FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
(MARK  ONE)

[X]     QUARTERLY  REPORT  PURSUANT  TO  SECTION  13  OR  15(D)  OF  THE
     SECURITIES  EXCHANGE  ACT  OF  1934

FOR  THE  QUARTERLY  PERIOD  ENDED  SEPTEMBER  30,  2004

OR

[  ]     TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR  15(D)  OF  THE
     SECURITIES  EXCHANGE  ACT  OF  1934

FOR  THE  TRANSITION  PERIOD  FROM      TO

COMMISSION  FILE  NUMBER  1-12368

                            THE LEATHER FACTORY, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

             DELAWARE                              75-2543540
 (STATE  OR  OTHER  JURISDICTION  OF          (I.R.S.   EMPLOYER
 INCORPORATION  OR  ORGANIZATION)           IDENTIFICATION  NUMBER)

                3847 EAST LOOP 820 SOUTH, FT. WORTH, TEXAS  76119
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

                                 (817) 496-4414
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

     INDICATE  BY  CHECK  MARK  WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED  TO  BY  FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934  DURING  THE  PRECEDING  12  MONTHS  (OR  FOR  SUCH SHORTER PERIOD THAT THE
REGISTRANT  WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING  REQUIREMENTS  FOR  THE  PAST  90  DAYS.

                                  YES   X    NO

     INDICATE  BY  CHECK  MARK  WHETHER  THE REGISTRANT IS AN ACCELERATED FILER.

                              YES_____    NO__X___

     INDICATE  THE  NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
OF  COMMON  STOCK,  AS  OF  THE  LATEST  PRACTICABLE  DATE.

                    CLASS                                  SHARES OUTSTANDING AS
                                                          OF  OCTOBER  29,  2004
--------------------------------------------              ----------------------
COMMON  STOCK,  PAR  VALUE  $.0024  PER SHARE                   10,554,711

<PAGE>

                            THE LEATHER FACTORY, INC.

                                    FORM 10-Q

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2004


                                TABLE OF CONTENTS


                                                                   PAGE NO.

PART  I.  FINANCIAL  INFORMATION

  ITEM 1.  FINANCIAL  STATEMENTS

    CONSOLIDATED  BALANCE  SHEETS
       SEPTEMBER 30, 2004 AND DECEMBER 31, 2003                         3

    CONSOLIDATED  STATEMENTS  OF  INCOME
       THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003          4

    CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
       NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003                    5

    CONSOLIDATED  STATEMENTS  OF  STOCKHOLDERS'  EQUITY
       NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003                    6

    NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS                      7

  ITEM 2.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS                     11

  ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  17

  ITEM 4.  CONTROLS AND PROCEDURES                                     17

PART  II.  OTHER  INFORMATION

  ITEM 2.  CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER
               PURCHASES OF EQUITY SECURITIES                          18

  ITEM 6.  EXHIBITS                                                    18


SIGNATURES                                                             19

<PAGE>

                            THE LEATHER FACTORY, INC.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                 SEPTEMBER 30,    DECEMBER 31,
<S>                                                                             <C>              <C>
                                                                                     2004            2003
                                                                                 (UNAUDITED)
                                                                                --------------   --------------
                                 ASSETS
CURRENT ASSETS:
CASH                                                                            $    1,328,052   $   1,728,344
ACCOUNTS RECEIVABLE-TRADE, NET OF ALLOWANCE FOR DOUBTFUL ACCOUNTS OF
   $61,000 AND $31,000 IN 2004 AND 2003, RESPECTIVELY                                2,242,548       1,828,738
INVENTORY                                                                           12,880,245      11,079,893
PREPAID INCOME TAXES                                                                    14,357         206,023
DEFERRED INCOME TAXES                                                                  199,881         134,312
OTHER CURRENT ASSETS                                                                   608,857         702,236
                                                                                --------------   --------------
     TOTAL CURRENT ASSETS                                                          117,273,940      15,679,546
                                                                                ---------------  --------------

