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 May 1, 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 June 7, 1999: 17,079,786:



<PAGE>


                         LECHTERS, INC. AND SUBSIDIARIES
                                    FORM 10-Q
                          FOR QUARTER ENDED MAY 1, 1999
                                      INDEX


<TABLE>
<CAPTION>

                                                                                                                            PAGE NO.
<S>                                                                                                                          <C>
PART I.   Financial Information
     Item 1.    Financial Statements
                Consolidated Balance Sheets May 1, 1999 and January 30, 1999 ...............................................   1
                Consolidated Statements of Operations for the Thirteen Weeks Ended May 1, 1999 and May 2, 1998 .............   2
                Consolidated Statements of Cash Flows for the Thirteen Weeks Ended May 1, 1999 and May 2, 1998 .............   3
                Consolidated Statement of Shareholders' Equity for the Thirteen Weeks Ended May 1, 1999 ....................   4
                Notes to Consolidated Financial Statements .................................................................  5-7
     Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations ...................... 8-10

PART II.  Other Information
     Item 6.    Exhibits and Reports on Form 8-K ...........................................................................  11
</TABLE>

<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>


                         LECHTERS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

           (Amounts in thousands, except share and per share amounts)



<TABLE>
<CAPTION>
                                                             May 1,           January 30,
                                                             1999                1999
                                                          -----------         ----------
            A S S E T S                                   (unaudited)
<S>                                                       <C>                 <C>
Current Assets:
   Cash and Cash Equivalents                              $ 12,156            $ 35,503
   Marketable Securities                                    62,844              62,750
   Accounts Receivable                                       7,802               4,185
   Merchandise Inventories                                 107,968              89,224
   Prepaid Expenses                                          4,390               1,734
                                                          -----------         ----------

   Total Current Assets                                    195,160             193,396
Property and Equipment:
   Fixtures and Equipment                                   58,355              57,678
   Leasehold Improvements                                   96,891              96,452
                                                          -----------         ----------
                                                           155,246             154,130
   Less Accumulated Depreciation & Amortization             91,298              88,401
                                                          -----------         ----------
   Net Property and Equipment                               63,948              65,729
Other Assets                                                 9,955               8,519
                                                          -----------         ----------
Total Assets                                              $269,063            $267,644
                                                          ===========         ==========
  LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
   Accounts Payable                                       $ 15,315           $   8,982
   Dividends Payable - Preferred Stock                        --                 1,010
   Salaries, Wages and Other Accrued Expenses               17,051              17,156
   Taxes, Other Than Income Taxes                            1,904               1,774
                                                          -----------         ----------
   Total Current Liabilities                                34,270              28,922
Long-term Debt
   5% Convertible Subordinated Debentures due
   September 27, 2001 (Net of Unamortized
   Discount of $3,444 and $3,768 respectively)              61,556              61,232
                                                          -----------         ----------
   Total Long-Term Debt                                     61,556              61,232

Deferred Income Taxes and Other Deferred Credits            18,484              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 Income                        5                 109
   Additional Paid-in Capital                               62,380              62,380
   Retained Earnings                                        72,310              76,587
                                                          -----------         ----------
   Total Shareholders' Equity                              154,753             159,134
                                                          -----------         ----------
Total Liabilities and Shareholders' Equity                $269,063            $267,644
                                                          ===========         ==========

     See accompanying notes to consolidated financial statements.
</TABLE>

                                      - 1 -



<PAGE>


                         LECHTERS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

             (Amounts in thousands, except share and per share data)
<TABLE>
<CAPTION>
                                                               Thirteen Weeks Ended
                                                          May 1,                   May 2,
                                                           1999                     1998
                                                       ------------             ------------
                                                                   (unaudited)

<S>                                                       <C>                      <C>
Net Sales                                                 $ 83,407                 $ 86,194

Cost of Goods Sold (including occupancy
 and indirect costs)                                        61,837                   64,536
                                                       ------------             ------------

       Gross Profit                                         21,570                   21,658

Selling, General and Administrative Expenses                28,734                   28,286
                                                       ------------             ------------
Operating Loss                                              (7,164)                  (6,628)

Other Expenses (Income):
   Interest Expense                                          1,133                    1,097

   Interest Income                                            (807)                  (1,421)

   Net Investment
    Gain/Income                                               (240)                    (141)
                                                       ------------             ------------
Total Other Expenses (Income)                                   86                     (465)
                                                       ------------             ------------
Loss Before Income Taxes                                    (7,250)                  (6,163)

