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 July 29, 2000

                                       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 September 6, 2000: 15,354,986:
<PAGE>


                         LECHTERS, INC. AND SUBSIDIARIES
                                    FORM 10-Q
                         FOR QUARTER ENDED JULY 29, 2000
                                      INDEX


                                                                 Page No.
PART I.       Financial Information


      Item 1. Financial Statements

              Consolidated Balance Sheets at                          1
              July 29, 2000 and January 29, 2000

              Consolidated Statements of Operations                   2
              for the Thirteen and Twenty-Six Weeks Ended
              July 29, 2000 and July 31,1999

              Consolidated Statements of Cash Flows                   3
              for the Thirteen and Twenty-Six Weeks Ended
              July 29, 2000 and July 31,1999

              Consolidated Statement of Shareholders'                 4
              Equity for the Twenty-Six Weeks Ended
              July 29, 2000

              Notes to Consolidated Financial Statements            5-7

     Item 2.  Management's Discussion and Analysis of              8-10
              Financial Condition and Results of Operations

     Item 3.  Quantitative and Qualitative Disclosures About         10
              Market Risk

PART II.      Other Information

     Item 4.  Submission of Matters to a Vote of Security         10-11
              Holders.

     Item 6.  Exhibits and Reports on Form 8-K                    11-12
<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;
    - 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
          ---------------------
Item 1.   Financial Statements

                         LECHTERS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
           (Amounts in thousands, except share and per share amounts)
<TABLE>

                                           July 29, 2000        January 29, 2000
                                           -------------        ----------------
                                            (unaudited)
                      ASSETS
<S>                                              <C>                     <C>
Current Assets:
     Cash and cash equivalents                  $11,791                  $9,917
     Marketable securities                        4,797                  65,301
     Accounts receivable                         12,872                   2,881
     Merchandise inventories                    113,166                 103,100
     Prepaid expenses                             6,172                   2,043
                                           -------------        ----------------

        Total Current Assets                    148,798                 183,242

Property and equipment:
     Fixtures and equipment                      57,817                  56,194
     Leasehold improvements                      93,462                  92,368
                                           -------------        ----------------
                                                151,279                 148,562
Less accumulated depreciation and
amortization                                     98,678                  93,780
                                           -------------        ----------------
Net property and equipment                       52,601                  54,782

Other Assets                                     11,785                  11,497
                                           -------------        ----------------
      Total Assets                            $ 213,184               $ 249,521
                                           =============        ================

 LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                           $  13,265               $  16,305
     Dividends payable-preferred stock              - -                   1,010
     Salaries, wages and other accrued
     expenses                                    16,087                  15,662
     Taxes, other than income taxes               1,576                   2,041
                                           -------------        ----------------
              Total Current Liabilities          30,928                  35,018

Long-Term Debt 5% Convertible subordinated
     debentures  due September 27, 2001
     (net of unamortized discount of
     $1,160 and $2,251, respectively)            42,145                  57,804
                                           -------------        ----------------
        Total long-term debt                     42,145                  57,804

Deferred income taxes and other deferred
credits                                          12,979                  12,538

Shareholders' Equity:
 Convertible preferred stock,$100 par
   value authorized 1,000,000 shares,
   Issued and outstanding Series A-149,999
   shares and Series B-50,001 shares             20,000                  20,000
 Common stock, no par value,
   authorized-50,000,000
   shares, issued 17,176,286
   and 17,176,286, respectively                      58                      58
 Accumulated other comprehensive loss                (5)                    (65)
   Additional paid-in-capital                    62,380                  62,380
   Retained earnings                             47,710                  63,129
                                           -------------        ----------------
                                                130,143                 145,502
 Less: Treasury Stock at cost
   Common Stock:  1,766,300 shares
   and 684,000 shares, respectively              (3,011)                 (1,341)
                                           -------------        ----------------
    Total Shareholders' Equity                  127,132                  144,161
                                           -------------        ----------------

Total Liabilities And Shareholders' Equity    $ 213,184               $ 249,521
                                           =============        ================
</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                      Twenty-Six Weeks Ended
                                          July 29,           July 31,               July 29,           July 31,
                                            2000              1999                    2000               1999
                                          --------           --------               --------           --------
                                                 (UNAUDITED)                                (UNAUDITED)
<S>                                     <C>                <C>                    <C>                <C>
Net sales                                 $ 84,193           $ 90,913               $167,936           $174,320
Cost of goods sold
(including  occupancy and indirect
costs)                                      64,796             70,629                128,618            132,466
                                        -----------        -----------            -----------        -----------

Gross profit                                19,397             20,284                 39,318             41,854

Selling, general and administrative
expenses                                    33,118             29,858                 63,403             58,592
                                        -----------        -----------            -----------        -----------

Operating loss                             (13,721)            (9,574)               (24,085)           (16,738)
Other expenses(income):
  Interest expense                             957              1,139                  1,934              2,272
  Interest income                             (162)              (645)                  (855)            (1,452)

  Net investment gain/income                   (26)               (94)                   (89)              (334)
                                        -----------        -----------            -----------        -----------
       Total other expenses(income)            769                400                    990                486
                                        -----------        -----------            -----------        -----------

Loss before tax benefit and
 extraordinary item                        (14,490)            (9,974)               (25,075)           (17,224)

Income tax benefit                          (5,072)            (4,089)                (8,777)            (7,062)
                                        -----------        -----------            -----------        -----------


Net loss before extraordinary item          (9,418)            (5,885)               (16,298)           (10,162)

Extraordinary item - gain on early
 extinguishment of debentures (net of
 income tax of $474)                           - -                - -                    879                - -
                                        -----------        -----------            -----------        -----------
Net loss                                    (9,418)            (5,885)               (15,419)           (10,162)

Preferred stock dividend requirement           253                253                    505                505
                                        -----------        -----------            -----------        -----------

Net loss available to common
 shareholders                             ($ 9,671)          ($ 6,138)              ($15,924)          ($10,667)
                                        ===========        ===========            ===========        ===========

Net loss per common share
 Basic and Diluted
   Loss before extraordinary item           ($0.62)            ($0.36)                ($1.04)            ($0.62)
   Extraordinary item                          - -                - -                   0.05                - -
                                        -----------        -----------            -----------        -----------
   Net loss                                 ($0.62)            ($0.36)                ($0.99)            ($0.62)
                                        ===========        ===========            ===========        ===========
Weighted average common shares
Outstanding
  Basic and diluted                     15,618,000         17,098,000             16,010,000         17,137,000
                                        ===========        ===========            ===========        ===========
</TABLE>
          See accompanying notes to consolidated financial statements.

                                       -2-
<PAGE>


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

<TABLE>
                                                            Twenty-Six Weeks Ended
                                                            ----------------------
                                                      July 29, 2000       July 31,1999
                                                      -------------       ------------
                                                              (unaudited)

Cash flows from operating activities:
<S>                                                       <C>               <C>
   Net loss                                               ($15,419)         ($ 10,162)

Adjustments to reconcile net loss to net cash
      used in operating activities:
      Depreciation and amortization                          7,786              7,904
      Gain on repurchase of debentures                      (1,353)               - -
      Other                                                    440                911
       Changes in operating assets and liabilities:
         Increase in accounts receivable                    (9,991)            (6,575)
         Increase in merchandise inventories               (10,066)           (24,278)
         Increase in prepaid expenses                       (4,129)            (4,396)
         (Decrease)/increase in accounts payable,
           accrued salaries, wages and other accrued
           expenses and taxes, other than income taxes      (3,080)             3,995
         Increase in other assets                           (1,551)            (2,769)
                                                      -------------       ------------
        Net cash used in operating activities              (37,363)           (35,370)

Cash flows from investing activities:
        Capital expenditures                                (3,930)            (3,946)
        Decrease in available for sales securities          60,608             15,782
                                                      -------------       ------------
        Net cash provided by investing activities           56,678             11,836

Cash flows from financing activities:
        Payment of preferred stock dividend                 (1,010)            (1,010)
        Purchase of treasury stock                          (1,670)              (218)
        Repurchase of debentures                           (14,761)               - -
                                                      -------------       ------------
        Net cash used in financing activities              (17,441)            (1,228)
                                                      -------------       ------------

Net increase/(decrease) in cash and cash equivalents         1,874            (24,762)

Cash and cash equivalents, beginning of period               9,917             35,503
                                                      -------------       ------------

Cash and cash equivalents, end of period                    $11,791           $10,741
                                                      =============       ============

Supplemental  disclosures of cash flow information:
      Cash paid during the period for:
        Interest                                            $  525            $   - -
                                                      =============       ============
        Income taxes                                        $   62            $    77
                                                      =============       ============

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

                                       -3-
<PAGE>

                        LECHTERS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                             (Amounts in thousands)

<TABLE>
<CAPTION>

                                                                               Accumulated
                                       Convertible    Additional                  Other
                              Common    Preferred      Paid-In     Retained   Comprehensive      Treasury              Comprehensive
                              Stock       Stock        Capital     Earnings       Loss            Stock        Total        Loss
                              ------   -----------    ----------   --------   -------------      ---------   --------  -------------


Balance,
<S>                            <C>       <C>           <C>         <C>            <C>             <C>        <C>           <C>
   January 29, 2000            $58       $20,000       $62,380     $63,129        ($65)           ($1,341)   $144,161
Net loss - twenty-six
weeks
   ended July 29, 2000         - -          - -            - -     (15,419)        - -                - -     (15,419)     (15,419)
Other comprehensive income
   net of tax:
   Unrealized gain on
   available for sale
   securities                  - -          - -            - -         - -          60                - -          60           60
Purchase of treasury stock     - -          - -            - -         - -         - -             (1,670)     (1,670)         - -
                              ------   -----------    ----------   --------   -------------      ---------   --------- -------------
Balance,
   July 29, 2000 (unaudited)   $58       $20,000       $62,380     $47,710         ($5)           ($3,011)   $127,132     ($15,359)
                              ======   ===========    ==========   ========   =============      =========   ========= =============
</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 29, 2000.

     The Company's results of  operations  for the thirteen and twenty-six weeks
     ended July 29, 2000 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 2000.

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 twenty-
     six weeks ended July 29, 2000 and July 31, 1999.  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 twenty-
     six weeks ended July 29, 2000 and July 31, 1999.


                                      -5-
<PAGE>


3.   SEGMENT INFORMATION

     The Company defines its principal business into two segments, 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 and twenty-six weeks ended July 29,  2000  and  July 31,  1999 are
     summarized  below.  "Corporate  and   other"  includes   general  corporate
     expenses,  principally service office expense and  distribution centers, as
     well as interest income and expense.

     The Company's segment disclosures are as follows:
<TABLE>
<CAPTION>

                                   Thirteen Weeks Ended                     Twenty-Six Weeks Ended
                              July 29, 2000    July 31, 1999            July 29, 2000    July 31, 1999
                              -------------    -------------            -------------    -------------

SALES
<S>                                <C>              <C>                     <C>              <C>
Specialty Housewares               $63,532          $68,954                 $127,287         $133,600
Off-Price Home Business             20,661           21,959                   40,649           40,720
                              -------------    -------------            -------------    -------------

Total sales                        $84,193          $90,913                 $167,936         $174,320
                              =============    =============            =============    =============

LOSS BEFORE INCOME TAX BENEFIT
Specialty Housewares               ($1,439)         ($2,400)                 ($3,128)         ($2,785)
Off-Price Home Business             (1,350)             401                     (710)             779
Corporate and other                (10,932)          (7,575)                 (20,247)         (14,732)
                              -------------    -------------            -------------    -------------
Operating loss                     (13,721)          (9,574)                 (24,085)         (16,738)
Other expenses                         769              400                      990              486
                              -------------    -------------            -------------    -------------

Total loss before income tax
benefit                           ($14,490)         ($9,974)                ($25,075)        ($17,224)
                              =============    =============            =============    =============

DEPRECIATION AND AMORTIZATION
  EXPENSE
Specialty Housewares                $2,001           $2,203                   $4,010           $4,453
Off-Price Home Business                391              372                      806              741
Corporate and other                  1,506            1,369                    2,970            2,710
                              -------------    -------------            -------------    -------------

Total depreciation and
amortization expense                $3,898           $3,944                   $7,786           $7,904
                              =============    =============            =============    =============

CAPITAL ADDITIONS
Specialty Housewares                $  695           $1,486                  $   884           $2,510
Off-Price Home Business              1,130              100                    1,252              467
Corporate and other                  1,538              688                    1,794              969
                              -------------    -------------            -------------    -------------

Total capital additions             $3,363           $2,274                   $3,930           $3,946
                              =============    =============            =============    =============

TOTAL ASSETS                  July 29, 2000    July 31, 1999
                              -------------    -------------

Specialty Housewares              $ 90,415         $104,464
Off-Price Home Business             23,062           24,345
Corporate and other                 99,707          132,260
                              -------------    -------------

Total assets                      $213,184         $261,069
                              =============    =============

</TABLE>


                                      -6-

<PAGE>

4.   COMPREHENSIVE LOSS

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

<TABLE>
<CAPTION>


                                                       Twenty-Six Weeks Ended
                                                       ----------------------
                                                   July 29, 2000  July 31,1999
                                                   -------------  ------------
<S>                                                    <C>            <C>
Net Loss                                               ($15,419)     ($10,162)

Components of comprehensive loss:

Unrealized gain/(loss)on available-for-sale
  securities, net of applicable income tax
  provision/benefit                                          60          (175)
                                                   -------------  ------------

Comprehensive loss                                     ($15,359)     ($10,337)
                                                   =============  ============
</TABLE>


5.   STOCK REPURCHASE PLAN

     In May 1999, the Board of Directors authorized the Company to repurchase up
     to one  million shares  of the Company's  common  stock  from  time to time
     when warranted  by market conditions. In March 2000, the Board of Directors
     authorized  an  additional  repurchase  of  up to 3 million  shares  of the
     Company's common stock.  During Fiscal 1999, the Company purchased  684,000
     shares  at an  average  cost of $1.96.  As of  July 29, 2000  an additional
     1,082,300  shares  were purchased at  an average cost  of  $1.54 per share.
     Subsequent to July 29, 2000, the Company has purchased an additional 55,000
     shares at an average cost of $1.24 per  share, bringing  the  total  amount
     of  treasury  stock,  as of  September  6, 2000 to 1,821,300 shares  at  an
     average cost of $1.69 per share.

6.   SUBSEQUENT EVENT-DEBENTURE REPURCHASE

     During the period  subsequent to July 29, 2000, through  September 6, 2000,
     the  Company  has  repurchased  $2,315  of  its   Convertible  Subordinated
     Debentures prior to  their  due  date  of  September 27, 2001.  The Company
     will  realize  an  extraordinary gain of approximately  $220, net of taxes,
     from these  transactions that will  be reflected  in  the  third quarter of
     Fiscal 2000.


                                      -7-

<PAGE>

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  JULY 29, 2000 IN COMPARISON  WITH  THIRTEEN WEEKS  ENDED
JULY 31, 1999.

For the thirteen weeks ended July 29, 2000 ("Second Quarter 2000") the Company's
total  comparable  store sales  decreased 3.0%.  Comparable  store sales for the
Specialty  Housewares segment,  which is comprised of Lechters Housewares(R) and
Lechters Kitchen  Place(R),  decreased 2.6% while comparable store sales for the
Off-Price Home Business segment, comprised of Famous Brands Housewares Outlet(R)
and Cost Less Home StoreSM,  decreased 4.4%. On an overall basis,  net sales for
Second  Quarter 2000 decreased  $6,720 to $84,193,  a 7.4% decrease from $90,913
reported  for the  comparable  thirteen  week  period of the prior  fiscal  year
("Second  Quarter  1999").  The  decrease  was  attributable  to the  previously
mentioned  decrease in comparable store sales, and was also due to the reduction
in stores in operation  which averaged 60 less locations for Second Quarter 2000
compared  to  Second  Quarter  1999.  For  Second  Quarter  2000,  sales for the
Specialty Housewares segment,  which had 47 or 10.8% fewer locations,  decreased
7.9% to $63,532,  while sales for the Off-Price Home Business segment, which had
13 fewer  locations, decreased  5.9% to $20,661. During Second Quarter 2000, the
Company  opened  one store and  closed  seven  stores,  reducing  the  stores in
operation at July 29, 2000 to 511 from the 523 open as of January 29,  2000.  At
the end of Second Quarter 1999 there were 571 stores in operation.

Gross  Profit for the quarter was  $19,397,  a decrease of $887 from $20,284 for
Second  Quarter 1999. The Gross Profit rate was 23.0% of net sales compared with
22.3% in the prior  year.  By  operating  segment,  gross  profit for  Specialty
Housewares  decreased $343 to $13,842 or 21.8% of net sales, while the Off-Price
Home Business gross profit  decreased $544 to $5,555 or 26.9% of net sales.  The
reduction  in gross  profit  dollars was due to lower sales over the prior year.
The increased gross profit rate was due to accelerated  price  reductions in the
first quarter reducing the amount compared to the same period last year.

Selling,  General and Administrative Expenses increased $3,260 to $33,118, which
constituted  39.3% of sales, an increase in the expense rate of 6.5% from Second
Quarter  1999.  The  increase in  expenses  was due to the  amortization  of new
systems,  the Company's new  distribution  center,  both of which should provide
operating  efficiencies in the future, and the Company's  developing  e-commerce
strategy, Lechters.com, which incurred $1,349 of the expense increase.

Other Expense for the second quarter  increased $369 to an expense of $769, 0.9%
of sales compared to $400, 0.4% of sales,  for Second Quarter 1999. The increase
was due to the reduction in the interest income and investment income reflecting
the lower  balances of cash and  marketable  securities,  partially  offset by a
reduction in interest  expense due to the  repurchases  of $21,695 face value of
the Convertible Subordinated Debentures prior to their due date of September 27,
2001.

By operating segment for Second Quarter 2000,  Specialty  Housewares  incurred a
loss  before tax  benefit of $1,439  compared  to a loss  before tax  benefit of
$2,400 for Second Quarter 1999. For the same period, the Off-Price Home Business
incurred a loss before  income tax benefit of $1,350  compared to income of $401
for Second Quarter 1999.  "Corporate and other" expenses including  Lechters.com
costs  increased the loss before tax benefit by $10,932 for Second  Quarter 2000
as compared to $7,575 for Second Quarter Fiscal 1999.

The net loss for Second  Quarter  Fiscal 2000 was $9,418  compared to a net loss
for the comparable  period of Fiscal 1999 of $5,885.  The increased loss was the
result of decreased sales which reduced gross profit and the net effect of other
contributing expense factors noted above.

TWENTY-SIX  WEEKS ENDED JULY 29, 2000 IN COMPARISON WITH TWENTY-SIX  WEEKS ENDED
JULY 31, 1999.

For the  twenty-six  weeks ended July 29, 2000 the  Company's  total  comparable
store sales increased 0.3%.  Comparable store sales for the Specialty Housewares
segment,  which is  comprised  of Lechters  Housewares(R) and  Lechters  Kitchen
Place(R),  increased  0.4% while  comparable  store sales for the Off-Price Home
Business segment,


                                       -8-

<PAGE>

comprised  of Famous Brands Housewares Outlet(R) and  Cost Less Home  Store(SM),
decreased  0.1%.  The sales  decrease was due to the reduced number of stores in
operation during Fiscal 2000, which averaged 59 fewer store locations than 1999.
Year-to-date the total Company's net sales decreased $6,384 to $167,936,  a 3.7%
decrease from $174,320  reported for the  comparable  period of the prior fiscal
year.  Total  sales  for the  Specialty  Housewares  segment  decreased  4.7% to
$127,287 while sales for the Off-Price Home Business  decreased 0.2% to $40,649.
As of July 29,  2000 the  Company  has opened  two  stores  and closed  fourteen
stores,  operating a total of 511 stores (comprised of 389 Specialty  Housewares
stores and 122 Off-Price Home Business  stores) in 41 states and the District of
Columbia compared with 571 stores on July 31, 1999, a decrease of 10.5%.

Gross Profit  for the  twenty-six  week  period  ended July  29, 2000  decreased
$2,536 to  $39,318.  At 23.4% of sales,  the gross  margin  rate  decreased  0.6
percentage  points from the rate for the  comparable  period of Fiscal 1999.  By
operating  segment, gross  profit for Specialty  Housewares decreased $2,131  to
$27,950 or 22.0% of net sales,  while the Off-Price  Home Business  gross profit
decreased  $405 to $11,368 or 28.0% of net sales.  The reduction in gross profit
was due to lower sales over the prior year.  The reduced  gross  profit rate was
primarily due to increased price reductions especially those reductions taken in
the first quarter of the fiscal year.

Selling, General and Administrative Expenses increased $4,811 to $63,403, and at
37.8% of sales,  were 4.2  percentage  points  higher as a rate  compared to the
comparable  period of Fiscal 1999. As noted, the increase in expenses was due to
the  amortization of new systems,  the Company's new  distribution  center,  and
initial development expenses of the Company's e-commerce strategy, Lechters.com,
which has incurred $1,708 in expense for the year-to-date period.

Other expense for the  twenty-six  weeks ended July 29, 2000,  increased $504 to
$990, 0.6% of sales,  compared to $486, 0.3% of sales, for the comparable period
of the prior fiscal year.  The increase was due to the reduction in the interest
and investment income, which resulted from reduced invested balances.

By operating segment for Fiscal 2000 to date,  Specialty  Housewares  incurred a
loss  before tax  benefit of $3,128  compared  to a loss  before tax  benefit of
$2,785 for the comparable  period last year. For the same period,  the Off-Price
Home  Business  incurred a loss before tax benefit of $710 compared to income of
$779 for  Fiscal 1999 year-to-date.  "Corporate  and other"  expenses  including
Lechters.com,  increased  the loss  before tax benefit by $20,247 as compared to
$14,732 for the comparable period of the prior fiscal year.

The Company  recognized  an  extraordinary  gain of $879,  net of tax,  from the
repurchase of $16,750 of Convertible  Subordinated Debentures prior to their due
date of September 27, 2001.

The  year-to-date  net loss for Fiscal  2000 was  $15,419  or ($0.99)  per share
compared to a loss of $10,162 or ($0.62) per share for the comparable  period of
Fiscal 1999.

LIQUIDITY AND CAPITAL RESOURCES

Cash flow during the  twenty-six  weeks ended July 29, 2000 as  reflected on the
Consolidated  Statements  of Cash  Flows,  was a net  increase  in cash and cash
equivalents of $1,874. Operating activities,  comprised of the operating loss of
$15,419 adjusted for non-cash expenses such as depreciation and amortization and
by changes in operating  assets,  utilized $37,363 of cash during the twenty-six
weeks  ended July 29,  2000.  Significant  components  of  operating  activities
included  depreciation and amortization  which was a non-cash expense of $7,786,
merchandise inventories which increased cash use by $10,066. Accounts receivable
and prepaid  expenses  increased  cash use by $9,991 and  $4,129,  respectively.
Accounts  payable,  accrued expenses and taxes other than income taxes decreased
cash by $3,080.

Investing  activities  provided  net cash of $56,678  compared  to  $11,836  for
year-to-date  Fiscal  1999,  due to the  decrease in  Marketable  Securities  of
$60,608.  Capital  expenditures  were primarily for construction of and fixtures
for  new  stores,  renovations  and  remodels  of  existing  stores,  and  a new
distribution  center.  Capital expenditures were $3,930 for Fiscal 2000 compared
to $3,946 for the comparable period last year.

Cash flows from financing activities utilized $17,441 of cash. The repurchase of
$16,750 face value of the Company's Convertible Subordinated Debentures utilized
$14,761  of cash.  The  Company  paid  $1,010 in  dividends  on the  Convertible
Preferred  Stock and purchased  1,082,300  shares of treasury stock at a cost of
$1,670.  Subsequent to July 29, 2000, the Company purchased an additional 55,000
shares at an average cost of $1.24 per share.
                                       -9-
<PAGE>

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  credit agreement which was to
expire on March 26, 2001.  The proceeds of the credit  facility may be used for:
(i) on-going working capital requirements; (ii) the replacement,  refinancing or
retirement  of certain of the Company's  securities,  and/or (iii) 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.

As of July 29, 2000 there were no outstanding borrowings under the facility. The
credit facility is secured by a security  interest in  substantially  all of the
Company's assets.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial  Accounting  Standards Board (FASB) issued Statement
of Financial  Accounting  Standards  (SFAS) No. 133,  "Accounting for Derivative
Instruments  and  Hedging  Activities."  In July  1999,  the  FASB  delayed  the
effective  date to fiscal years  beginning  after June 15, 2000. The Company has
not  actively  utilized  derivative  instruments  to  hedge  its  market  risks.
Accordingly, the adoption of this statement is not expected to materially impact
the Company's financial statements.

SUBSEQUENT EVENT-DEBENTURE REPURCHASE

During the period  subsequent to July 29, 2000,  through  September 6, 2000, the
Company has repurchased $2,315 of its Convertible  Subordinated Debentures prior
to  their  due  date  of  September  27,  2001.  The  Company  will  realize  an
extraordinary gain of approximately  $220, net of taxes, from these transactions
that will be reflected in the third quarter of Fiscal 2000.

Item 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The  Company  imports  about 20% of its  merchandise  from the Far  East,  which
subjects it to the market risk of currency  fluctuations.  However,  the Company
uniformly  utilizes purchase  contracts and letters of credit  denominated in US
dollars to mitigate this risk. Additionally,  there are multiple suppliers, both
foreign and domestic,  for its products.  With respect to marketable securities,
the Company is subject to the variations in the investment markets. It mitigates
this risk by employing the services of an investment management firm, which with
the Company's  oversight,  invests solely in the highest quality  securities and
spreads  the  market  risk  among  various  types  of  securities  with  varying
maturities.

Although  the  Company has not had to borrow  funds  under the Credit  Agreement
during the first twenty-six weeks of Fiscal 2000 or during the comparable period
of  Fiscal  1999,  should  it need to  utilize  the line of  credit  for  direct
borrowings, the interest rate is subject to market conditions at the time of the
borrowing.

PART II.  Other Information
Item 4- Submission of Matters to a Vote of Security Holders

(a) Regular annual meeting of the Company's  stockholders  held June 20, 2000 in
New York, NY.

(b) Directors elected at the meeting for a three-year term:

Martin S. Begun
Robert Knox
Roberta S. Maneker
John Wolff

Continuing Directors:
                      David K. Cully
                      Charles A. Davis             Donald Jonas
                      Bernard D. Fischman          Stephen T. Westerfield
                      Anthony E. Malkin            Norman Matthews


                                      -10-

<PAGE>

(c)(1)   a. To elect four Director; and
         b. To  consider and  act upon  a proposal to  ratify the appointment of
            Deloitte & Touche LLP as the independent auditors of the Company for
            the fiscal year ending February 3, 2001; and
         c. To  consider and act upon a proposal to ratify an  amendment  to the
            1998  Long-Term  Incentive Plan  to increase  the  number of  shares
            available from 1,000,000 to 2,500,000.

(2) Director Nominees

    Class of Stock      For                     Withhold             Total Voted
    --------------      ---                    ---------             -----------
    Common              12,854,768             1,658,525              14,513,293
    Series A Preferred   2,399,984                     -               2,399,984
                         ----------            ---------             -----------
                 Total  15,254,752             1,658,525              16,913,277

    Proposal to ratify Deloitte & Touche LLP as Independent Auditors

    Class of Stock      For            Against         Abstain       Total Voted
    --------------      ---           ---------        -------       -----------
    Common              14,103,168      67,810         342,315        14,513,293
    Series A Preferred   2,399,984           -               -         2,399,984
                        ----------    ---------        -------       -----------
                 Total  16,503,152      67,810         342,315        16,913,277


    Proposal to amend the 1998 Long-Term Incentive Plan
                                                           Broker
    Class of Stock      For         Against    Abstain   Non-Votes   Total Voted
                        ---        ---------   -------   ---------   -----------
    Common              5,555,226  3,581,225   114,550   5,262,292    14,513,293
    Series A Preferred  2,399,984          -         -           -     2,399,984
                        ---------  ---------   -------   ---------    ----------
                 Total  7,955,210  3,581,225   114,550   5,262,292    16,913,277


(3) Election of Directors

    Name                          Votes For                 Votes Withheld
    ----                          ---------                 --------------
    Martin S. Begun              15,254,752                   1,658,525
    Robert Knox                  15,254,752                   1,658,525
    Roberta Maneker              15,254,752                   1,658,525
    John Wolff                   15,254,752                   1,658,525

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).

10.10.3  Memorandum  of  Agreement  dated August 8, 2000 between the Company and
         Local 99 UNITE, covering office  employees for a term from July 1, 2000
         to June 30, 2003.*

27       Financial Data Schedule*


                                      -11-

<PAGE>

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/ Daniel L. Anderton         /s/ John D. Sullivan
          ----------------------         --------------------
          Principal Financial Officer,   Principal Accounting Officer, and
          and Vice President-Finance     Vice President and Corporate Controller

Date:    September 12, 2000


                                      -12-