentiality,                  Noncompetition and Nonsolicitation Agreement by and between CPI                  Corp.                  and           |
|     |   | Renato                  Cataldo, incorporated by reference to CPI Corp.'s Form 10-Q, Exhibit                  10.104, filed 9/1/05.                     |
|     |   |                                                                                                                                                    |   |   |                                              |   |   |   |
| (10.51)* |   | Stock                  Award and Restriction Agreement by and between CPI Corp. and Paul                  Rasmussen,                                    |
|     |   | incorporated                  by reference to CPI Corp.'s Form 10-Q, Exhibit 10.105, filed 9/1/05.                                                      |
|     |   |                                                                                                                                                    |   |   |                                              |   |   |   |
| (10.52)* |   | Confidentiality,                  Noncompetition and Nonsolicitation Agreement by and between CPI                  Corp.                  and           |
|     |   | Paul                  Rasmussen, incorporated by reference to CPI Corp.'s Form 10-Q,                  Exhibit                  10.106, filed 9/1/05.    |
|     |   |                                                                                                                                                    |   |   |                                              |   |   |   |
| (10.53)  |   | Credit                  Agreement (As Amended and Restated Effective November 30, 2005)                  among the                  Company,            |
|     |   | the                  financial institutions that are or may from time to time become                  parties                  thereto and LaSalle      |
|     |   | National                  Bank Association, incorporated by reference to CPI Corp.'s Current                  Report                  on Form 8-K,      |
|     |   | Exhibit                  10.84, filed 12/8/05.                                                                                                          |   |   |                                              |   |
|     |   |                                                                                                                                                    |   |   |                                              |   |   |   |
| (10.54)  |   | Guaranty                  and Collateral Agreement among CPI Corp. and the other parties                  thereto, as                  guarantors, and  |
|     |   | LaSalle                  Bank National Association, an administrative agent, incorporated                  by                  reference to CPI Corp.'s |
|     |   | Current                  Report on Form 8-K, Exhibit 10.85, filed 12/8/05.                                                                              |   |   |
|     |   |                                                                                                                                                    |   |   |                                              |   |   |   |
| (10.55)* |   | Retention                  agreement, dated as of January 12, 2006, by and between CPI Corp.                  and                  Thomas Gallahue,     |
|     |   | incorporated                  by reference to CPI Corp.'s Current Report on Form 8-K, Exhibit                  10.107,                  filed 1/19/06.  |
|     |   |                                                                                                                                                    |   |   |                                              |   |   |   |
| (10.56)  |   | First                  Amendment to Amended and Restated Credit Agreement dated as of                  January 25,                  2006                |
|     |   | (the                  "Credit Agreement"), among the Company, the financial institutions                  that                  are or may from         |
|     |   | time                  to time become parties thereto and LaSalle Bank National Association,                  as                  administrative agent   |
|     |   | and                  arranger for the lenders, incorporated by reference to CPI Corp.'s                  Current                  Report on Form 8-K,   |
|     |   | Exhibit                  10.108, filed 1/26/06.                                                                                                         |   |   |                                              |   |

