CPI Corp. says acquisitions and marketing can overcome digital photo threat
CPI Corp. (NYSE: CPY) executives said the professional portrait company, which experienced a recent 13% quarterly decline in customer visits, has been hurt by advances in digital photography, but is optimistic marketing and acquisitions will halt any business declines.
Digital photography has allowed a large number of players to enter the portrait photography market, and improvements in technology have made customers more “discerning and demanding [which] may be impacting visit frequency,” CEO Renato Cataldo said on the call.
CPI, or Consumer Portraits Inc., is optimistic that aggressive marketing and studio acquisitions and retention will stem the business loss, Cataldo said.
On Tuesday, a bankruptcy judge approved CPI’s $100 million purchase of Portrait Corp. of America. Portrait Corp. filed for bankruptcy on Aug. 31, citing the prevalence of digital photography as a factor. Portrait Corp. was the exclusive photo portrait provider for Wal-Mart Stores Inc. (NYSE: WMT). CPI currently operates over 1,000 studios, including Sears’ photo portrait studios.
CPI purchased Portrait Corp. because of the price, the opportunity to sell to the “unrivaled customer foot traffic” of Wal-Mart and to gain access to Portrait Corp.’s digital photo facilities, Cataldo said.
After Tuesday’s close, CPI reported net sales of $57.8 million for the first quarter ended April 28, down from $59.7 million in the year-ago period. The St. Louis, Mo.-based business recorded a $2.6 million first-quarter profit, or $0.40 a share, up from $1.8 million, or $0.29 per share, a year earlier. CPI said profits were favorably impacted by $0.5 million due to a change in its vacation policy. The 13% decline in customer “sittings” was offset by an 11% increase in average sales per customer sitting, the company said.
Over the last 52 weeks, CPI shares have fluctuated in value between $28.17 and $87.19. In midday Wednesday trading, CPI was down 3.4% at $75.67.
