FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

          [X] Quarterly Report Pursuant to Section 13 or 15 (d) of the
                         Securities Exchange Act of 1934

                   For the quarterly period ended May 2, 2004

                                       OR

          [ ] Transition Report Pursuant to Section 13 or 15 (d) of the
                         Securities Exchange Act of 1934

            For the transition period from_____________to___________.

                         Commission File Number 1 - 9482

                              HANCOCK FABRICS, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                                            64-0740905
  (State or other jurisdiction                              (I. R. S. Employer
of incorporation or organization)                           Identification No.)

   3406 West Main Street, Tupelo, MS                              38801
(Address of principal executive offices)                        (Zip Code)


               Registrant's telephone number, including area code
                                 (662) 842-2834

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed  by  Section  13 or 15 (d) of the  Securities  Exchange  Act of 1934
during the preceding 12 months (or for such shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.
Yes   X    No
    ----      ----

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes   X    No
    ----      ----

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practical date.

As of May 2, 2004,  the  registrant  had  outstanding an aggregate of 18,888,270
shares of common stock, $.01 par value.

<PAGE>
<TABLE>
<S>                                                                                       <C>

INDEX

Part I.  Financial Information:
                                                                                          Page Numbers
  Item 1. Financial Statements (unaudited)

    Consolidated Balance Sheets as of May 2, 2004 and February 1, 2004                         3

    Consolidated Statements of Income for the Thirteen Weeks  Ended May 2,                     4
      2004 and May 4, 2003

    Consolidated Statements of Cash Flows for the Thirteen Weeks Ended                         5
      May 2, 2004 and May 4, 2003

    Consolidated Statement of Shareholders' Equity for the Thirteen Weeks
      Ended May 2, 2004                                                                        6

    Notes to Consolidated Financial Statements                                               7 - 10

  Item 2. Management's Discussion and Analysis of Financial Condition
    and Results of Operations                                                               11 - 14

  Item 3. Quantitative and Qualitative Disclosures about Market Risks                         15

  Item 4. Controls and Procedures                                                             15

Part II.  Other Information:

  Item 2. Changes in Securities, Use of Proceeds and Issuer
          Purchases of Equity Securities                                                      16

  Item 6. Exhibits and Reports on Form 8-K                                                    17

Signature                                                                                     17
</TABLE>


                                       2
<PAGE>

PART I. FINANCIAL INFORMATION

HANCOCK FABRICS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<S>                                                                <C>                <C>

---------------------------------------------------------------------------------------------------
                                                                       May 2,        February 1,
(in thousands, except for share and per share amounts)                  2004             2004
---------------------------------------------------------------------------------------------------
Assets
Current assets:
          Cash and cash equivalents                                $       3,246      $      4,080
          Receivables, less allowance for doubtful accounts                1,082               966
          Inventories                                                    150,963           154,984
          Prepaid expenses                                                 1,789             2,304
---------------------------------------------------------------------------------------------------
          Total current assets                                           157,080           162,334

Property and equipment, at depreciated cost                               63,357            57,142
Deferred tax assets                                                        5,691             6,207
Pension payment in excess of required contribution                        15,406            15,936
Goodwill                                                                   4,480             4,480
Other assets                                                               3,241             3,324
---------------------------------------------------------------------------------------------------
          Total assets                                             $     249,255      $    249,423
===================================================================================================

Liabilities and Shareholders' Equity
Current liabilities:
          Accounts payable                                         $      38,842      $     42,704
          Accrued liabilities                                             18,622            22,574
          Deferred tax liabilities                                         3,713             3,113
          Income taxes                                                     1,184             7,299
---------------------------------------------------------------------------------------------------
          Total current liabilities                                       62,361            75,690

Long-term debt obligations                                                23,000            10,000
Postretirement benefits other than pensions                               22,533            22,368
Reserve for store closings                                                   462               592
Other liabilities                                                          9,081             9,193
---------------------------------------------------------------------------------------------------
          Total liabilities                                              117,437           117,843
---------------------------------------------------------------------------------------------------

Commitments and contingencies
---------------------------------------------------------------------------------------------------

Shareholders' equity:
          Common stock, $.01 par value; 80,000,000 shares authorized;
           32,093,841 and 31,941,582 issued and outstanding,
            respectively                                                     321               319
          Additional paid-in capital                                      72,746            70,105
          Retained earnings                                              217,172           218,612
          Treasury stock, at cost, 13,205,571 and 13,093,781
             shares held, respectively                                  (153,637)         (151,905)
          Deferred compensation on restricted stock incentive plan        (4,784)           (5,551)
---------------------------------------------------------------------------------------------------
          Total shareholders' equity                                     131,818           131,580
---------------------------------------------------------------------------------------------------
          Total liabilities and shareholders' equity               $     249,255      $    249,423
===================================================================================================
</TABLE>

  See accompanying notes to consolidated financial statements.


                                       3
<PAGE>

HANCOCK FABRICS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<S>                                                                           <C>               <C>
---------------------------------------------------------------------------------------------------------------
                                                                                   Thirteen Weeks Ended
                                                                                May 2,            May 4,
(in thousands, except per share amounts)                                         2004              2003
---------------------------------------------------------------------------------------------------------------

Sales                                                                         $   105,089       $   107,636
Cost of goods sold (1)                                                             52,606            52,897
---------------------------------------------------------------------------------------------------------------

    Gross profit                                                                   52,483            54,739
---------------------------------------------------------------------------------------------------------------

Selling, general and administrative expense                                        49,379            46,820
Depreciation and amortization                                                       1,710             1,452
---------------------------------------------------------------------------------------------------------------

    Operating income                                                                1,394             6,467

Other expense (income)
    Interest expense                                                                  124                94
    Interest income                                                                   (12)              (17)
---------------------------------------------------------------------------------------------------------------

Earnings before income taxes                                                        1,282             6,390
Income taxes                                                                          466             2,319
---------------------------------------------------------------------------------------------------------------

Net earnings and comprehensive income                                         $       816       $     4,071
===============================================================================================================

Earnings per share
    Basic                                                                     $       .05       $       .23
    Diluted                                                                   $       .04       $       .22
===============================================================================================================

Weighted average shares outstanding
    Basic                                                                          17,994            17,790
    Diluted                                                                        18,791            18,684
===============================================================================================================

Dividends per share                                                                 $0.12             $0.10
===============================================================================================================
</TABLE>

(1) Excluding depreciation and amortization
See accompanying notes to consolidated financial statements.


                                       4
<PAGE>

Hancock Fabrics, Inc.
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<S>                                                                     <C>              <C>
-----------------------------------------------------------------------------------------------------
(in thousands)
                                                                            Thirteen Weeks Ended
                                                                           May 2,         May 4,
                                                                            2004           2003
-----------------------------------------------------------------------------------------------------
Cash flows from operating activities:
         Net earnings and comprehensive income                          $         816    $     4,071
         Adjustments to reconcile net earnings to cash
           flows used in operating activities
                   Depreciation and amortization                                1,710          1,452
                   LIFO charge (credit)                                          (150)             -
                   Deferred income taxes                                        1,116              -
                   Amortization of deferred compensation on
                     restricted stock incentive plan                              710            504
                   Loss on disposition of property and equipment                  138              -
                   Interest expense on closed stores accrual                       27             34
                   Issuance of shares as compensation for professional
                     services                                                       8              7
                   Issuance of shares under directors' stock plan                  45             45
         (Increase) decrease in assets
                   Receivables and prepaid expenses                               399          1,241
                   Inventory at current cost                                    4,171         (2,045)
                   Pension payment in excess of required contribution             530            780
                   Other assets                                                    83             84
         Increase (decrease) in liabilities
                   Accounts payable                                            (3,862)        (3,897)
                   Accrued liabilities                                         (3,889)        (4,739)
                   Income taxes                                                (5,056)          (790)
                   Postretirement benefits other than pensions                    165            101
                   Reserve for store closings                                    (220)          (172)
                   Other liabilities                                             (112)          (186)
         Tax benefit of stock options exercised                                   483            102
-----------------------------------------------------------------------------------------------------
                   Net cash used in operating activities                       (2,888)        (3,408)
-----------------------------------------------------------------------------------------------------

Cash flows from investing activities:
         Additions to property and equipment                                   (8,070)        (3,592)
         Proceeds from the disposition of property and equipment                    7             17
-----------------------------------------------------------------------------------------------------
                   Net cash used in investing activities                       (8,063)        (3,575)
-----------------------------------------------------------------------------------------------------

Cash flows from financing activities:
         Borrowings on revolving  credit agreement                             13,000         17,000
         Purchase of treasury stock                                            (1,732)        (9,202)
         Proceeds from exercise of stock options                                1,105            408
         Cash dividends paid                                                   (2,256)        (1,884)
-----------------------------------------------------------------------------------------------------
                   Net cash provided by financing activities                   10,117          6,322
-----------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents                                            (834)          (661)
Cash and cash equivalents:
         Beginning of period                                                    4,080          4,589
-----------------------------------------------------------------------------------------------------
         End of period                                                  $       3,246    $     3,928
=====================================================================================================

Supplemental disclosures:
Cash paid during the period for:
         Interest                                                       $          95    $        34
         Income taxes                                                   $       3,932    $     3,109
=====================================================================================================
</TABLE>


                                       5

<PAGE>

HANCOCK FABRICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(unaudited)
<TABLE>
<S>                                       <C>         <C>       <C>      <C>       <C>          <C>
------------------------------------------------------------------------------------------------------------------------------------
(in thousands, except for number of shares)

------------------------------------------------------------------------------------------------------------------------------------
                                                               Additional
                                              Common Stock      Paid-in               Treasury Stock                      Total
                                          --------------------           Retained   -------------------     Deferred   Shareholders'
                                            Shares    Amount    Capital  Earnings    Shares      Amount    Compensation   Equity
------------------------------------------------------------------------------------------------------------------------------------
Balance February 1, 2004                  31,941,582    $319    $70,105  $218,612  (13,093,781) ($151,905)    ($5,551)     $131,580

Net earnings and comprehensive income                                         816                                               816
Cash dividends ($.12 per share)                                            (2,256)                                           (2,256)
Cancellation of restricted stock              (5,650)               (57)                                           57
Amortization & vesting of deferred
 compensation on restricted stock
 incentive plan                                                   1,059                                           710         1,769
Issuance of shares under directors'
 stock plan                                    2,805                 45                                                          45
Issuance of shares as compensation for
  professional services                          454                  8                                                           8
Purchase of treasury stock                                                            (111,790)    (1,732)                   (1,732)
Stock options exercised                      154,650       2      1,103                                                       1,105
Tax benefit of stock options exercised                              483                                                         483
------------------------------------------------------------------------------------------------------------------------------------
Balance May 2, 2004                       32,093,841    $321    $72,746  $217,172  (13,205,571) ($153,637)    ($4,784)     $131,818
====================================================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.






                                       6

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 1:  BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Hancock Fabrics,
Inc.  ("Hancock" or the  "Company")  have been  prepared in accordance  with the
instructions  to Form 10-Q and  therefore  do not  include all  information  and
footnotes  necessary for a fair presentation of financial  position,  results of
operations  and cash flows in  conformity  with  generally  accepted  accounting
principles. The statements do reflect all adjustments (consisting of only normal
recurring  entries),  which are, in the opinion of  management,  necessary for a
fair  presentation of financial  position in conformity with generally  accepted
accounting  principles.  The statements  should be read in conjunction  with the
Notes  to the  Consolidated  Financial  Statements  for the  fiscal  year  ended
February 1, 2004 incorporated into the Company's Annual Report on Form 10-K.

The  results of  operations  for the  thirteen  week  period is not  necessarily
indicative of the results to be expected for the full fiscal year.

NOTE 2: STOCK OPTIONS

Stock  options  are  accounted  for  using  the  intrinsic  value  method  where
compensation  cost for stock  options is measured as the excess,  if any, of the
quoted  market price of Hancock's  stock at the date of grant over the amount an
employee  must pay to acquire the stock.  For the 13 weeks ended May 2, 2004 and
May 4, 2003 the exercise  price of all options  granted  equaled the fair market
value at the date of  grant;  accordingly,  no  compensation  expense  for stock
options has been recorded.

Pro forma  information  regarding  net earnings and earnings per share as if the
fair  value  method  had been  applied  in  measuring  compensation  expense  is
presented below (in thousands, except per share amounts):

<TABLE>
<S>                                                            <C>            <C>
                                                                   2004           2003
                                                               -------------- --------------

Net earnings, as reported                                      $        816     $    4,071
Deduct: Total stock-based employee compensation
  expense determined under fair value based method
  for all awards, net of related tax effects                           (448)          (162)
                                                               -------------- --------------
Pro forma net earnings                                         $        368     $    3,909
                                                               ============== ==============

Earnings per share:
   Basic - as reported                                         $        .05     $      .23
                                                               ============== ==============
   Basic - pro forma                                           $        .02     $      .22
                                                               ============== ==============

   Diluted - as reported                                       $        .04     $      .22
                                                               ============== ==============
   Diluted - pro forma                                         $        .02     $      .21
                                                               ============== ==============
</TABLE>



                                       7
<PAGE>

NOTE 3:  EARNINGS PER SHARE

Basic  earnings per share excludes  dilution and is computed by dividing  income
available  to  common  shareholders  by the  weighted-average  number  of common
shares,  par value $.01 ("Common  Stock")  outstanding  for the period.  Diluted
earnings  per  share  reflects  the  potential  dilution  that  could  occur  if
securities or other  contracts to issue Common Stock were exercised or converted
into Common  Stock or resulted in the  issuance of Common Stock that then shared
in the earnings of the Company.


COMPUTATION OF EARNINGS PER SHARE
(unaudited)
<TABLE>
<S>                                                                 <C>          <C>
------------------------------------------------------------------------------------------------
(in thousands, except for share and                                    Thirteen Weeks Ended
                                                                   -----------------------------
  per share amounts)                                                  May 2,       May 4,
                                                                       2004         2003
------------------------------------------------------------------------------------------------
Basic earnings per share:

  Net earnings                                                             $816       $4,071
                                                                    ============ ============

  Weighted average number of common shares outstanding
    during period                                                    17,993,773   17,790,199
                                                                    ============ ============

Basic earnings per share                                                  $0.05        $0.23
                                                                    ============ ============

Diluted earnings per share:

  Net earnings                                                             $816       $4,071
                                                                    ============ ============

  Weighted average number of common shares outstanding
    during period                                                    17,993,773   17,790,199

   Stock options                                                        346,088      443,548

   Restricted stock and deferred stock units                            451,441      450,234
                                                                    ------------ ------------
  Weighted average number of common shares outstanding
    during period  adjusted for dilutive securities                  18,791,302   18,683,981
                                                                    ============ ============

Diluted earnings per share                                                $0.04        $0.22
                                                                    ============ ============

Weighted average common stock equivalents not included in EPS

  (stock options) because the effect would be anti-dilutive             413,500      444,168
                                                                    ============ ============
</TABLE>




                                       8
<PAGE>

NOTE 4:  RESERVE FOR STORE CLOSINGS

Reserves  for store  closings  are  established  based on estimates of net lease
obligations and other store closing costs.

At May 2, 2004,  the total reserve  balance  included in current and  noncurrent
liabilities was $1,368,000  which represents the present value of the future net
lease  obligations  required for the locations which have been closed.  The 2004
activity in the reserve is as follows (in thousands):

<TABLE>
<S>                          <C>              <C>                  <C>             <C>              <C>
                                                 Addition to
                               February 1,      (Reduction in)                                          May 2,
                                  2004             Reserve            Interest        Payments           2004
                             ---------------- -------------------  --------------- ---------------- ---------------

2004
   Lease obligations         $        1,561     $              -    $         27     $       (220)   $       1,368
                             ================ ===================  =============== ================ ===============
</TABLE>


NOTE 5: RETIREMENT BENEFITS

On  December  8,  2003,  the  Medicare   Prescription   Drug,   Improvement  and
Modernization  Act of 2003 (the  "Act") was  signed  into law.  The Act  expands
Medicare to include  coverage for prescription  drugs.  Hancock sponsors medical
programs,  including  prescription  drug coverage for retirees,  and the Company
expects that this legislation will eventually reduce the Company's cost for some
of these programs.  On January 12, 2004, the FASB issued FASB Staff Position No.
106-1,   Accounting  and  Disclosure   Requirements   Related  to  the  Medicare
Prescription  Drug,  Improvement and Modernization Act of 2003, which allows the
deferral  of  financial  recognition  of the Act  until  the FASB  issues  final
accounting  guidance.  Hancock  elected  to defer  the  recognition  of the Act.
Therefore,  the  Company's  net  periodic  postretirement  benefit cost does not
reflect the effects of the Act. The FASB's  specific  authoritative  guidance on
accounting for the federal subsidy is pending,  and that guidance,  when issued,
could require a change to the amounts  recorded in the financial  statements and
disclosed in the Notes to the Consolidated Financial Statements.

The following  summarizes  the net periodic  benefit cost for the thirteen weeks
ended May 2, 2004 and May 4, 2003:

<TABLE>
<S>                                                    <C>              <C>                <C>             <C>
                                                            Retirement Plan              Postretirement Benefit Plan
(Dollars in thousands)                                    2004           2003                2004           2003
-----------------------------------------------------------------------------------------------------------------------
Service costs                                          $      718       $      620         $     165       $     140
Interest cost                                                 970              976               248             233
Expected return on assets                                  (1,388)          (1,161)
Amortization of prior service costs                            18               20               (62)            (63)
Recognized net actuarial (gain) loss                          212              325               (58)            (90)
-----------------------------------------------------------------------------------------------------------------------
Net periodic benefit cost                              $      530       $      780         $     293       $     220
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

Hancock's minimum required contribution for 2004 is $0, while the maximum amount
that may be  contributed  and deducted  for income tax  purposes is  $4,335,000.
Hancock has not yet decided whether it will make a contribution in 2004.


                                       9
<PAGE>

NOTE 6: RECENT ACCOUNTING PRONOUNCEMENTS

In May 2003,  the FASB  issued SFAS No. 150,  Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equity. The Statement
establishes   standards  on  how  to  classify  and  measure  certain  financial
instruments with  characteristics of both liabilities and equity. This Statement
is effective for financial  instruments  entered into or modified  after May 31,
2003, and otherwise for interim periods  beginning after June 15, 2003.  Hancock
adopted  SFAS No. 150 as of June 1, 2003 and  August 4,  2003,  and there was no
impact on its financial statements.

During November 2003, the EITF reached a consensus on Issue 03-10,  "Application
of Issue No.  02-16 by  Resellers  to Sales  Incentives  Offered to Consumers by
Manufacturers". EITF 03-10 addresses the accounting and disclosure treatment for
consideration  received by a reseller from a vendor that is a  reimbursement  by
the vendor for  honoring  the  vendor's  sales  incentives  offered  directly to
consumers.  EITF 03-10 is effective for sales  incentives  tendered to consumers
for fiscal years beginning  after December 15, 2003.  Hancock adopted EITF Issue
03-10 on February 2, 2004, and there was no impact on its financial statements.

During  December 2003, the FASB issued SFAS No. 132 (revised  2003),  Employers'
Disclosure  about Pensions and Other  Postretirement  Benefits,  an amendment of
FASB  Statements  No.  87,  88,  and  106.  This  Statement  revises  employers'
disclosures  about pension and other  postretirement  benefit plans and replaces
SFAS No. 132,  Employers'  Disclosure  about  Pensions and Other  Postretirement
Benefits.  SFAS No. 132 (revised)  requires  additional  disclosures to those in
SFAS No. 132 about assets, obligations, cash flows, net periodic benefit cost of
defined  benefit  pension  plans and other  postretirement  plans.  SFAS No. 132
(revised) is effective for fiscal years ending after December 15, 2003.  Hancock
adopted the disclosure  requirements of SFAS No. 132 (revised) as of February 1,
2004.

During  December  2003,  the FASB  issued FIN No. 46  (revised  December  2003),
Consolidation of Variable Interest  Entities.  FIN No. 46 (revised) replaces FIN
No. 46,  Consolidation of Variable Interest Entities,  and provides guidance for
companies having ownership of variable interest entities,  typically referred to
as special purpose entities, in determining whether to consolidate such variable
interest  entities.  FIN No. 46 (revised) is effective for public  entities with
interests in variable interest entities or potential  variable interest entities
for periods ending after  December 15, 2003. For public  entities with interests
in all other types of entities,  FIN No. 46 (revised) is effective for financial
statements  for  periods  ending  after  March 15,  2004,  with  early  adoption
permitted. Hancock adopted FIN No. 46 (revised) as of February 1, 2004 and there
was no impact on its financial statements.

During January 2004,  the FASB issued FASB Staff Position No. 106-1,  Accounting
and  Disclosure   Requirements  Related  to  the  Medicare   Prescription  Drug,
Improvement  and  Modernization  Act of  2003,  which  allows  the  deferral  of
financial   recognition  of  the  Medicare  Prescription  Drug  Improvement  and
Modernization Act until the FASB issues final accounting guidance. Refer to Note
5, above, and Note 10 in the Consolidated  Financial Statements contained in the
Company's Annual Report on Form 10-K for additional information.


                                       10
<PAGE>

ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

FINANCIAL CONDITION

Historically,  cash flow from  operations  has been  sufficient  to finance  the
expansion  and  operation of Hancock's  business.  Hancock's  principal  capital
requirements  are for the  financing of  inventories  and to a lesser extent for
capital expenditures relating to store locations and its distribution  facility.
Funds  for such  purposes  are  generated  from  Hancock's  operations  and,  if
necessary,  supplemented by borrowings from commercial  lenders.  In addition to
cash  dividends,  Hancock has  historically  used excess cash and, if necessary,
borrowings  from  commercial  lenders to purchase  treasury  stock as market and
financial conditions allow.

During the thirteen weeks ended May 2, 2004,  net earnings and non-cash  charges
and credits,  including  depreciation and  amortization,  totaling $4.4 million,
borrowings of $13 million and proceeds from stock option exercises totaling $1.1
million were used to fund a $3.9 million  reduction  of accrued  liabilities,  a
$5.1 million reduction of income tax obligations, $2.3 million in cash dividends
and $8.1 million in additions to property and equipment. At May 2, 2004, Hancock
had outstanding debt of $23 million, or 14.9% of total capitalization,  compared
to $17 million, or 12.6% of total  capitalization at May 4, 2003. Hancock opened
three stores and closed six stores during the thirteen  weeks ended May 2, 2004,
resulting  in a total of 430 stores at quarter  end.  We expect to open 10 to 12
stores and close 7 to 10 in the second  quarter  and plan to have 10 or more net
additions for the year.




RESULTS OF OPERATIONS

Thirteen weeks ended May 2, 2004 compared with thirteen weeks ended May 4, 2003

Net earnings were $816 thousand,  or $.04 per diluted share,  compared with $4.1
million, or $.22 per diluted share, in 2003's first quarter.

Sales decreased to $105.1 million from $107.6 million in the same quarter of the
previous  year  primarily  as the result of a 3.2% decline in  comparable  store
sales.  Comparable  store sales were adversely  affected by a weaker offering of
spring  merchandise,  together with a delay in getting the spring assortments to
our  stores on a timely  basis as the  result  of  relocating  our  distribution
operations from our only  distribution  center to a new facility.  Store selling
square footage  increased from 4,968,000  selling square feet at the end of last
year's first quarter to 5,062,000  square feet this year due to new stores being
larger in size than the stores that were closed.

Gross  margins  declined  from  50.9% to 49.9% due  largely to the need for more
seasonal clearance markdowns resulting from the slower sales.

Selling, general and administrative expenses as a percentage of sales were 47.0%
compared to 43.5% in the first quarter of 2003. The  deleveraging  impact on the
expense ratio that results from negative  comparable store sales was the primary
factor affecting the comparison.  In addition,  there was approximately $350,000
of expense  associated with completing the distribution  center move, a $350,000
spike in employee medical claims,  $150,000 of store lease termination costs and
a $150,000 increase in legal costs associated with various real estate activity,
including a condemnation case for one store.


                                       11
<PAGE>

Depreciation and amortization increased to 1.6% of sales from 1.3% primarily due
to capital expenditures related to the new distribution center and the continued
roll-out of point-of-sale ("POS") systems to our stores. At quarter end, POS had
been  installed  in 224 stores,  and our goal is to complete the roll-out in the
remaining stores by fiscal year end.

Interest  expense  increased  slightly due to higher  average  outstanding  debt
levels incurred in connection with funding  construction of the new distribution
center. The effect of higher borrowings was partially offset,  however, by lower
interest rates.

Income tax expense  decreased almost $1.9 million due to the reduction in pretax
earnings from the same period in 2003. Hancock's effective tax rate was 36.3% in
both years.


Thirteen weeks ended May 4, 2003 compared to thirteen weeks ended May 5, 2002

Net earnings were $4.1 million,  or $.22 per diluted  share,  compared with $3.7
million,  or $.20 per  diluted  share,  in the same  period of the  prior  year.
Earnings  were  influenced by higher sales and a higher gross margin than in the
first quarter of 2002.

Sales  increased to $107.6  million from $104.0  million in the first quarter of
the  previous  year,  as the result of an increase of 4.2% in  comparable  store
sales.  Comparable store sales benefited from the continued repositioning of the
store base, the  remerchandising  of Hancock's product mix and efforts to appeal
to a more diverse customer base. Gross margins  increased to 50.9% from 50.5% in
the previous year as a result of the shift in the  merchandise  mix more towards
higher-margin home decorating products.

Selling, general and administrative expenses as a percentage of sales were 43.5%
compared to 43.6% in the first quarter of 2002. Expense leverage from comparable
store sales  increases was offset  partially by higher costs  resulting from the
start-up of certain activities at the new distribution center.

Interest expense was higher due to average debt outstanding  totaling $7 million
during this year's first quarter versus no debt outstanding in the first quarter
of 2002.

Income  tax  expense  increased  $215  thousand  due to the  increase  in pretax
earnings from the same period in 2002. Hancock's effective tax rate was 36.3% in
both years.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  recorded  amount of  assets  and
liabilities  at the date of the financial  statements  and revenues and expenses
during  the  period.   Significant  accounting  policies  employed  by  Hancock,
including  the use of estimates and  assumptions,  are presented in the Notes to
Consolidated  Financial  Statements  contained in the Company's Annual Report on
Form 10-K. Management bases its estimates on its historical experience, together
with other relevant  factors,  in order to form the basis for making  judgments,
which will affect the carrying values of assets and  liabilities.  On an ongoing
basis,  management  evaluates its estimates and makes changes to carrying values
as deemed necessary.

OFF-BALANCE SHEET ARRANGEMENTS

Hancock has no off-balance sheet financing arrangements.


                                       12
<PAGE>

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

Hancock has an arrangement  that provides up to $5 million in letters of credit.
At May 2, 2004,  Hancock had commitments  under this arrangement of $3.7 million
on issued letters of credit which support  purchase orders for merchandise to be
imported.  Hancock also has a $4.7 million standby letter of credit to guarantee
payment of potential  future workers'  compensation  claims.  Hancock leases its
retail fabric store locations  under operating  leases expiring at various dates
through 2024.

Hancock has no standby  repurchase  obligations or guarantees of other entities'
debt.

EFFECTS OF INFLATION

The impact of inflation on labor and occupancy  costs can  significantly  affect
Hancock's operations.  Many of Hancock's employees are paid hourly rates related
to Federal and State minimum wage requirements;  accordingly, any increases will
affect Hancock. In addition, payroll taxes, employee benefits and other employee
costs continue to increase. Health insurance and workers' compensation insurance
costs,  in  particular,  continue  to rise at an  unsettling  rate in the United
States each year, and higher employer  contributions  to Hancock's  pension plan
have been necessary  recently in light of weaker  investment  returns.  Costs of
leases for new store locations remain stable,  but renewal costs of older leases
continue to increase.  Hancock  believes the  practice of  maintaining  adequate
operating  margins through a combination of price adjustments and cost controls,
careful evaluation of occupancy needs and efficient purchasing practices are the
most effective tools for coping with increased costs and expenses.

Inflation is one of the key factors used in the  calculation  of the LIFO charge
or credit to Cost of Sales.  During the first quarter of 2004, a decrease in the
Producer  Price Index  resulted in a LIFO credit of $150,000.  There was no LIFO
charge or credit in the same period of 2003.

SEASONALITY

Hancock's  business is slightly  seasonal.  Peak sales  periods occur during the
fall and  pre-Easter  weeks,  while the lowest  sales  periods  occur during the
summer and the month of January.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2003,  the FASB  issued SFAS No. 150,  Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equity. The Statement
establishes   standards  on  how  to  classify  and  measure  certain  financial
instruments with  characteristics of both liabilities and equity. This Statement
is effective for financial  instruments  entered into or modified  after May 31,
2003, and otherwise for interim periods  beginning after June 15, 2003.  Hancock
adopted  SFAS No. 150 as of June 1, 2003 and  August 4,  2003,  and there was no
impact on its financial statements.

During November 2003, the EITF reached a consensus on Issue 03-10,  "Application
of Issue No.  02-16 by  Resellers  to Sales  Incentives  Offered to Consumers by
Manufacturers". EITF 03-10 addresses the accounting and disclosure treatment for
consideration  received by a reseller from a vendor that is a  reimbursement  by
the vendor for  honoring  the  vendor's  sales  incentives  offered  directly to
consumers.  EITF 03-10 is effective for sales  incentives  tendered to consumers
for fiscal years beginning after December 15, 2003.  Hancock adopted EITF Issued
03-10 on February 2, 2004, and there was no impact on its financial statements.

During  December 2003, the FASB issued SFAS No. 132 (revised  2003),  Employers'
Disclosure  about Pensions and Other  Postretirement  Benefits,  an amendment of
FASB  Statements  No.  87,  88,  and  106.  This  Statement  revises  employers'
disclosures  about pension and other  postretirement  benefit plans and replaces
SFAS No. 132,  Employers'  Disclosure  about  Pensions and Other  Postretirement


                                       13
<PAGE>

Benefits.  SFAS No. 132 (revised)  requires  additional  disclosures to those in
SFAS No. 132 about assets, obligations, cash flows, net periodic benefit cost of
defined  benefit  pension  plans and other  postretirement  plans.  SFAS No. 132
(revised) is effective for fiscal years ending after December 15, 2003.  Hancock
adopted the disclosure  requirements of SFAS No. 132 (revised) as of February 1,
2004.

During  December  2003,  the FASB  issued FIN No. 46  (revised  December  2003),
Consolidation of Variable Interest  Entities.  FIN No. 46 (revised) replaces FIN
No. 46,  Consolidation of Variable Interest Entities,  and provides guidance for
companies having ownership of variable interest entities,  typically referred to
as special purpose entities, in determining whether to consolidate such variable
interest  entities.  FIN No. 46 (revised) is effective for public  entities with
interests in variable interest entities or potential  variable interest entities
for periods ending after  December 15, 2003. For public  entities with interests
in all other types of entities,  FIN No. 46 (revised) is effective for financial
statements  for  periods  ending  after  March 15,  2004,  with  early  adoption
permitted. Hancock adopted FIN No. 46 (revised) as of February 1, 2004 and there
was no impact on its financial statements.

During January 2004,  the FASB issued FASB Staff Position No. 106-1,  Accounting
and  Disclosure   Requirements  Related  to  the  Medicare   Prescription  Drug,
Improvement  and  Modernization  Act of  2003,  which  allows  the  deferral  of
financial   recognition  of  the  Medicare  Prescription  Drug  Improvement  and
Modernization Act until the FASB issues final accounting guidance. Refer to Note
10 in the Consolidated Financial Statements for additional information.

FORWARD-LOOKING STATEMENTS

This  Report  contains  forward-looking  statements  within  the  meaning of the
Private  Litigation Reform Act of 1995. Such statements are not historical facts
and reflect the Company's current views regarding matters such as operations and
financial performance. In general,  forward-looking statements are identified by
such words or phrases as "anticipates", "believes", "approximates", "estimates",
"expects",  "intends"  or  "plans"  or the  negative  of  those  words  or other
terminology.    Forward-looking    statements   involve   inherent   risks   and
uncertainties;  the Company's actual results could differ  materially from those
expressed in our  forward-looking  statements.  The risks and uncertainties that
could  cause  our  actual  results  to  differ  from  those   expressed  in  our
forward-looking statements include, but are not limited to:

    -     Transition of  operations to the Company's new corporate  offices will
          result in higher operating expenses than historically  experienced and
          may disrupt our operations
    -     Changes in customer demand or purchase patterns
    -     Competitive  changes,  including  but not  limited  to, an increase in
          advertising,   an  increase  in  promotional   pricing   activity  and
          liquidations  of inventory in Hancock's  markets in connection  with a
          competitor's store closing or need to dispose of old inventory
    -     Adverse general economic trends
    -     Delays or interruptions in the flow of merchandise  between  Hancock's
          suppliers and/or its distribution center and its stores
    -     Disruption in the Company's data processing services
    -     The stability of interest rates during periods of borrowing

Forward-looking  statements  speak only as of the date made, and neither Hancock
Fabrics nor its  management  undertakes  any  obligation to update or revise any
forward-looking statement.


                                       14
<PAGE>

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Hancock does not hold  derivative  financial or commodity  instruments at May 2,
2004.  Hancock  is exposed  to  financial  market  risks,  including  changes in
interest rates. All borrowings  under Hancock's  Revolving Credit Agreement bear
interest at a negotiated  rate, a floating rate (the higher of the federal funds
rate plus 1/2% or the prime rate), a rate derived from the money market rate, or
a rate derived from the London  Interbank  Offered Rate. An increase in interest
rates of 100 basis points would not significantly  affect Hancock's results. All
of Hancock's business is transacted in U. S. dollars and,  accordingly,  foreign
exchange rate fluctuations have never had a significant  impact on Hancock,  and
they are not expected to in the foreseeable future.

ITEM 4: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Hancock  carried  out an  evaluation  of  the  effectiveness  of its  disclosure
controls  and  procedures  (as defined in Rule  13a-15(e)  under the  Securities
Exchange  Act of 1934) as of the end of the period  covered by this report under
the supervision  and with the  participation  of its  management,  including its
chief executive officer and chief financial  officer.  Based on that evaluation,
Hancock's  chief executive  officer and chief  financial  officer have concluded
that its  disclosure  controls  and  procedures  are  effective  to ensure  that
material   information   relating  to  Hancock,   including   its   consolidated
subsidiaries, is made known to them by others within such entities, particularly
during the period in which this report was  prepared,  in order to allow  timely
decisions regarding required disclosure.

Change in Internal Control Over Financial Reporting

There was no change in Hancock's  internal control over financial  reporting (as
defined  in Rule  13a-15(f)  under the  Securities  Exchange  Act of 1934)  that
occurred during its most recent fiscal quarter that has materially affected,  or
is reasonably likely to materially  affect,  its internal control over financial
reporting.




                                       15
<PAGE>

PART II.  OTHER INFORMATION:

ITEM 2: CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER
        PURCHASES OF EQUITY SECURITIES


This table  provides  information  with  respect to  purchases by the Company of
shares of its Common Stock during the first quarter of 2004:


Issuer Purchases of Equity Securities
<TABLE>
<S>                          <C>                    <C>               <C>                      <C>
------------------------------------------------------------------------------------------------------------------------
                                                                        Total Number of               Maximum
                                                                      Shares Purchased as      Number of Shares That
                               Total number of      Average Price       Part of Publicly       May Yet Be Purchased
Period                       Shares Purchased *     Paid Per Share      Announced Plans           Under the Plans
------------------------------------------------------------------------------------------------------------------------

February 2, 2004 through
February 29, 2004                           20,111            $16.65                  20,111                    357,738
------------------------------------------------------------------------------------------------------------------------

March 1, 2004 through
April 4, 2004                               91,679            $15.24                  91,679                    266,059
------------------------------------------------------------------------------------------------------------------------

April 5, 2004 through
May 2, 2004                                      -                 -                       -                    266,059
------------------------------------------------------------------------------------------------------------------------

Total                                      111,790            $15.49                 111,790
------------------------------------------------------------------------------------------------------------------------
</TABLE>

      *The number of shares purchased during the quarter includes 111,580 shares
      deemed  surrendered to the Company to satisfy tax withholding  obligations
      arising from the lapse of restrictions on shares.

In June of 2000 the  Board  of  Directors  authorized  the  repurchase  of up to
2,000,000  shares of the Company's Common Stock from time to time when warranted
by market  conditions.  There have been 1,733,941  shares  purchased  under this
authorization through May 2, 2004.


                                       16
<PAGE>

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

 (a) Exhibits

     31.1  Certification of Chief Executive Officer
     31.2  Certification of Chief Financial Officer
     32    Certification of Chief Executive Officer and Chief Financial Officer
           Pursuant to 18 U.S.C. Section 1350

 (b) Reports on Form 8-K

- Current Report on Form 8-K filed February 25, 2004 announcing quarterly
  earnings.
- Current Report on Form 8-K filed May 19, 2004 announcing quarterly
  earnings.

SIGNATURE

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                                     HANCOCK FABRICS, INC.
                                                         (Registrant)

                                               By:  /s/ Bruce D. Smith
                                                   ---------------------------
                                                         Bruce D. Smith

                                                  Senior Vice President and
                                                   Chief Financial Officer
                                                  (Principal Financial and
                                                     Accounting Officer)
June 9, 2004



                                       17
<PAGE>

                                                                    Exhibit 31.1

                    Certification of Chief Executive Officer


I, Larry G. Kirk, certify that:

1.     I have reviewed this  quarterly  report on Form 10-Q of Hancock  Fabrics,
       Inc.;

2.     Based on my knowledge,  this report does not contain any untrue statement
       of a material fact or omit to state a material fact necessary to make the
       statements  made,  in  light  of  the  circumstances   under  which  such
       statements  were made, not misleading  with respect to the period covered
       by this report;

3.     Based on my knowledge,  the  financial  statements,  and other  financial
       information  included  in this  report,  fairly  present in all  material
       respects the financial condition, results of operations and cash flows of
       the registrant as of, and for, the periods presented in this report;

4.     The  registrant's  other  certifying  officer and I are  responsible  for
       establishing  and  maintaining  disclosure  controls and  procedures  (as
       defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
       and we have:

       a)     designed such disclosure  controls and procedures,  or caused such
              disclosure  controls  and  procedures  to be  designed  under  our
              supervision,  to ensure that material  information relating to the
              registrant, including its consolidated subsidiaries, is made known
              to us by others  within those  entities,  particularly  during the
              period in which this report is being prepared;

       b)     evaluated  the   effectiveness  of  the  registrant's   disclosure
              controls  and   procedures   and  presented  in  this  report  our
              conclusions about the effectiveness of the disclosure controls and
              procedures,  as of the end of the period  covered  by this  report
              based on such evaluation; and

       c)     disclosed in this report any change in the  registrant's  internal
              control  over  financial   reporting  that  occurred   during  the
              registrant's  most  recent  fiscal  quarter  that  has  materially
              affected,  or is  reasonably  likely to affect,  the  registrant's
              internal control over financial reporting; and

5.     The registrant's other certifying officer and I have disclosed,  based on
       our most recent evaluation of internal control over financial  reporting,
       to the  registrant's  auditors and the audit  committee  of  registrant's
       board of directors:

       a)     all significant deficiencies and material weaknesses in the design
              or operation of internal  control over financial  reporting  which
              are reasonably likely to adversely affect the registrant's ability
              to record,  process,  summarize and report financial  information;
              and

       b)     any fraud,  whether or not material,  that involves  management or
              other  employees who have a significant  role in the  registrant's
              internal control over financial reporting.


Date:  June 9, 2004


/s/ Larry G. Kirk
------------------------
Larry G. Kirk
Chairman of the Board and Chief Executive Officer


                                       18
<PAGE>

                                                                    Exhibit 31.2
                    Certification of Chief Financial Officer


I, Bruce D. Smith, certify that:

1.     I have reviewed this  quarterly  report on Form 10-Q of Hancock  Fabrics,
       Inc.;

2.     Based on my knowledge,  this report does not contain any untrue statement
       of a material fact or omit to state a material fact necessary to make the
       statements  made,  in  light  of  the  circumstances   under  which  such
       statements  were made, not misleading  with respect to the period covered
       by this report;

3.     Based on my knowledge,  the  financial  statements,  and other  financial
       information  included  in this  report,  fairly  present in all  material
       respects the financial condition, results of operations and cash flows of
       the registrant as of, and for, the periods presented in this report;

4.     The  registrant's  other  certifying  officer and I are  responsible  for
       establishing  and  maintaining  disclosure  controls and  procedures  (as
       defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
       and we have:

       a)     designed such disclosure  controls and procedures,  or caused such
              disclosure  controls  and  procedures  to be  designed  under  our
              supervision,  to ensure that material  information relating to the
              registrant, including its consolidated subsidiaries, is made known
              to us by others  within those  entities,  particularly  during the
              period in which this report is being prepared;

       b)     evaluated  the   effectiveness  of  the  registrant's   disclosure
              controls  and   procedures   and  presented  in  this  report  our
              conclusions about the effectiveness of the disclosure controls and
              procedures,  as of the end of the period  covered  by this  report
              based on such evaluation; and

       c)     disclosed in this report any change in the  registrant's  internal
              control  over  financial   reporting  that  occurred   during  the
              registrant's  most  recent  fiscal  quarter  that  has  materially
              affected,  or is  reasonably  likely to affect,  the  registrant's
              internal control over financial reporting; and

5.     The registrant's other certifying officer and I have disclosed,  based on
       our most recent evaluation of internal control over financial  reporting,
       to the  registrant's  auditors and the audit  committee  of  registrant's
       board of directors:

       a)     all significant deficiencies and material weaknesses in the design
              or operation of internal  control over financial  reporting  which
              are reasonably likely to adversely affect the registrant's ability
              to record,  process,  summarize and report financial  information;
              and

       b)     any fraud,  whether or not material,  that involves  management or
              other  employees who have a significant  role in the  registrant's
              internal control over financial reporting.


Date:  June 9, 2004

/s/ Bruce D. Smith
------------------------------
Bruce D. Smith
Senior Vice President and
Chief Financial Officer


                                       19
<PAGE>

                                                                      Exhibit 32


      Certification of Chief Executive Officer and Chief Financial Officer
                       Pursuant to 18 U.S.C. Section 1350

Each of the undersigned, Larry G. Kirk and Bruce D. Smith, certifies pursuant to
18 U.S.C.  Section 1350 that: (1) this quarterly  report on Form 10-Q of Hancock
Fabrics,  Inc. ("Hancock") for the quarter ended May 2, 2004 fully complies with
the  requirements  of Section 13(a) or 15(d) of the  Securities  Exchange Act of
1934,  and  (2)  the  information  contained  in this  quarterly  report  fairly
presents,  in all material  respects,  the  financial  condition  and results of
operations of Hancock.

Date:  June 9, 2004


/s/ Larry G. Kirk
------------------------------
Larry G. Kirk
Chairman of the Board and Chief Executive Officer



/s/ Bruce D. Smith
------------------------------
Bruce D. Smith
Senior Vice President and Chief Financial Officer







                                       20