Picture People, the 320-unit chain of portrait studios with headquarters in Foster City, CA, has been sold by its parent, Hallmark Cards, to Plainfield Asset Management Co., Greenwich, CT. The deal was closed on Sep. 30. As both Hallmark and Plainfield are privately held, the details of the sale are not known, though the initial contacts were made last winter.
Jerry Welch has been named chairman of the board of Picture People. Welch has a strong retail background, serving as president of such firms as FAO Schwarz, Zany Brainy, and Right Start, all nationally positioned chains appealing to the child marketplace—as does Picture People.
Welch said that two key executives of Picture People were no longer with the firm: Lisa Berman, CEO, and Opal Ferrero, CFO. Charlie Masson, a management specialist, has been named new CEO. All other personnel would be retained. John Johnson, vice president of business development for Picture People, is remaining, along with about 3,700 associates.
Picture People was founded in 1987 as Expressly Portraits, with typical locations in regional malls. Hallmark purchased the chain in 1999. Julie O'Dell, spokesperson for Hallmark, said, "Having a retail-based portrait studio business did not fit into our long-term strategy."
It is generally felt that the portrait operation did little to enhance Hallmark's prime focus: greeting cards, gifts, flowers, etc. Hallmark's revenue exceeds $4 billion annually, and the loss of Picture People, with an estimated volume of about $200 million, would not seem to have any significant impact on Hallmark's financials.
Plainfield Asset Management is a hedge fund founded by Max Holmes, its CEO. According to Welch, the firm will generally only invest in companies it finds desirable and that the outright purchase of Picture People was somewhat unusual.
Welch said he became interested in the portrait business when he headed up Right Start, a national specialty retailer of juvenile products for infants and children. At the time he felt there was a natural alliance for a portrait firm specializing in children, as did Right Start. He approached the management of Expressly Portraits at that time, but no deal was worked out. The idea stayed with him, however.
He indicated that he approached Plainfield Asset Management with the plan to purchase Picture People. "I thought it was a terrific chain," he said.
With his strength in retailing but little in the portrait segment, Welch said, "My immediate plans are to do a lot of listening and learning."
Among the decisions that he will have to make: the transition of the on-site labs at each Picture People location to digital. Presently only a handful of the studios have Noritsu digital systems. The bulk of the locations are equipped with optical units customized for Picture People by San Marco Imaging.
"We are committed to digital," said Welch. "Digital will alter the portrait business that we know today." Other national on-site portrait operations generally send work back to central labs for customer fulfillment rather than combining the shoot, sales, and delivery process that is the Picture People business model. These include PCA at Wal-Mart, CPI and Sears, Lifetouch at JCPenney and Target, and Olan Mills at Kmart.
John Johnson has been testing digital systems from Fuji, Agfa, San Marco, and Noritsu for some time at the firm's Modesto, CA, facility. Executives from these vendors have been awaiting a decision for many months, but Johnson had been delaying. As it turns out, the process was being held up by the parent, Hallmark, who was in discussion on the sale with Plainfield. Few knew that.
What now? Welch said that a decision concerning the equipment vendor would be made "within 60 days" [This article was being written in early October—Editor]. In the meantime, it is understood that minilab manufacturers have been contacted and asked to resubmit a program that would include not only equipment, but paper and chemicals as well.
According to sources, the plan is to have all Picture People labs digitized by the end of next summer so that everything will be in place for the important fourth quarter. ptn