PROPERTY AND EQUIPMENT, AT COST                                                      5,882,044       5,574,992
LESS ACCUMULATED DEPRECIATION AND AMORTIZATION                                      (3,992,857)     (3,669,099)
                                                                                ---------------  --------------
     PROPERTY AND EQUIPMENT, NET                                                     1,889,187       1,905,893

GOODWILL, NET OF ACCUMULATED AMORTIZATION OF $762,000 AND $758,000
   IN 2004 AND 2003, RESPECTIVELY                                                      737,543         704,235
OTHER INTANGIBLES, NET OF ACCUMULATED AMORTIZATION OF $206,000 AND $164,000
   IN 2004 AND 2003, RESPECTIVELY                                                      416,231         432,549
OTHER ASSETS                                                                           324,796         336,183
                                                                                ---------------  --------------
                                                                                $   20,641,696   $  19,058,406
                                                                                ===============  ==============


             LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE                                                                $    1,632,357   $   1,545,079
ACCRUED EXPENSES AND OTHER LIABILITIES                                               1,178,921       1,000,427
NOTES PAYABLE AND CURRENT MATURITIES OF LONG-TERM DEBT                                       -           1,134
                                                                                ---------------  --------------
     TOTAL CURRENT LIABILITIES                                                       2,811,278       2,546,640
                                                                                ---------------  --------------

DEFERRED INCOME TAXES                                                                  288,617         209,289

NOTES PAYABLE AND LONG-TERM DEBT, NET OF CURRENT MATURITIES                          1,006,821       1,792,984

COMMITMENTS AND CONTINGENCIES                                                                -               -

STOCKHOLDERS' EQUITY:
PREFERRED STOCK, $0.10 PAR VALUE; 20,000 SHARES AUTHORIZED,
   NONE ISSUED OR OUTSTANDING                                                                -               -
COMMON STOCK, $0.0024 PAR VALUE; 25,000,000 SHARES AUTHORIZED,
  10,560,661 AND 10,487,961 SHARES ISSUED IN 2004 AND 2003, RESPECTIVELY;
  10,555,153 AND 10,487,961 SHARES OUTSTANDING IN 2004 AND 2003, RESPECTIVELY           25,345          25,171
PAID-IN CAPITAL                                                                      4,796,999       4,673,158
RETAINED EARNINGS                                                                   11,719,282       9,804,719
LESS:  NOTES RECEIVABLE SECURED BY COMMON STOCK                                        (15,000)        (20,000)
LESS:  TREASURY STOCK, 5,508 SHARES, AT COST                                           (23,960)              -
ACCUMULATED OTHER COMPREHENSIVE LOSS                                                    32,314          26,445
                                                                                ---------------  --------------
     TOTAL STOCKHOLDERS' EQUITY                                                     16,534,980      14,509,493
                                                                                ---------------  --------------
                                                                                $   20,641,696   $  19,058,406
                                                                                ===============  ==============
</TABLE>


   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>


                            THE LEATHER FACTORY, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
             THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

<TABLE>
<CAPTION>
                                                         THREE MONTHS                  NINE MONTHS
<S>                                              <C>             <C>            <C>           <C>
                                                      2004           2003          2004          2003
                                                 --------------  -------------  ------------  ------------
NET SALES                                        $  10,580,074   $ 10,119,070   $33,720,764   $31,139,830

COST OF SALES                                        4,640,641      4,529,258    15,075,359    14,183,460
                                                 --------------  -------------  ------------  ------------
          GROSS PROFIT                               5,939,433      5,589,812    18,645,405    16,956,370

OPERATING EXPENSES                                   5,164,190      4,672,820    15,569,191    13,769,241
                                                 --------------  -------------  ------------  ------------
INCOME FROM OPERATIONS                                 775,243        916,992     3,076,214     3,187,129