Income Tax Benefit                                          (2,973)                  (2,523)
                                                       ------------             ------------
Net Loss                                                    (4,277)                  (3,640)

Preferred Stock Dividend Requirement                           252                      252
                                                       ------------             ------------
Net Loss Applicable to Common Shareholders               ($  4,529)               ($  3,892)
                                                       ============             ============
Net Loss Per Common Share - Basic                        ($   0.26)               ($   0.23)
                                                       ============             ============
Net Loss Per Common Share - Diluted                      ($   0.26)               ($   0.23)
                                                       ============             ============
Weighted Average Common Shares Outstanding -Basic       17,176,000               17,175,000
                                                       ============             ============
Weighted Average Common Shares Outstanding -Diluted     17,176,000               17,175,000
                                                       ============             ============


          See accompanying notes to consolidated financial statements.
</TABLE>


                                      - 2 -

<PAGE>

                         LECHTERS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                  Thirteen Weeks Ended
                                                                May 1,             May 2,
                                                                1999               1998
                                                             -----------        -----------
                                                                       (unaudited)
Cash Flows From Operating Activities:
<S>                                                           <C>                <C>
   Net Loss                                                   ($  4,277)         ($  3,640)

Adjustments to Reconcile Net Loss to Net
   Cash Used In Operating Activities:
    Depreciation and Amortization                                 3,960              4,162
    Other                                                           364                287

Changes in Assets and Liabilities:
   Increase in Accounts Receivable                               (3,617)              (574)
   Increase in Merchandise Inventories                          (18,744)           (11,095)
   Increase in Prepaid Expenses                                  (2,656)            (2,134)
   Increase in Accounts Payable,
    Accrued Expenses and Taxes Other
    Than Income Taxes                                             6,358             10,560
   Decrease in Income Taxes Payable                                  --             (2,016)
   Increase in Other Assets                                      (1,783)            (1,463)
                                                             -----------        -----------
   Net Cash Used In Operating Activities                        (20,395)            (5,913)
                                                             -----------        -----------
Cash Flows From Investing Activities:
   Capital Expenditures                                          (1,672)            (1,126)
   (Increase) Decrease in Available for Sale Securities            (270)            10,030
                                                             -----------        -----------
   Net Cash (Used) Provided by
    Investing Activities                                         (1,942)             8,904
                                                             -----------        -----------
Cash Flows From Financing Activities:
   Payment of Preferred Stock Dividend                           (1,010)            (1,010)
   Exercise of Stock Options                                         --                 10
                                                             -----------        -----------
   Net Cash Used In Financing Activities                         (1,010)            (1,000)
                                                             -----------        -----------
Net (Decrease) Increase  in Cash and Cash Equivalents           (23,347)             1,991

Cash and Cash Equivalents, Beginning of Period                   35,503             16,395
                                                             -----------        -----------
Cash and Cash Equivalents, End of Period                       $ 12,156           $ 18,386
                                                             ===========        ===========
Supplemental Disclosure of Cash Flows Information:

Cash Paid During the Period for:
   Interest                                                    $     --           $     --
                                                             ===========        ===========
   Income Taxes                                                $     15           $  2,017
                                                             ===========        ===========


          See accompanying notes to consolidated financial statements.
</TABLE>



                                      - 3 -
<PAGE>


                         LECHTERS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                             (Amounts in thousands)

<TABLE>
<CAPTION>
                                                                                   Accumulated
                                                                                      Other
                                Common     Preferred    Additional                 Comprehensive
                                Stock       Stock       Paid-In      Retained         Income                      Comprehensive
                                Issued      Issued      Capital      Earnings         (Loss)           Total           Loss
                              ---------    ---------   ---------    ----------     -------------     ---------    -------------
<S>                               <C>      <C>          <C>          <C>             <C>              <C>             <C>
Balance,
  January 30, 1999                $58      $20,000      $62,380      $76,587         $109             $159,134        $   --

Net Loss-Thirteen
  Weeks Ended
  May 1, 1999                     --           --            --       (4,277)          --               (4,277)       (4,277)

Other Comprehensive Loss,
  Net of tax:
  Unrealized Loss on
  Available-For-Sale
  Securities                      --           --            --          --          (104)                (104)         (104)
                              ---------    ---------   ---------    ----------     -------------     ---------    -------------
Balance,
May 1, 1999 (unaudited)           $58      $20,000      $62,380      $72,310         $  5             $154,753       ($4,381)
                              =========    =========   =========    ==========     =============     =========    =============

</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 weeks ended May 1,
        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
        weeks ended May 1, 1999 and May 2, 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 weeks ended May 1, 1999 and May 2, 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
        Store(SM). The contribution of these segments, as well as "corporate and
        other"  for the  thirteen  weeks  ended  May 1, 1999 and May 2, 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.

                                                           Thirteen Weeks Ended
                                                          May 1,         May 2,
                                                          1999            1998
                                                        ---------     ---------
SALES
Specialty Housewares                                    $  64,646     $  67,413
Off-Price Home Business                                    18,761        18,781
                                                        ---------     ---------
Total Sales                                             $  83,407     $  86,194
                                                        =========     =========
(LOSS) INCOME BEFORE TAX PROVISION
Specialty Housewares                                    ($    385)    $     215
Off-Price Home Business                                       378           151
Corporate and Other                                        (7,157)       (6,994)
                                                        ---------     ---------
Operating (Loss)/Income                                    (7,164)       (6,628)
Interest Expense (Income)                                      86          (465)
                                                        ---------     ---------

Total (Loss) Income Before Income Tax Provision         ($  7,250)    ($  6,163)
                                                        =========     =========
DEPRECIATION AND AMORTIZATION EXPENSE
Specialty Housewares                                    $   2,250     $   2,399
Off-Price Home Business                                       369           401
Corporate and Other                                         1,341         1,362
                                                        ---------     ---------
Total Depreciation and Amortization Expense             $   3,960     $   4,162
                                                        =========     =========
CAPITAL EXPENDITURES
Specialty Housewares                                    $   1,024     $     525
Off-Price Home Business                                       367           210
Corporate and Other                                           281           391
                                                        ---------     ---------
Total Capital Expenditures                              $   1,672     $   1,126
                                                        =========     =========
TOTAL ASSETS
Specialty Housewares                                    $ 102,762     $ 108,429
Off-Price Home Business                                    23,617        27,104
Corporate and Other                                       142,684       146,159
                                                        ---------     ---------
Total Assets                                            $ 269,063     $ 281,692
                                                        =========     =========


                                      - 6 -
<PAGE>


4.      COMPREHENSIVE LOSS

        The following is a summary of the Company's comprehensive loss:


                                                          Thirteen Weeks Ended
                                                             May 1,      May 2,
                                                             1999         1998
                                                            -------     --------
Net  Loss                                                   ($4,277)    ($3,640)

Components of
Comprehensive Loss:

Unrealized Loss on Available-For-Sale Securities -
   Net of Applicable Income Tax Benefit                        (104)       (104)
                                                            -------     --------
Comprehensive Loss                                          ($4,381)    ($3,744)
                                                            =======     =======




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 June 7, 1999, totaled  approximately
        96,500  shares at a cost of $206.  The  Company's  intention  is to hold
        these shares as treasury stock.


                                      - 7 -

<PAGE>


MANAGEMENT'S   DISCUSSION  AND  ANALYSIS  OF FINANCIAL  CONDITION AND RESULTS OF
OPERATIONS

RESULTS OF OPERATIONS

THIRTEEN WEEKS ENDED MAY 1, 1999 IN COMPARISON  WITH THIRTEEN WEEKS ENDED MAY 2,
1998.

(Amounts in thousands, except share and per share amounts)

Net  sales for  the  thirteen  weeks   ended  May 1, 1999  decreased  $2,787  to
$83,407, a 3.2% decrease from $86,194 reported for the comparable  thirteen week
period of the prior fiscal year.  The decrease  was  primarily  attributable  to
fewer  stores in operation  in the first  quarter of Fiscal 1999.  The number of
stores open for the quarter averaged 42 fewer stores than the comparable  period
last  year.  For the first  quarter  of  Fiscal  1999,  sales for the  Specialty
Housewares  segment  which is comprised of Lechters  Housewares(R)  and Lechters
Kitchen  Place(R)  decreased  4.1%,  while sales for the Off-Price Home Business
segment  comprised  of Famous  Brands  Housewares  Outlet(R)  and Cost Less Home
Store(SM)  decreased  0.1%. On a comparable  store basis,  sales for the Company
decreased 1.5%. Specialty Housewares comparable store sales decreased 2.5% while
Off-Price Home Business  comparable store sales increased 2.6%. During the first
quarter of Fiscal  1999,  the Company  opened four stores and closed six stores,
reducing  the stores in  operation at May 1, 1999 to 576 from the 578 open as of
January 30, 1999. At the close of the first quarter of Fiscal 1998,  the Company
operated 615 stores.

Gross Profit for the first quarter  decreased $88 to $21,570,  which at 25.9% of
sales  was  0.8  percentage  points  higher  than  the  25.1%  reported  for the
comparable  thirteen  week period of Fiscal  1998.  The higher gross profit rate
reflects an improved  merchandise  margin  performance from higher markup in the
beginning  inventory and reduced markdowns.  The Gross Profit rate also improved
due to reduced  occupancy costs as a result of fewer stores in operation  during
the first quarter of Fiscal 1999 compared to the comparable thirteen week period
of Fiscal 1998.

Selling, General and Administrative Expenses increased $448 to $28,734. At 34.5%
of sales,  the expense rate was 1.7  percentage  points higher than the rate for
the  comparable  period of the prior fiscal  year.  Store  payroll  expenses and
freight costs were higher due to increased  merchandise shipments to the stores.
Advertising  expense  increased  due to an  additional  circular.  These expense
increases  were partially  offset by reductions in asset  write-offs and reduced
Service Office expenses.

Other  (Income)/Expense  for the first quarter  decreased  $551 to an expense of
$86, 0.1% of sales compared to income of $465,  0.5% of  sales,  for  the  first
quarter of the prior fiscal year.  The decrease was due to the  reduction in the
interest  income.  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 Net Loss for the first  Quarter of Fiscal  1999 was  $4,277 or  ($0.26)  per
share  compared  to a loss of $3,640  or  ($0.23)  per share for the  comparable
period of Fiscal 1998.  While the gross profit rate  improved,  the reduction in
sales and gross profit due primarily to fewer stores could not be offset.

                                      - 8 -

<PAGE>


YEAR 2000

The Company  repeats its disclosure made in its Annual Report to Shareholders on
Form 10-K  revised for  information  which has changed from the Form 10-K filing
date of April 28,1999.

The Year 2000 ("Y2K") issue is primarily the result of computer  programs  using
two digits  instead of four  digits to  indicate  the year.  From the  Company's
perspective,  the major risks  associated  with the Year 2000  involve  areas in
which the Company is dependent on others to take  appropriate and timely actions
before January 1, 2000.  Specifically,  as a retailer,  the Company is dependent
upon an  uninterrupted  supply of merchandise  to its stores,  upon landlords to
provide normal operating  conditions at the properties  leased by the Company in
which to transact  business and upon service  providers who supply such items as
phone  service  and  utilities  which  allow the  Company to operate  its stores
located in 42 states and the District of Columbia from its  headquarters  in New
Jersey.  These key  factors  must be  resolved  by  outside  parties.  Without a
successful  resolution of these factors, the Company will not be able to operate
in its normal manner and severe adverse economic  consequences will result. With
respect to the  products  sold by the  Company,  for the most part,  they do not
contain embedded electronic devices which would make them subject to Y2K issues.

To monitor  these  outside  parties in their Y2K  process and to ensure that all
factors over which it had control from a Y2K  perspective  were resolved  before
the start of the Y2K, the Company  initiated  its Year 2000  compliance  project
during  Fiscal Year 1997 with a review of all  existing  information  technology
("IT") software systems.

In Fiscal Year 1996,  prior to the recognition of the Year 2000 as a significant
business risk and in the normal course of business,  the Company  identified key
core systems  which  needed to be  replaced.  A new  financial  suite  including
modules for general ledger,  accounts  payable and fixed assets was installed at
the beginning of Fiscal 1998. A new merchandise  inventory  analysis and control
system has been acquired.  The core software package was installed during Fiscal
Year 1998. The new merchandise  analysis systems are scheduled to be operational
in stages  during the first half of Fiscal Year 1999.  Finally,  the Company has
also  contracted  to  install  a new  warehouse  management  system  which is in
development  and will be  implemented  by August 1999.  All three major  systems
acquisitions  have been  certified  Year 2000  compliant by the vendor.  All new
software to be acquired by the Company  will be required to be certified as Year
2000 compliant by the vendor.

The Company  established a Year 2000  Compliance Task Force in the third quarter
of Fiscal 1998 whose charter is to review all of the Company's efforts to ensure
that the  Company  will be Year  2000  compliant  prior to  December  31,  1999.
Comprised of representatives from Information Technology,  Operations,  Finance,
Loss Prevention,  Merchandising and Human Resources, the task force has reviewed
all known  potential Year 2000 issues and has  established a Master  Schedule of
items ready to be resolved to ensure that the Y2K will have no adverse impact on
the  Company.  The Y2K Task Force's  initial  focus was to review steps taken to
date primarily in the IT area.

The Y2K Task Force also commenced its review of non-IT related issues  involving
equipment with embedded  technology  which may not be Year 2000 compliant.  This
phase of the project has been completed,  and it has identified  limited amounts
of equipment with embedded  technology subject to Y2K exposure.  Early in Fiscal
1999, the Company mailed a Y2K readiness  questionnaire to all of its vendors. A
second  mailing  was also made to key vendors who did not respond to the initial
mailing.

With  the  receipt of questionnaire  responses, which  was  completed at the end
of May 1999, the third phase of the Year 2000  compliance  project will focus on
evaluating the results of the questionnaire, reviewing the results of the non-IT
equipment survey and verifying IT software surveys previously  conducted.  Based
on the completion of the above process,  the Y2K Task Force will issue its final
Y2K Master Schedule and remediation  plan,  which will be completed by the third
quarter of Calendar Year 1999. If deemed necessary, third party consultants will
be engaged to evaluate and/or assist in the completion of the plan.

                                     - 9 -
<PAGE>


The final two phases of the Year 2000 remediation plan involve the establishment
of  contingency  plans  scheduled for  development  during the second quarter of
Fiscal Year 1999 and the development of "worst case" scenarios.  The development
of "worst  case"  scenarios  will be based on the  assessment  of the  Company's
readiness and the readiness of its key vendors,  major suppliers,  landlords and
key service  suppliers.  Given the fact that the Company operates a large number
of stores which are geographically  dispersed and has a large supplier base, the
Company's  initial  evaluations to date indicate that these two conditions  will
tend to  mitigate  potential  adverse  impacts  of the Year  2000  issues.  This
evaluation,  however, is based on certain expectations and assumptions which may
ultimately prove to be inaccurate.

As part of their oversight responsibilities, the Audit Committee of the Board of
Directors has requested and will be provided with periodic status reports, on at
least a monthly basis, on the progress the Company has made with respect to Year
2000 readiness and compliance.

The cost of the software  purchased  for the major  systems as  described  above
approximates  $4,700.  Future  costs  of new  software  for  major  systems  are
estimated to be $625 for the completion of the  merchandise  inventory  analysis
and  control  system  and  $900  for a  warehouse  management  system.  Costs of
compliance such as hardware  upgrades,  equipment  replacement and miscellaneous
software,  which are  "capitalized"  as other assets,  are estimated to be $300.
Costs of re-training or modifications  to existing  programs will be expensed as
incurred and are  estimated to be $400.  It is  anticipated  that funds for Year
2000 compliance costs will be generated by internal sources.

LIQUIDITY AND CAPITAL RESOURCES

Cash,  cash  equivalents  and marketable  securities  decreased  $7,927 from the
balances at the close of the first quarter of Fiscal 1998.

Cash flow  during  the  thirteen  weeks  ended May 1, 1999 as  reflected  on the
Consolidated  Statements  of Cash  Flows,  was a net  decrease  in cash and cash
equivalents of $23,347. Operating activities, comprised of the operating loss of
$4,277 adjusted for non-cash  expenses such as depreciation and amortization and
by changes in operating  assets,  utilized $20,395 of cash during Fiscal 1999 to
date.  Significant  components  of operating  activities  for the first  quarter
included  depreciation and  amortization  which is a non-cash expense of $3,960,
merchandise  inventories  which  increased  using  $18,744 of cash and  accounts
payable,  accrued expenses and taxes other than income taxes which increased and
provided cash of $6,358.  The  increases in inventory and accounts  payable were
normal  occurrences as the Company has increased its inventories  from their low
year-end  balances.  Total  merchandise  inventories were $2,161 lower at May 1,
1999  than  at May 2,  1998.  Investing  activities,  capital  expenditures  and
reductions in  marketable  (available-for-sale)  securities  used $1,942 in cash
with capital expenditures utilizing $1,672 of cash.

Capital  expenditures  were primarily for  construction  of and fixtures for new
stores,  renovations  and  remodels of  existing  stores.  Financing  activities
utilized  $1,010,  of cash as the Company paid the  dividend on the  convertible
preferred stock.

                                     - 10 -

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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 June
7, 1999,  totaled  approximately  96,500 shares at a cost of $206. The Company's
intention is to hold these shares as treasury stock.

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).

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

                                   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:   June 11, 1999


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