CPI gets the picture. The company, recognized as a longtime leader in portrait photography, operates more than 3,080 photographic studios in North America. Through licensing agreements, it is the sole operator of about 1,000 Sears Portrait Studios inside Sears stores (a deal that has been in effect since 1986) and about 1,900 portrait studios in Wal-Mart stores. CPI also runs more than 150 Kiddie Kandids photo studios inside Babies "R" Us stores and about two dozen studios in malls. The company also offers on-location photography and videography services across the US. All of CPI's studios and photographers use digital imaging technology. CPI traces its roots back to a single studio established in 1942.
Equipped with an expansive network and a long-standing reputation in retail, the company saw demand for its business rise in recent years. Its progress was stifled, however, by tough economic conditions in North America (namely the US recession), which resulted in fewer portrait sittings by cash-strapped families. Revenue peaked at more than $460 million in fiscal 2009 but has since fallen to about $405 million in fiscal 2011, about a 10% drop. Despite the lower sales figures, CPI has turned a roughly $8 million loss into a more than $10 million profit during this period. Improved lab efficiency and productivity, the elimination of film, and in-house production of greeting cards were among the cost-cutting efforts that helped to boost the company's bottom line.
Expanding its brick-and-mortar presence through acquisitions has been a major part of CPI's strategy. In early 2010 the company purchased the assets of bankrupt competitor Kiddie Kandids, which operated photo studios inside Babies "R" Us stores. CPI has since reopened more than 130 of those locations and added about 20 more in Babies "R" Us stores during late 2010; it opened about 20 Kiddie Kandids studios in shopping malls, as well.
Still, CPI's portrait studio business continues to be pressured amid the US's recovery from the recession. In an effort to stabilize its earnings, the company decided to give mobile photography services (a new offering) a shot. In early 2011 CPI acquired the assets of Bella Pictures, a provider of wedding photography and videography services in most major US markets. Bella operates through a network of about 1,000 photographers.
As with most photography businesses, CPI's peaks in sales are primarily seasonal. Thanksgiving and Christmas provide big boosts, with the holidays typically generating about a third of total revenues.
The company hopes its full conversion to digital imaging technology will expand demand beyond the holidays, as consumers can receive their portraits faster. The transition also helps CPI to deliver targeted marketing campaigns, which helps to bring in business. The digital conversion started in 2005 and was completed in mid-2009, with Sears studios in Canada being the last to upgrade.
Hedge fund Ramius Group is the company's largest shareholder with about 20% of the stock. CPI successfully defended a proxy contest from Ramius in mid-2009 and as a result, Ramius, which sought to nominate two directors to the board, has no board representation. – less