UPDATED at 4:55 p.m. with the company's statement.
A pension fund has sued St. Louis-based CPI Corp., alleging that the portrait studio operator misled investors about the company's financial health.
The suit, filed by IBEW Local 98 Pension Fund, is seeking class action status for shareholders who purchased the company's common stock between April 20, 2010 and December 21, 2011. The suit was filed in U.S. district court in St. Louis on Friday.
CPI said in a statement this afternoon that it "believes the allegations are completely without merit and intends to vigorously defend against the complaint."
CPI operates portrait studios inside of Sears and Walmart stores. It has struggled recently as many of its core customers have been adversely affected by the economy.
In December, CPI's shares plummeted 62.5 percent after the company announced a net loss of $7.3 million, or $1.03 a share, and an 11 percent drop in net sales in the third quarter. The company blamed the poor performance in part on ineffective marketing efforts.
Then last week, the company said that its same-store sales in the first eight weeks of the fourth quarter ending February 4 had declined 18 percent to $82 million, down from $101 million in the comparable period a year ago.
CPI is also fighting to stay on the New York Stock Exchange. It received a notice in October that it was out of compliance with listing standards.