Business News

CPI Corp. Announces First-Quarter 2009 Results

Thursday 11. June 2009 - Comparable same-store sales, excluding impacts of revenue deferral adjustments, foreign currency translation, loyalty program revenue deferral and store closures, increase 1% versus the prior-year first quarter.

— First-quarter PictureMe Portrait Studio(R) brand (PMPS) comparable
store sales, as adjusted, increase 14% year-over-year

— First-quarter Sears Portrait Studio brand (SPS) comparable store
sales, as adjusted, decrease 11% year-over-year

— First-quarter Adjusted EBITDA increases to $11.5 million versus $10.5
million in the prior-year period despite significant deferral of sales
and EBITDA to the second quarter as a result of the late Easter.

— Net deferral to the second quarter of approximately $3.7 million
in sales associated with the timing of Easter in 2009 reduced
Adjusted EBITDA in the first quarter by $2.4 million.

— First-quarter diluted earnings per share (EPS) increases to $0.34
compared with a loss of ($0.04) a year ago despite large negative
impact of Easter-related deferral.

— Net deferral of Easter-related sales to the second quarter reduced
EPS in the first quarter by $0.23 per diluted share.


— Strong results in the first quarter reflect the successful integration
and upgrade of the PMPS studios as well as the impact of cost
reductions and productivity improvements implemented throughout the
organization.


— The Company presently expects to pay down a substantial portion of its
term debt before the end of the fiscal year. A prepayment of $5
million will be made next week.



CPI Corp. (NYSE:CPY) today reported strong results for the first quarter ended May 2, 2009.

“Our strong first-quarter results amid very difficult economic and industry conditions are a testament to the success of our distinctive, high-quality product offerings and aggressive marketing efforts as well as the significant added value of our state-of-the-art digital technology platform,” said Renato Cataldo, president and chief executive officer. “We are very encouraged by our results to date as well as our progress on various customer indicators and productivity metrics we track internally. As a result, we expect to see improved gains in earnings and cash flow over the course of the year even as we continue to experience fierce economic headwinds.”

Net sales for the fiscal 2009 first quarter decreased $9.9 million, or 10%, to $93.5 million from the $103.4 million reported in the 2008 first quarter. Excluding impacts of revenue deferral associated with the timing of Easter ($3.7 million), foreign exchange translation ($2.8 million), revenue deferral related to positive response to the Company’s loyalty programs ($2.3 million) and store closures ($1.9 million), comparable same-store sales increased $0.8 million, or 1%.

Net sales from the Company’s PictureMe Portrait Studio(R) brand (PMPS), on a comparable same-store basis, excluding revenue deferral adjustments associated with the timing of Easter and the Company’s loyalty program, foreign currency translation, store closures and other items, totaling $6.6 million, increased 14% in the first quarter of 2009 to $54.7 million from $48.1 million reported in the first quarter of 2008. PMPS sales performance for the first quarter was the result of an approximate 33% increase in average sale per customer sitting, offset in part by an approximate 15% decline in the number of sittings. The Company attributes its increase in average sale per customer sitting primarily to customers’ positive response to the new offerings made possible by the recently completed digital conversion and the implementation of new sales and performance management processes. The Company believes the sittings decline reflects the difficult economic environment, which has especially pressured customer demand in lower income categories.

During the first quarter of 2009, net sales from the Company’s Sears Portrait Studio brand (SPS), on a comparable same-store basis, excluding revenue deferral adjustments associated with the timing of Easter and the Company’s loyalty program, foreign currency translation, store closures and other items, totaling $4.1 million, decreased 11%, to $46.3 million from $52.0 million reported in the first quarter of 2008. SPS sales performance for the first quarter was the result of declines in the number of sittings and sales per sitting of approximately 10% and 2%, respectively. The Company believes the decline in SPS brand sales reflects the difficult economic environment and, especially, the related reduction in same-day, walk-in business. The decline was mitigated substantially by improved execution of the Company’s customer outreach and loyalty programs.

The Company also reported net income of $2.3 million, or $0.34 per diluted share, for the fiscal 2009 first quarter, versus a net loss of $256,000, or ($0.04) per diluted share, reported for the first quarter of fiscal 2008. Foreign currency translation and store closures did not materially affect net income but the revenue deferral of $3.7 million (associated principally with the late Easter which caused significant deliveries of finished Easter portraits to fall into the second quarter) reduced reported net income in the first quarter of fiscal 2009 by approximately $1.6 million, or $0.23 per diluted share.

First-quarter Adjusted EBITDA increased to $11.5 million versus $10.5 million in the prior-year period, despite the net deferral to the second quarter of approximately $3.7 million in sales associated with the timing of Easter which negatively impacted Adjusted EBITDA in the first quarter by $2.4 million. The improvements in net income and Adjusted EBITDA year-over-year result from cost reductions and productivity improvements implemented throughout the organization.

Costs and expenses were $88.6 million in the first quarter of 2009, compared with $102.4 million in the first quarter of 2008.

Cost of sales, excluding depreciation and amortization expense, was $7.0 million in the first quarter of 2009, compared with $10.5 million in the first quarter of 2008. The decrease is principally attributable to lower overall manufacturing production levels, improved product mix, increased manufacturing productivity, eliminated film and related shipping costs stemming from the PMPS digital conversion, and decreased overhead costs resulting from the integration of the PMPS operations.

Selling, general and administrative (SG&A) expenses were $75.2 million for the first quarter of 2009, compared with $82.9 million in the first quarter of 2008. The decrease in SG&A expenses primarily relates to the elimination of duplicative costs in connection with the PMPS integration; fiscal year 2008 nonrecurring costs associated with the PMPS digital conversion; lower studio employment costs due to scheduling improvements and selected operating hour reductions; reduced employee insurance costs related to changes in plan design and lower enrollment; and favorable foreign exchange rate translation. These decreases were offset in part by increases in marketing expense due to additional promotional programs for the Easter holiday, higher average hourly studio rates and increased sales incentives in connection with new studio and field initiatives.

Depreciation and amortization decreased to $6.0 million in the first quarter of 2009 from $7.5 million in the first quarter of 2008. The decrease in depreciation and amortization is primarily attributable to certain assets, acquired in connection with the 2007 acquisition of PCA, becoming fully depreciated subsequent to the prior-year first quarter. This decrease is offset in part by an increase in depreciation attributable to the equipment purchased for the PMPS digital conversion throughout fiscal year 2008.

In the first quarter of 2009 and 2008, the Company recognized $420,000 and $1.5 million, respectively, in other charges and impairments primarily associated with certain PMPS integration charges, including severance and lab closure costs. The prior-year charges also include certain fees incurred in connection with the settlement of the previous Sears license agreement.

The Company’s preliminary net sales for the first five weeks of the second quarter, on a comparable same-store point-of-sale basis, excluding the impacts of foreign currency translation and the favorable revenue deferral from the first quarter, decreased 7% compared with the corresponding period in the prior year. PMPS and SPS net sales for the first five weeks of the second quarter were +10% and -21%, respectively.

The Company presently expects to pay down a substantial portion of its term debt before the end of the fiscal year. A prepayment of $5 million will be made next week.