More on the decline of big-box chain studios
Sales have declined to the point where, given its cost structure, cash flow is now negative. These dynamics, on a levered balance sheet, make this stock a likely zero over the next year. Despite its fall over the last two weeks, CPY still trades at 14x optimistic 2011E EBITDA. You can short the stock here with limited risk and still get a 100% return.
Industry
Going to Sears or Wal-Mart to have your family picture taken is something you would see in a black-and-white film. The advent of high-quality digital cameras at inexpensive prices has made professional quality picture taking accessible to anyone. New technology captures multiple images in a single shot and automatically combines the most appealing of those images into one picture. Unique technical knowledge and professional training is no longer a differentiator for CPY. The fact that little training is needed to be a CPY photo tech only reinforces this reality.
http://seekingalpha.com/article/316626-cpi-s-bleak-q3-points-to-dark-days-ahead
National Chain Kiddie Kandids went under in 2010,
eventually selling to CPI (owner of Sears Studios)
National Chain Picture People under went a major restructuring and downsizing around 2006-8, dropping about 2/3 of it's stores and retooling, before beginning a cautious growth plan.
CPI and Lifetouch have both been absorbing regional chains and successful indy studios across the country, with Lifetouch being a dominant player in the Senior Portrait market. This means that if you take the family to Target or JC Penny's, and get the school packs you're a Lifetouch family.
For insight on the mind of the mom, read here
http://www.mothering.com/community/t/1218931/favorite-national-chain-portrait-studio
Some comments:
Picture People
They produce a richer looking picture. The plain white background is very chic right now. They also strive to capture the child's personality. So, they encourage just throwing the kid down and letting them do their thing. There is very little posing. And, the photographers have more freedom because their camera is not attached to the ceiling.
But, I think their prints are cheaply made. They are made right there within 45 minutes. When we go to a real photographer he sends them out to get developed. It takes a week or two. They are so much nicer. But, that runs me like $30 for each 4x6, $8 a wallet.
When I worked at Picture People, they used a $125k photo printer. Real silver and developer, but the studio I worked at shot film. The printer was old, ill maintained and cranky, and the print quality varied on if the 1 person who knew how to get it in sync was working that day. I've heard they switched to $75k units when they went digital, but the nearest PP is 2 hrs from me so can't check.
I think Portrait Innovations rocks.
You can't beat their $9.99 special (1 10x13, 2 8x10, 4 5x7, 4 3.5x5, 32 wallets, and 6 photo cards). Amazing deal.
Lots of comments about pricing.
People are trained to use coupons, look for packages, etc.
Sears, Kmart, Walmart, JC Penny's, Target, etc all have 1 thing in common : loss leader.
Come for the cheep photos, while you wait for us to print them on our in-house $5k dye-sub printer, shop.
It's hard to compete in a price conscious market against items sold at a loss anyway.
It's like having a fully equipped dojo, with those sweet mats, the spotless restroom, the lobby with big screen tv, staff on duty noon-9pm, with the stocked pro shop, trying to compete against the guy working out of his basement. ($10 a week vs $150 a month, hmm....)