|    |   |                                                                                                                                           |   |   | EXHIBIT                  INDEX (continued) |   |
|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------------------------------------------|--------|
|    |   |                                                                                                                                           |   |   |                                       |   |   |   |
| EXHIBIT |   |                                                                                                                                           |   |   |                                       |   |   |   |
| NUMBER  |   |                                                                                                                                           |   |   | DESCRIPTION                                |   |   |
|    |   |                                                                                                                                           |   |   |                                       |   |   |   |
| (10.57) |   | Stock                  Award and Restriction Agreement, dated April 6, 2006, by and between                  CPI                  Corp. and    |
|    |   | David                  Meyer, incorporated by reference to CPI Corp.'s Current Report                  on Form                  8-K,           |
|    |   | Exhibit                  10.57, filed 4/12/06.                                                                                                 |   |   |                                       |   |
|    |   |                                                                                                                                           |   |   |                                       |   |   |   |
| (10.58) |   | Extension                  dated January 18, 2006 of Sears License Agreement between CPI Corp.                  and                            |
|    |   | Sears                  Canada, Inc.                                                                                                            |   |   |                                       |   |   |
|    |   |                                                                                                                                           |   |   |                                       |   |   |   |
| (10.59) |   | Form                  of Indemnification Agreement by and between CPI Corp. and each                  of the                  following:       |
|    |   | Edmond                  S. Abrain, James R. Clifford, Joanne Sawhill Griffin, Lee Liberman,                  Nicholas R. Reding,               |
|    |   | Ingrid                  Otero-Smart, Martin Sneider and Virginia V. Weldon.                                                                    |   |   |
|    |   |                                                                                                                                           |   |   |                                       |   |   |   |
| (11.1)  |   | Computation                  of Earnings (Loss) Per Share - Diluted                                                                            |   |   |                                       |
|    |   |                                                                                                                                           |   |   |                                       |   |   |   |
| (11.2)  |   | Computation                  of Earnings (Loss) Per Share - Basic                                                                              |   |   |                                       |
|    |   |                                                                                                                                           |   |   |                                       |   |   |   |
| (14.0)  |   | Code                  of Business Conduct and Ethics                                                                                           |   |   |                                       |   |
|    |   |                                                                                                                                           |   |   |                                       |   |   |   |
| (21.0)  |   | Subsidiaries                  of the Registrant                                                                                                |   |   |                                       |   |
|    |   |                                                                                                                                           |   |   |                                       |   |   |   |
| (23.0)  |   | Independent                  Auditor's Consent                                                                                                 |   |   |                                       |   |
|    |   |                                                                                                                                           |   |   |                                       |   |   |   |
| (31.1)  |   | Certification                  Pursuant to Rule 13a-14(a) Under the Securities and Exchange Act                  of                  1934      |
|    |   | by                  the President and Chief Executive Officer                                                                                  |   |   |                                       |
|    |   |                                                                                                                                           |   |   |                                       |   |   |   |
| (31.2)  |   | Certification                  Pursuant to Rule 13a-14(a) Under the Securities and Exchange Act                  of                  1934      |
|    |   | by                  the Executive Vice President, Finance and Chief Financial                  Officer                                         |   |
|    |   |                                                                                                                                           |   |   |                                       |   |   |   |
| (32.0)  |   | Certification                  Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section                  906 of                  the |
|    |   | Sarbanes-Oxley                  Act of 2002 by the President and Chief Executive Officer and                  the                              |
|    |   | Executive                  Vice President, Finance and Chief Financial Officer                                                                 |   |   |

SIGNATURES

| CPI                  CORP. |                        |                                |                                     |   |
|----------------------------|-----------------------------|-------------------------------------|------------------------------------------|--------|
|                       |                        |                                |                                     |   |   |   |   |   |   |
|                       |                    BY: | /s/                  Paul Rasmussen |                                     |   |
|                       |                        |                                | Paul                  Rasmussen          |   |   |   |
|                       |                        |                                | Chief                  Executive Officer |   |   |
|                       |                        |                                |                                     |   |   |   |   |   |   |

| SIGNATURES                  OF DIRECTORS AND PRINCIPAL OFFICERS |   |   |
|-----------------------------------------------------------------|--------|--------|
|                                                            |   |   |   |   |   |   |   |   |   |   |
|                                                            |   |   |   | **Signature** |   |   | **Title** |   |   | **Date** |
|                                                            |   |   |   |   |   |   |   |   |   |   |
|                                                            | /s/    |   | Paul                  Rasmussen |   | Chief                  Executive Officer |   | April                  18, 2006 |
|                                                            |   |   |   | (Paul                  Rasmussen) |   |   |   |   |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |
|                                                            | /s/    |   | David                  M. Meyer |   | Chairman                  of the Board of Directors |   | April                  18, 2006 |
|                                                            |   |   |   | (David                  M. Meyer) |   |   |   |   |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |
|                                                            | /s/    |   | James                  J. Abel |   | Director |   |   | April                  18, 2006 |
|                                                            |   |   |   | (James                  J. Abel) |   |   |   |   |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |
|                                                            | /s/    |   | Michael                  S. Koeneke |   | Director |   |   | April                  18, 2006 |
|                                                            |   |   |   | (Michael                  S. Koeneke) |   |   |   |   |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |
|                                                            | /s/    |   | Mark                  R. Mitchell |   | Director |   |   | April                  18, 2006 |
|                                                            |   |   |   | (Mark                  R. Mitchell) |   |   |   |   |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |
|                                                            | /s/    |   | John                  Turner White, IV |   | Director |   |   | April                  18, 2006 |
|                                                            |   |   |   | (John                  Turner White, IV) |   |   |   |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |
|                                                            | /s/    |   | Gary                  W. Douglass |   | Executive                  Vice President, Finance |   | April                  18, 2006 |
|                                                            |   |   |   | (Gary                  W. Douglass) |   | and                  Chief Financial Officer |   |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |
|                                                            | /s/    |   | Dale                  Heins |   |   | Vice                  President, Corporate Controller |   | April                  18, 2006 |
|                                                            |   |   |   | (Dale                  Heins) |   | and                  Principal Accounting Officer |   |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |