SECURITIES AND EXCHANGE COMMISSION

                               WASHINGTON DC 20549

                                    FORM 10-Q

x       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

                   For quarterly period ended October 30, 1999

                                       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 No. 0-17870

                                 LECHTERS, INC.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                            NEW JERSEY                       No. 13-2821526
(STATE OR OTHER JURISDICTION OF INCORPORATION)               (I.R.S.   EMPLOYER
                                                             IDENTIFICATION NO.)

1 Cape May Street, Harrison, NEW JERSEY                      07029-2404
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                     (ZIP CODE)

Registrant's telephone number, including area code:          (973) 481-1100


     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,  and (2) has been  subject to such filing
requirements for the past 90 days.



                           YES        X   NO
                                     ---       ---


     The number of shares of the Registrant's  common stock,  without par value,
outstanding at December 8, 1999: 16,492,286:

<PAGE>

                        LECHTERS, INC. AND SUBSIDIARIES
                                    FORM 10Q
                       FOR QUARTER ENDED OCTOBER 30, 1999
                                      INDEX

                                                                        PAGE NO.
PART I.    Financial Information

           Item 1.    Financial Statements

                      Consolidated Balance Sheets
                      October 30, 1999 and January 30, 1999                    1

                      Consolidated Statements of Operations
                      for the Thirteen and Thirty-Nine Weeks Ended
                      October 30, 1999 and October 31, 1998                    2

                      Consolidated Statements of Cash Flows
                      for the Thirty-Nine Weeks Ended
                      October 30, 1999 and October 31, 1998                    3

                      Consolidated Statement of Shareholders'
                      Equity for the Thirty-Nine Weeks Ended
                      October 30, 1999                                         4

                      Notes to Consolidated Financial Statements             5-8

           Item 2.    Management's Discussion and Analysis of
                      Financial Condition and Results of Operations         8-13

PART II.   Other Information

           Item 6.    Exhibits and Reports on Form 8-K                     13-14

<PAGE>

                              SAFE HARBOR STATEMENT
           UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

     In connection  with the safe harbor  provisions  of the Private  Securities
Litigation  Reform  Act of 1995  (Reform  Act),  the  Company  is hereby  filing
cautionary  statements  identifying  important  factors  that  could  cause  the
Company's   actual  results  to  differ   materially  from  those  projected  in
forward-looking  statements  (as such term is defined in the Reform Act) made by
or on  behalf  of the  Company  in  this  quarterly  report  on  Form  10-Q,  in
presentations,  in response to  questions  or  otherwise.  Any  statements  that
express, or involve discussions as to expectations,  beliefs, plans, objectives,
assumptions   or   future  events  or  performance  (often,  but   not   always,
through  the  use  of  words  or  phrases  such  as  "anticipates",  "believes",
"estimates",  "expects",   "intends",  "plans",   "predicts",  "projects", "will
likely result", "will continue", or similar  expressions) are   not   statements
of historical facts and may be forward-looking.

     Forward-looking    statements   involve   estimates,    assumptions,    and
uncertainties  and are  qualified  in their  entirety by  reference  to, and are
accompanied by, the following important factors, which are difficult to predict,
contain  uncertainties,  are beyond the  control  of the  Company  and may cause
actual  results to differ  materially  from those  contained in  forward-looking
statements:

    -  economic and geographic factors including political and economic risks;
    -  changes in and   compliance  with  environmental   and  safety  laws and
       policies;
    -  weather conditions;
    -  population growth rates and demographic patterns;
    -  competition for retail customers;
    -  Year 2000 issues;
    -  market demand, including structural market changes;
    -  changes in tax rates or policies or in rates of inflation;
    -  changes in project costs;
    -  unanticipated changes in operating expenses and capital expenditures;
    -  capital market conditions;
    -  legal  and  administrative  proceedings  (whether civil  or criminal) and
       settlements that influence the business and profitability of the Company.

Any forward-looking statement speaks only as of the date on which such statement
is made, and the Company undertakes no obligation to update any  forward-looking
statement  to  reflect  events or  circumstances  after  the date on which  such
statement is made or to reflect the  occurrence  of  unanticipated  events.  New
factors  emerge  from  time to time and it is not  possible  for  management  to
predict all of such factors,  nor can it assess the impact of any such factor on
the business or the extent to which any factor,  or combination of factors,  may
cause results to differ  materially from those contained in any  forward-looking
statement.

<PAGE>

   Part I.   Financial Information

                         LECHTERS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
           (Amounts in thousands, except share and per share amounts)
<TABLE>
                                                            October 30,         January 30,
                                                               1999                 1999
                                                            -----------         -----------
<S>                                                          <C>                  <C>
                        A S S E T S                         (unaudited)
Current Assets:
     Cash and Cash Equivalents                                 $8,285            $ 35,503
     Marketable Securities                                     34,207              62,750
     Accounts Receivable                                       19,818               4,185
     Merchandise Inventories                                  131,112              89,224
     Prepaid Expenses                                           7,320               1,734
                                                             ---------           ---------

     Total Current Assets                                     200,742             193,396
Property and Equipment:
     Fixtures and Equipment                                    56,928              57,678
     Leasehold Improvements                                    94,199              96,452
                                                             ---------           ---------
                                                              151,127             154,130
     Less Accumulated Depreciation & Amortization              91,280              88,401
                                                             ---------           ---------
         Net Property and Equipment                            59,847              65,729
Other Assets                                                   10,848               8,519
                                                             ---------           ---------
Total Assets                                                 $271,437            $267,644
                                                             =========           =========

            LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
     Accounts Payable                                         $29,966            $  8,982
     Dividends Payable - Preferred Stock                           --               1,010
     Salaries, Wages and Other Accrued Expenses                14,842              17,156
     Taxes, Other Than Income Taxes                             2,516               1,774
                                                             ---------           ---------
     Total Current Liabilities                                 47,324              28,922

Long-Term Debt
     5% Convertible Subordinated Debentures due September
     27, 2001 (Net of Unamortized
     Discount of $2,780 and $3,768 respectively)               62,220              61,232
                                                             ---------           ---------
     Total Long-Term Debt                                      62,220              61,232

Deferred Income Taxes and Other Deferred Credits               19,208              18,356
Shareholders' Equity:
     Convertible Preferred Stock, $100 Par Value
        Authorized 1,000,000 Shares,
        Issued and Outstanding - Series A - 149,999
        Shares; Series B - 50,001 Shares                       20,000              20,000
     Common Stock, No Par Value,
        Authorized 50,000,000 Shares,
        Issued and Outstanding
        17,176,286 and 17,176,286, respectively                    58                  58
     Accumulated Other Comprehensive (Loss) Income                (83)                109
     Additional Paid-in Capital                                62,380              62,380
     Retained Earnings                                         61,061              76,587
                                                             ---------           ---------
                                                              143,416             159,134
     Less: Treasury Stock
        Common Stock - 364,000 Shares at Cost                    (731)                 --
                                                             ---------           ---------
     Total Shareholders' Equity                               142,685             159,134
                                                             ---------           ---------
Total Liabilities and Shareholders' Equity                   $271,437            $267,644
                                                             =========           =========
</TABLE>

              See accompanying notes to consolidated financial statements.

                                      - 1 -
<PAGE>

                         LECHTERS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
           (Amounts in thousands, except share and per share amounts)

<TABLE>
                                          Thirteen Weeks Ended      Thirty-Nine Weeks Ended
                                        October 30,  October 31,    October 30,   October 31,
                                          1999          1998          1999           1998
                                        ------------------------    -------------------------
                                             (unaudited)                 (unaudited)

<S>                                     <C>           <C>            <C>          <C>
Net Sales                                  $94,837       $95,682       $269,157     $273,298
Cost of Goods Sold (including
   occupancy and indirect costs)            71,511        72,894        203,977      207,292
                                        -----------   -----------    -----------  -----------
      Gross Profit                          23,326        22,788         65,180       66,006

Selling, General and
   Administrative Expenses                  31,943        28,948         90,535       85,176
                                        -----------   -----------    -----------  -----------
Operating Loss                              (8,617)       (6,160)       (25,355)     (19,170)
Other Expenses (Income):
    Interest Expense                         1,145         1,121          3,417        3,343
    Interest Income                           (581)         (770)        (2,033)      (3,109)
    Net Investment
       Gain/Income                             (91)         (118)          (425)        (339)
                                        -----------   -----------    -----------  -----------

Total Other Expenses (Income)                  473           233            959         (105)
                                        -----------   -----------    -----------  -----------

Loss Before Income Taxes                    (9,090)       (6,393)       (26,314)     (19,065)

Income Tax Benefit                          (3,726)       (2,621)       (10,788)      (7,817)
                                        -----------   -----------    -----------  -----------

Net Loss                                    (5,364)       (3,772)       (15,526)     (11,248)

Preferred Stock Dividend Requirement           253           253            758          758
                                        -----------   -----------    -----------  -----------

Net Loss Applicable to Common
  Shareholders                             ($5,617)      ($4,025)      ($16,284)    ($12,006)
                                        ===========   ===========    ===========  ===========

Net Loss Per Common Share - Basic           ($0.33)       ($0.23)        ($0.95)      ($0.70)
                                        ===========   ===========    ===========  ===========

Net Loss Per Common Share - Diluted         ($0.33)       ($0.23)        ($0.95)      ($0.70)
                                        ===========   ===========    ===========  ===========

Weighted Average Common Shares
   Outstanding - Basic                  17,048,000    17,176,000     17,107,000   17,176,000
                                        ===========   ===========    ===========  ===========

Weighted Average Common Shares
   Outstanding - Diluted                17,048,000    17,176,000     17,107,000   17,176,000
                                        ===========   ===========    ===========  ===========
</TABLE>

               See accompanying notes to consolidated financial statements.

                                            - 2 -
<PAGE>

                         LECHTERS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in thousands)

<TABLE>
                                                      Thirty-Nine Weeks Ended
                                                   October 30,       October 31,
                                                      1999              1998
                                                   -----------------------------
                                                            (unaudited)
<S>                                                 <C>                <C>
Cash Flows From Operating Activities:
    Net Loss                                        ($15,526)          ($11,248)

Adjustments to Reconcile Net Loss to Net
   Cash Used In Operating Activities:
    Depreciation and Amortization                     12,375             12,455
    Loss on Disposal of Property and Equipment         1,498                648
    Deferred Rent                                        609                694
    Other                                                504                 (7)

Changes in Assets and Liabilities:
    Increase in Accounts Receivable                  (15,633)            (7,192)
    Increase in Merchandise Inventories              (41,888)           (30,875)
    Increase in Prepaid Expenses                      (5,586)            (5,523)
    Increase in Accounts Payable,
      Accrued Expenses and Taxes Other
      Than Income Taxes                               19,412             16,550
    Decrease in Income Taxes Payable                     - -             (1,865)
    Increase in Other Assets                          (3,699)            (3,305)
                                                    ---------          ---------

    Net Cash Used In Operating Activities            (47,934)           (29,668)

Cash Flows From Investing Activities:
    Capital Expenditures                              (5,761)            (6,526)
    Decrease in Available for Sale Securities         28,218             22,411
                                                    ---------          ---------

    Net Cash Provided by Investing Activities         22,457             15,885

Cash Flows From Financing Activities:
    Payment of Preferred Stock Dividend               (1,010)            (1,010)
    Exercise of Stock Options                             --                 10
    Purchase of Treasury Stock                          (731)                --
                                                    ---------          ---------

    Net Cash Used In Financing Activities             (1,741)            (1,000)
                                                    ---------          ---------

Net Decrease in Cash and Cash Equivalents            (27,218)           (14,783)

Cash and Cash Equivalents, Beginning of Period        35,503             16,395
                                                    ---------          ---------

Cash and Cash Equivalents, End of Period              $8,285            $ 1,612
                                                    =========          =========

Supplemental Disclosure of Cash Flows
Information:

Cash Paid During the Period for:
    Interest                                         $ 3,252            $ 2,769
                                                    =========          =========

    Income Taxes                                        $ 99            $ 2,289
                                                    =========          =========
</TABLE>

         See accompanying notes to consolidated financial statements.

                                      - 3 -
<PAGE>

                         LECHTERS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                             (Amounts in thousands)
<TABLE>
                                                                              Accumulated
                                                                                 Other
                             Common    Preferred    Additional               Comprehensive
                             Stock      Stock        Paid-In     Retained        Income      Treasury                 Comprehensive
                             Issued     Issued       Capital     Earnings        (Loss)        Stock       Total          Loss
                            --------   ---------    ----------   ---------    -----------    --------   ----------    -------------
<S>                         <C>        <C>          <C>          <C>         <C>             <C>        <C>           <C>
Balance,
   January 30, 1999             $58     $20,000       $62,380     $76,587           $109       $  --     $159,134             $ --

Net Loss-Thirty-Nine
  Weeks Ended
  October 30, 1999               --          --            --     (15,526)            --          --      (15,526)         (15,526)

Other Comprehensive Loss,
  Net of tax:
  Unrealized Loss on
  Available-For-Sale
  Securities                     --          --            --          --           (192)         --         (192)            (192)

Purchase of Treasury Stock       --          --            --          --             --        (731)        (731)              --
                            --------   ---------    ----------   ---------    -----------    --------   ----------    -------------
Balance,
October 30, 1999 (unaudited)    $58     $20,000       $62,380     $61,061           ($83)      ($731)    $142,685        ($15,718)
                            ========   =========    ==========   =========    ===========    ========   ==========    ============

</TABLE>

               See accompanying notes to consolidated financial statements.

                                            - 4 -
<PAGE>

                         LECHTERS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (Amounts in thousands, except share and per share amounts)
                                   (UNAUDITED)


1.      GENERAL

        The  accompanying   unaudited  Consolidated  Financial   Statements have
        been prepared  in accordance  with  the  instructions  for Form 10-Q and
        do not include all the information  and footnotes  required by generally
        accepted accounting principles for complete financial statements. In the
        opinion of management,  all  adjustments (consisting of normal recurring
        accruals)  considered  necessary for a  fair  presentation  for  interim
        periods have been included.

        Certain   information  and   footnote  disclosures normally  included in
        financial  statements  prepared  in  accordance with generally  accepted
        accounting   principles  have  been  condensed   or   omitted.   It   is
        suggested  that  these   condensed  consolidated  financial   statements
        be read in conjunction with  the  audited financial  statements  and the
        notes thereto  included in the  Company's Annual Report on Form 10-K for
        the year ended January 30, 1999.

        The  Company's  results  of  operations for the thirteen and thirty-nine
        weeks  ended  October  30,  1999  are not necessarily  indicative of the
        operating  results for the full year.

        Certain  reclassifications have been made to the financial statements of
        the prior year to conform with the classifications used for Fiscal 1999.

2.      NET LOSS PER SHARE

        "Basic"  net loss per share  data were  computed  by  dividing net loss,
        reduced  by the Convertible Preferred Stock Dividend requirement, by the
        weighted  average  number  of common  shares   outstanding  during   the
        thirteen   and   thirty-nine  weeks   ended   October  30,   1999    and
        October 31, 1998.  With respect to "diluted" net loss  per share,  stock
        options which  are  potential  common  shares,  were  excluded  from the
        weighted  average of outstanding  shares because  inclusion would reduce
        the  loss  per  share.  With  respect to the  Company's  5%  Convertible
        Subordinated Debentures and the Company's  Convertible  Preferred Stock,
        for  the  purpose of computing diluted  net loss per  share, the assumed
        conversion of such debentures  and  such preferred stock would each have
        an anti-dilutive effect on diluted loss per share for the  thirteen  and
        thirty-nine  weeks ended  October 30, 1999 and October 31, 1998.

                                      - 5 -
<PAGE>

3.      SEGMENT INFORMATION

        The   Company   defines its  principal  business  segments  as  follows:
        the  Specialty  Housewares   segment   which   operates   as    Lechters
        Housewares(R) and  Lechters  Kitchen  Place (R), and  the Off-Price Home
        Business segment which operates as  Famous  Brands  Housewares Outlet(R)
        and  Cost Less Home StoreSM.   The  contribution  of these segments,  as
        well as "corporate and other"  for  the   thirteen    and    thirty-nine
        weeks ended  October 30, 1999 and October 31, 1998 are summarized below.
        The caption "corporate and  other" includes general corporate  expenses,
        principally expenses of service office and distribution  centers as well
        as interest income and expense.

<TABLE>
                                                 Thirteen Weeks Ended          Thirty-Nine Weeks Ended
                                              October 30,     October 31,    October 30,     October 31,
                                                  1999           1998            1999            1998
                                              -----------     -----------    -----------     -----------
<S>                                           <C>             <C>            <C>             <C>
SALES
Specialty Housewares                             $71,060         $72,452       $204,660        $209,780
Off-Price Home Business                           23,777          23,230         64,497          63,518
                                              -----------     -----------    -----------     -----------

Total Sales                                      $94,837         $95,682       $269,157        $273,298
                                              ===========     ===========    ===========     ===========

(LOSS) INCOME BEFORE TAX PROVISION
Specialty Housewares                             ($1,570)          ($273)       ($4,355)          ($288)
Off-Price Home Business                            1,138             544          1,917             777
Corporate and Other                               (8,185)         (6,431)       (22,917)        (19,659)
                                              -----------     -----------    -----------     -----------
Operating (Loss)/Income                           (8,617)         (6,160)       (25,355)        (19,170)
Other Expenses (Income)                              473              233           959            (105)
                                              -----------     -----------    -----------     -----------
Total (Loss) Income Before Income Tax
Provision                                        ($9,090)        ($6,393)      ($26,314)       ($19,065)
                                              ===========     ===========    ===========     ===========

DEPRECIATION AND AMORTIZATION
    EXPENSE
Specialty Housewares                              $2,476          $2,515         $6,929          $7,342
Off-Price Home Business                              376             397          1,117           1,198
Corporate and Other                                1,619           1,285          4,329           3,915
                                              -----------     -----------    -----------     -----------

Total Depreciation and Amortization Expense       $4,471          $4,197        $12,375         $12,455
                                              ===========     ===========    ===========     ===========

CAPITAL EXPENDITURES
Specialty Housewares                              $1,453          $2,925         $3,963          $4,871
Off-Price Home Business                              192             421            659             723
Corporate and Other                                  170             288          1,139             932
                                              -----------     -----------    -----------     -----------

Total Capital Expenditures                        $1,815          $3,634         $5,761          $6,526
                                              ===========     ===========    ===========     ===========

                                              October 30,     October 31,
                                                  1999            1998
                                              -----------     -----------
TOTAL ASSETS
Specialty Housewares                            $108,607        $117,793
Off-Price Home Business                           25,860          27,152
Corporate and Other                              136,970         136,806
                                              -----------     -----------

Total Assets                                    $271,437        $281,751
                                              ===========     ==========

</TABLE>

                                            - 6 -
<PAGE>

4.      COMPREHENSIVE LOSS
        The following is a summary of the Company's comprehensive loss:

<TABLE>
                                                                      Thirty-Nine Weeks Ended
                                                                   October 30,     October 31,
                                                                     1999            1998
                                                                   ---------------------------
<S>                                                                <C>             <C>
        Net  Loss                                                    ($15,526)       ($11,248)

        Components of Comprehensive (Loss) Income:

        Unrealized Loss/(Gain) on Available-For-Sale Securities,
          Net of Applicable Income Tax Benefit                           (192)            148
                                                                   -----------     -----------
        Comprehensive Loss                                           ($15,718)       ($11,100)
                                                                   ===========     ===========
</TABLE>

5.      STOCK REPURCHASE PLAN

        On May 3, 1999,  the Company  announced  the   approval by  the Board of
        Directors of a  program  to  repurchase  from  time  to  time  of  up to
        1,000,000  shares  of  the  Company's Common  Stock.   Share   purchases
        commenced  on  May  17,  1999  and  as  of  December  8,  1999,  totaled
        approximately   684,000    shares    at   a    cost   of   $1,346.  (See
        Note  6  for  restrictions on repurchases under the Company's new credit
        facility.)

6.      SENIOR SECURED REVOLVING CREDIT FACILITY

        On November  30, 1999,  the  Company  entered  into  a new $120  million
        senior  secured   revolving  credit  facility  with   BankBoston  Retail
        Finance Inc. and other  financial institutions,  replacing the Company's
        current credit agreement which was to expire on    March 26,  2001.  The
        new credit  facility  includes a $30  million sublimit for the  issuance
        of letters of credit (both  standby and  documentary).  The  proceeds of
        the credit facility may be used for: (i) the retirement of the Company's
        preexisting revolving credit  facility;  (ii) on-going  working  capital
        requirements;  (iii)   the   replacement, refinancing  or  retirement of
        certain  of  the  Company's  securities,  as  described   below;  and/or
        (iv) other general  corporate purposes. The credit facility is scheduled
        to mature on December 1, 2003.

        The credit facility permits the Company to repurchase its 5% convertible
        subordinated debentures  and/or up to $10 million of its capital  stock,
        provided that the Company can show excess availability  under the credit
        facility  of  not less  than  $25  million, after  giving  effect to the
        repurchases.

        The  Company's  maximum  borrowing  under  the credit  facility  may not
        exceed  the  lesser  of  (a) $120   million  and  (b)  the  total of (i)
        72% (78% for fiscal  months of September  through December of each year)
        of  the  cost value of  the  Company's  acceptable inventory,  including
        eligible   letter   of   credit  inventory;   plus  (ii)   80%  of   the
        Companys eligible   credit card accounts  receivable;  plus (iii) 95% of
        the Company's  cash  and  acceptable investments held  in  a  BankBoston
        custody  account; minus (iv) applicable reserves.

        The    credit    facility   contains   certain     covenants,  including
        limitations on capital expenditures, indebtedness  and transactions with
        afflilates and a  prohibition  on  the   payment  of   dividends,  other
        than  scheduled   payments  of  preferred  dividends  by the Company and
        dividends paid to the Company by its subsidiaries.

                                                - 7 -
<PAGE>

        Advances  under the  credit  facility  will  bear  interest per annum at
        the  BankBoston  base rate plus the  applicable  margin (0% to 0.50%) or
        the  Eurodollar rate plus the applicable margin (1.75% to 2.25%), at the
        Company's  option.  The applicable margins are determined based upon the
        Company's   excess  availability  under  the  credit  facility.    As of
        December  8,  1999  the  base  rate  applicable  margin  was  0% and the
        Eurodollar rate applicable margin was 1.75%.

        The Company will pay an unused line fee of 0.30% per annum on the unused
        portion of   the  credit  facility,  a  standby  letter  of  credit  fee
        equal  to the  applicable  Eurodollar  margin  less 25 basis  points per
        annum of the total  face  amount of each  outstanding  letter of credit,
        a documentary letter of credit fee equal to 1.25% per annum of the total
        face amount of each outstanding letter of credit and certain other fees.

        As of December 8, 1999, there were no outstanding  borrowings  under the
        new facility and outstanding letters of credit were $8,948.

        The   credit  facility will  be  secured  by  a   security  interest  in
        substantially  all of the Company's assets.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
        AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS
(Amounts in thousands, except share and per share amounts)

THIRTEEN  WEEKS ENDED  OCTOBER 30, 1999 IN  COMPARISON WITH THIRTEEN WEEKS ENDED
OCTOBER 31, 1998.

Sales  for  the  thirteen weeks ended  October 30,  1999 ("Third Quarter 1999"),
decreased $845 to $94,837,  a decrease of 0.9% compared to the comparable period
of Fiscal 1998  ("Third  Quarter  1998").  The decrease  was  attributable  to a
reduction of stores in operation  which averaged 57 fewer  locations from Fiscal
1998.  With  respect to sales by  segment,  sales for the  Specialty  Housewares
segment,  which is comprised  of Lechters  Housewares(R)  and  Lechters  Kitchen
Place(R),  decreased 1.9% to $71,060,  and sales for the Off-Price Home Business
segment  comprised  of Famous  Brands  Housewares  Outlet(R)  and Cost Less Home
StoreSM,  increased 2.4% to $23,777.  The Company's total chain comparable store
sales  increased  1.6%  compared  to the same  period  last  year.  By  segment,
comparable  store  sales for  Specialty  Housewares  increased  0.5%,  while the
Off-Price Home Business segment  increased 5.3%.  During Third Quarter 1999, the
Company  opened  seven  stores and closed  fifty-two,  decreasing  the stores in
operation at October 30, 1999 to 526 from the 571 in operation at the  beginning
of the third quarter, compared to 614 stores in operation at October 31, 1998.

Gross  Profit  for  Third  Quarter  1999 was  $23,326,  24.6%  of sales  and was
$538 and 0.8%, as a percent of sales, higher than gross profit for Third Quarter
1998. The increase was primarily attributable to improved margins on merchandise
sold reflecting  fewer price  reductions and to lower occupancy  expenses due to
fewer stores in operation during the period.

Selling,  General  and  Administrative  Expenses increased  $2,995,  to $31,943,
which  constituted  33.7% of sales, an increase in the expense rate of 3.4% from
Third Quarter 1998.  Additional  operating expenses were for consultants engaged
in logistics and information technology projects including Year 2000 initiatives
and for additional warehousing costs supporting Cost Less Home StoreSM.  Expense
for the Third Quarter 1999 was also  unfavorably  impacted by an asset write off
of approximately $1,200 related to the closing of 52 stores.

                                            - 8 -
<PAGE>

Other  (Income)/Expense   for  the  quarter  was  expense of  $473,  0.5% of net
sales and was $240,  and 0.3%, as a percent of sales,  above Third Quarter 1998.
Interest  expense was $24 higher  than last year's  amount  while  interest  and
investment  income and gains were $216 lower for the third  quarter  compared to
last year. The decreased  interest and investment income was the result of lower
balances of Marketable Securities. As of October 30, 1999, Marketable Securities
classified as available-for-sale  were $34,207,  which was $18,379 lower than at
October 31, 1998.

The   Net  Loss  for the  Third  Quarter  1999,  was  $5,364,  ($0.33) per share
compared to a Net Loss of $3,772, ($0.23) per share for Third Quarter 1998.

THIRTY-NINE   WEEKS   ENDED  OCTOBER 30,  1999  IN COMPARISON  WITH  THIRTY-NINE
WEEKS ENDED OCTOBER 31, 1998.

Sales  for the  thirty-nine  weeks  ended October 30, 1999,  decreased $4,141 to
$269,157,  a decrease  of 1.5% from the  comparable  thirty-nine  week period of
Fiscal  1998.  The sales  decrease  was due to the  reduced  number of stores in
operation  during  Fiscal 1999,  which  averaged 47 fewer store  locations  than
Fiscal 1998.  The  Specialty  Housewares  segment which is comprised of Lechters
Housewares(R)  and Lechters Kitchen  Place(R),  decreased 2.4% to $204,660 while
sales for the  Off-Price  Home  Business  segment  comprised  of  Famous  Brands
Housewares Outlet(R) and Cost Less Home StoreSM, increased 1.5% to $64,497. On a
comparable store basis,  sales for the Company increased 0.4% with the Specialty
Housewares segment decreasing 0.7% and sales for Off-Price Home Business segment
increasing 4.3%.  Year-to-date,  the Company has opened 14 stores and closed 66,
decreasing  the stores in  operation  from 578 at January  30, 1999 to 526 as of
October 30, 1999, compared to 614 stores in operation at October 31, 1998.

Gross  Profit  for  the  thirty-nine  week   period   ended  October   30,  1999
decreased  $826 to $65,180.  At 24.2% of sales,  the gross  margin rate was flat
with the period of Fiscal 1998.

Selling,  General   and  Administrative  Expenses  increased  $5,359  to $90,535
and at 33.6% of sales,  were 2.4 percentage  points higher as a percent of sales
compared to the  comparable  period of Fiscal 1998.  The increase in expense was
the result of  increased  Service  Office  expenses  due to  additional  payroll
primarily in merchandising  and information  technology to support the Company's
new  business  initiatives,  consulting  fees for  special  studies  and outside
warehousing  costs for Cost  Less  Home  StoresSM.  Expense  was also  adversely
impacted by the asset  write-offs of  approximately  $1,500  associated with the
closing of sixty-six stores to date during the current year.

Other  (Income)/Expense  for   the  thirty-nine  weeks  ended  October 30, 1999,
increased  $1,064 to an expense of $959,  0.4% of sales,  compared  to income of
$105, for the  comparable  period of the prior fiscal year. The increase was due
to the reduction in the interest  income,  which resulted from reduced  invested
balances.  Additionally,  interest  income for the first quarter of Fiscal 1998,
included  approximately  $450 of interest  income  related to federal income tax
refunds for prior fiscal years.

The  year-to-date  net  loss  for  Fiscal 1999  was $15,526 or ($0.95) per share
compared to a loss of $11,248 or ($0.70) per share for the comparable  period of
Fiscal 1998.

YEAR 2000 COMPLIANCE

Over the  past  2  years,  the Company  has  engaged in  a major  initiative  to
ensure that the Company's  systems would be Year 2000 ("Y2K") compliant and thus
minimize the impact of Y2K on the  Company's  operations.  The  following is the
status of that initiative in the Company's last filing before Y2K starts.

                                            - 9 -
<PAGE>

The Y2K  issue  is  primarily  the result of  computer programs using two digits
instead of four digits to indicate the year.  The Company's  initial  assessment
was that the major  exposure  from Y2K was the lack of  compliance  by others to
ensure an  uninterrupted  supply of merchandise  and that its landlords  provide
normal  operating  conditions  in the  locations  where it  operates  its retail
stores.  As a retailer  which  operates  stores in 41 states and the District of
Columbia,  the Company is also dependent on third party  providers of electrical
and communications  services to allow it to operate  efficiently and effectively
from its headquarters in New Jersey. Therefore, the risk of Y2K from an external
viewpoint is the ability of third parties to provide the merchandise and support
functions that allow the Company to transact its business.

With  respect   to   internal  Information  Technology   ("IT")  issues  and  to
address  operational  issues related with the start of calendar Y2K, the Company
established a Y2K Task Force which has been  reviewing  the Company's  readiness
for Y2K as well as  developing  strategies to mitigate any exposures the Company
may have.

Prior  to  Y2K  Task  Force's  establishment  and  not related to the Y2K issue,
the Company had reviewed  all of its IT systems to  determine  where new systems
could be utilized to take  advantage of the new IT technology  which was rapidly
being  developed.  From that  study,  the  Company  decided to upgrade  its core
financial  and  merchandise  information  systems.  The  core  financial  system
including general ledger,  accounts  payable,  and fixed assets was installed at
the beginning of Fiscal Year 1998. That system was certified as Y2K compliant by
its vendor. With respect to the merchandise information system, the basic system
modules were installed during the first half of Fiscal Year 1999 and it has also
been certified as Y2K compliant by its vendor. Finally, to take advantage of new
improved  technology,  a new warehouse  management  system was purchased and was
installed during the third quarter of the Fiscal Year 1999.  Previously expected
to be operational by October 1999, certain operational issues have postponed the
full utilization  of the new merchandise information system and warehouse system
until after the start of Fiscal 2000.  As a result, the remediation process  has
been  expanded to include the legacy warehouse system.  The estimated completion
date is December 22, 1999.

With  the  acquisition  of  the  above systems,  the focus of the Y2K Task Force
was on monitoring the  implementation of the new systems,  reviewing steps to be
taken to ensure that legacy systems which provide basic  information  which were
not being  replaced by new Y2K  compliant  systems  would be  remediated  and to
develop  contingency  plans to handle  situations  which may  develop due to Y2K
issues.  The scope of  remediation  of legacy  systems has become more extensive
than  originally  estimated  due to delays  in  installing  portions  of the new
merchandise  system and the  warehouse  management system.  This portion  of the
project  includes  remediation  of  the  software,  testing  of  the  code by IT
personnel and user acceptance testing of the remediated  software.  The original
date for  completion of this portion  of  the  project had  been  established as
December  1,  1999.    Current  estimates  indicate  that  the  legacy    system
remediation  including  the    merchandise   informaiton  system  and  warehouse
systems  will  be  complete  by  December   22,  1999  except  for low  priority
systems  which  will be  completed  by  December  31,  1999.  In  some  isolated
cases,  some  of  the  low  priority,  non critical  systems  will complete user
testing in the first week of January 2000.

With  respect  to  basic  office   systems,  all  personal  computers  have been
remediated as well as all hardware and critical operating  systems.  Application
remediation  has  been the  focus  of the  legacy  systems  remediation  project
mentioned  above.  All critical  equipment has been  surveyed and  determined to
either  not  contain  imbedded  date  sensitive  computer  chips  or not be date
sensitive.  Also  monitored by the Y2K Task Force was the  remediation  of store
point-of-sale  ("POS")  systems and systems which interface with the stores such
as third  party  credit  authorization.  As of the end of the third  quarter  of
Fiscal  Year  1999,  all store  based  software  had been  remediated  with only
additional testing needed to ensure that these systems will be operational after
midnight on December 31, 1999.

                                            - 10 -
<PAGE>

As  part  of  its Y2K  procedures, the  Y2K Task Force developed a vendor survey
letter which asked vendors to provide a status report on their readiness for the
start of Y2K. In early Fiscal Year 1999, the Company mailed a Y2K  questionnaire
to all of its vendors  requesting  information on the status of the vendor's Y2K
readiness.  From the initial responses and responses to a subsequent  mailing in
May 1999,  the Y2K Task Force  asked  each  operational  area of the  Company to
identify its key vendors.  This listing was then compared to the  respondents to
the Y2K Questionnaire.  In cases where a key vendor did not respond, alternative
procedures  were utilized such as reviews of public  filings made by the vendor.
In those cases where the Y2K readiness cannot be determined,  the Y2K Task Force
has  requested  where  possible  that an  alternative  Y2K  compliant  vendor be
identified.

In  addition  to  the  vendor  survey and remediation of software,  the Y2K Task
Force has  supervised and completed the  development of operational  contingency
plans for the first  weekend  of Y2K.  These  plans  provide  guidance  to store
personnel  should there be Y2K related  issues with  communications,  electrical
power and other  conditions which may adversely impact the operations of a store
or number of stores.  Included in its preparation  for the Y2K weekend,  the Y2K
Task  Force has  established  a Y2K Help Room at its  corporate  offices  in New
Jersey.  This facility will be in operation  starting December 31, 1999 and will
be staffed by key  corporate  personnel  during the hours stores are open on the
Y2K  weekend.  The  purpose of this  facility  will be to monitor  events in the
stores as they occur  during the Y2K weekend and where  necessary  take steps to
mitigate  any  problems  encountered  by the  stores and if  necessary  allocate
available resources as needed to resolve problem  conditions.  The Y2K Help Room
staff is  currently  being  developed  and the facility is being  equipped  with
additional communication capability to handle any potential contingency.

The  Y2K  Task  Force is  also monitoring  the development of contingency  plans
should Y2K issues adversely  affecting any of the Company's  operations develop.
These plans are being developed with a time horizon for Y2K related difficulties
extending for 3 days, one week and 3 weeks. The plans require that for each time
frame,  the  departments  involved  determine the resources,  namely  personnel,
equipment and space needed.  The  estimated  completion  date for these plans is
December 15, 1999.

With respect to the risks  associated  with the Company's Y2K  initiatives,  the
risks include but are not limited to:

   -  A vendor who has indicated Y2K compliance proves to be non Y2K compliant.
   -  There  are  significant  disruptions in  communications,  utilities and in
      operating and climate systems at the stores the Company operates.
   -  There  is  a  power  or  communications  failure  impacting  the Company's
      corporate office lasting more than several days.
   -  There is  disruption  of  the  flow of  imported  goods due to lack of Y2K
      compliance in locations outside the United States.

While  the  fact  that  the  Company operates a large number of stores which are
geographically  dispersed and the fact that no one vendor  supplies more than 1%
of the Company's  product tend to mitigate  potential  adverse  impacts,  should
there be any Y2K  related  problem  impacting a  significant  part of the United
States beyond a short  duration of time,  there will be an adverse impact on the
Company's operations and financial performance.

With  respect  to  the costs  associated  with Y2K, total software  purchased to
date  for  the  three  major  systems  totals  approximately  $6,450.  Estimated
additional  costs which will be incurred for the purchase of software  which are
charged to Other Assets and amortized  over their useful life is estimated to be
$500 for the  remainder of the  merchandise  package and $300 for the  warehouse
system. Miscellaneous   equipment,  computer  hardware and other costs which are
capitalized are estimated to be $300.   Costs of software  remediation and staff
re-training on systems being remediated, which are expensed as  incurred,  total
approximately  $300  to  date.  Estimated  costs  to  complete  the  remediation
projects and re-training are estimated to be approximately $1,000.

                                            - 11 -
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES.

Cash  flow  during  the  thirty-nine  weeks ended  October 30, 1999 as reflected
on the Statements of Cash Flows, was a net decrease of cash and cash equivalents
of $27,218. Operating activities, comprised of the operating Net Loss of $15,526
adjusted for non-cash  expenses such as  depreciation  and  amortization  and by
changes in  operating  assets,  utilized  $47,934 of cash during  Fiscal 1999 to
date.  Significant  components of operating activities for the thirty-nine weeks
ended October 30, 1999, included depreciation and amortization which is non-cash
expense of $12,375,  merchandise  inventories  which  increased using $41,888 of
cash and accounts  payable,  accrued  expenses and taxes other than income taxes
which  increased by $19,412.  Investing  activities,  capital  expenditures  and
reductions in marketable  (available-for-sale)  securities  provided  $22,457 of
cash with the reduction in marketable  securities  providing $28,218 and capital
expenditures utilizing $5,761.

Capital  expenditures  were  primarily  for  construction  and  fixtures for new
stores,  renovations  and  remodels of  existing  stores.  Financing  activities
utilized  $1,741 of cash as the Company  paid the  dividend  on the  convertible
preferred stock and purchased 364,000 shares of its Common Stock at an aggregate
cost of $731.

On  November  30,  1999,  the  Company  entered  into a new $120 million  senior
secured  revolving credit facility with BankBoston Retail Finance Inc. and other
financial  institutions,  replacing the Company's current credit agreement which
was to expire on March 26, 2001. The new credit facility  includes a $30 million
sublimit for the issuance of letters of credit (both  standby and  documentary).
The proceeds of the credit  facility may be used for: (i) the  retirement of the
Company's preexisting  revolving credit facility;  (ii) on-going working capital
requirements; (iii) the replacement, refinancing or retirement of certain of the
Company's  securities,  as described below;  and/or (iv) other general corporate
purposes. The credit facility is scheduled to mature on December 1, 2003.

The  credit  facility  permits  the  Company  to repurchase  its  5% convertible
subordinated  debentures and/or up to $10 million of its capital stock, provided
that the Company can show excess  availability  under the credit facility of not
less than $25 million, after giving effect to the repurchases.

The  Company's  maximum  borrowing  under  the  credit  facility  may not exceed
the  lesser of (a) $120  million  and (b) the  total of (i) 72% (78% for  fiscal
months of  September  through  December  of each  year) of the cost value of the
Company's acceptable  inventory,  including eligible letter of credit inventory;
plus (ii) 80% of the Companys  eligible  credit card accounts  receivable;  plus
(iii) 95% of the Company's cash and acceptable  investments held in a BankBoston
custody account; minus (iv) applicable reserves.

The  credit  facility  contains  certain  covenants,  including  limitations  on
capital  expenditures,  indebtedness  and  transactions  with  afflilates  and a
prohibition  on the  payment of  dividends,  other than  scheduled  payments  of
preferred  dividends  by the  Company and  dividends  paid to the Company by its
subsidiaries.

Advances  under  the  credit  facility  will  bear  interest  per  annum  at the
BankBoston base rate plus the applicable  margin (0% to 0.50%) or the Eurodollar
rate plus the applicable margin (1.75% to 2.25%),  at the Company's option.  The
applicable  margins are determined based upon the Company's excess  availability
under the  credit  facility.  As of  December  8, 1999 the base rate  applicable
margin was 0% and the Eurodollar rate applicable margin was 1.75%.

                                            - 12 -
<PAGE>

The   Company  will  pay  an  unused  line  fee of 0.30% per annum on the unused
portion  of the  credit  facility,  a standby  letter of credit fee equal to the
applicable  Eurodollar  margin less 25 basis  points per annum of the total face
amount of each outstanding  letter of credit, a documentary letter of credit fee
equal to 1.25% per annum of the total face amount of each outstanding  letter of
credit and certain other fees.

As  of  December  8,  1999, there  were no outstanding  borrowings under the new
facility and outstanding letters of credit were $8,948.

The  credit facility  will  be secured  by a  security interest in substantially
all of the  Company's  assets.  A copy of the  Credit  Agreement  is filed as an
exhibit to the Form 10-Q.

STOCK REPURCHASE PLAN

On  May  3,  1999,  the  Company  announced  the  approval  by   the   Board  of
Directors of a program to repurchase from time to time of up to 1,000,000 shares
of the Company's Common Stock. Share purchases  commenced on May 17, 1999 and as
of December 8, 1999 totaled  approximately  684,000  shares at a cost of $1,346.
(See Note 6 to the Financial  Statements for  restrictions on repurchases  under
the Company's new credit facility.)

Part II.   Other Information

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

3.1     Restated  Certificate  of  Incorporation  of  the  Company (Incorporated
        herein  by  reference  to  Exhibit  3.2  to  the  Company's Registration
        Statement on Form S-1 File No. 33-29465 (the "Registration Statement")).

3.2     By-laws of the Company (Incorporated  herein by reference to Exhibit 3.2
        to the  Company's Registration Statement on Form S-1 File No. 33-40372).

4.1     Preferred Stock Purchase Agreement  dated  April 5, 1996.  (Incorporated
        herein by  reference to the Company's Annual Report on Form 10-K for the
        year ended February 1, 1997).

4.2     Indenture, dated   as  of  September  27, 1991, between  the Company and
        Chemical  Bank, as  Trustee.  (Incorporated  herein  by reference to the
        Company's   Annual    Report  on  Form   10-K   for   the   year   ended
        January 25, 1992).

10.1    Loan  and  Security  Agreement  dated as  of November 30, 1999 among the
        Company, BankBoston Retail Finance, Inc., as Agent, BancBoston Robertson
        Stephens, Inc., as syndication agent, and certain listed Banks.*

27      Financial Data Schedule*

b.  Reports on Form 8-K.
1.      No reports on Form 8-K were  filed for the quarter for which this report
        is filed.

*Filed herewith.

                                            - 13 -

<PAGE>

                                          SIGNATURES

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.

                                            LECHTERS, INC.

                                            By:    /s/ James J. Sheppard
                                                   ---------------------
                                                   James J. Sheppard
                                                   Senior Vice President and
                                                   Chief Financial Officer


Date:   December 14, 1999

                                            - 14 -