OTHER INCOME (EXPENSE):
          INTEREST EXPENSE                             (14,910)       (40,735)      (41,019)     (174,555)
          OTHER, NET                                    30,600         (6,089)        3,509        68,433
                                                 --------------  -------------  ------------  ------------
          TOTAL OTHER INCOME (EXPENSE)                  15,690        (46,824)      (37,510)     (106,122)
                                                 --------------  -------------  ------------  ------------
INCOME BEFORE INCOME TAXES                             790,933        870,168     3,038,704     3,081,007

PROVISION FOR INCOME TAXES                             363,548        268,488     1,124,141       926,105
                                                 --------------  -------------  ------------  ------------
NET INCOME                                       $     427,385   $    601,680   $ 1,914,563   $ 2,154,902
                                                 ==============  =============  ============  ============



NET INCOME PER COMMON SHARE-BASIC                $        0.04   $       0.06   $      0.18   $      0.21
                                                 ==============  =============  ============  ============
NET INCOME PER COMMON SHARE-DILUTED              $        0.04   $       0.06   $      0.17   $      0.20
                                                 ==============  =============  ============  ============

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
  BASIC                                             10,560,661     10,394,374    10,540,374    10,269,415
  DILUTED                                           10,931,940     10,902,794    10,986,541    10,840,764
</TABLE>


   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>

                            THE LEATHER FACTORY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                  NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

<TABLE>
<CAPTION>
<S>                                                                      <C>           <C>
                                                                             2004          2003
                                                                         ------------  ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
  NET INCOME                                                             $ 1,914,563   $ 2,154,902
  ADJUSTMENTS TO RECONCILE NET INCOME TO NET
   CASH PROVIDED BY OPERATING ACTIVITIES-
     DEPRECIATION & AMORTIZATION                                             366,077       397,959
     LOSS ON DISPOSAL OF ASSETS                                                    -         9,372
     DEFERRED INCOME TAXES                                                    13,759        59,508
     OTHER                                                                     3,137        14,960
     NET CHANGES IN ASSETS AND LIABILITIES:
       ACCOUNTS RECEIVABLE-TRADE, NET                                       (413,809)     (390,808)
       INVENTORY                                                          (1,739,977)    1,074,217
       INCOME TAXES                                                          191,666         2,936
       OTHER CURRENT ASSETS                                                   93,380       (37,153)
       ACCOUNTS PAYABLE                                                       87,279      (162,618)
       ACCRUED EXPENSES AND OTHER LIABILITIES                                178,494    (1,538,342)
                                                                         ------------  ------------
     TOTAL ADJUSTMENTS                                                    (1,219,995)     (569,969)
                                                                         ------------  ------------
      NET CASH PROVIDED BY OPERATING ACTIVITIES                              694,568     1,584,933
                                                                         ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  PURCHASE OF PROPERTY AND EQUIPMENT                                        (267,552)     (326,284)
  PAYMENTS IN CONNECTION WITH BUSINESSES ACQUIRED                           (156,454)            -
  PROCEEDS FROM SALE OF ASSETS                                                     -         6,217
  INCREASE IN OTHER ASSETS                                                    11,387       (22,305)
                                                                         ------------  ------------
      NET CASH USED IN INVESTING ACTIVITIES                                 (412,619)     (342,372)
                                                                         ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  NET DECREASE IN REVOLVING CREDIT LOANS                                    (786,162)   (1,544,417)
  PAYMENTS ON NOTES PAYABLE AND LONG-TERM DEBT                                     -        (4,878)
  DECREASE IN CASH RESTRICTED FOR PAYMENT ON REVOLVING CREDIT FACILITY        (1,134)       43,685
  PAYMENTS RECEIVED ON NOTES SECURED BY COMMON STOCK                           5,000        24,003
  REPURCHASE OF COMMON STOCK (TREASURY STOCK)                                (23,960)            -
  PROCEEDS FROM ISSUANCE OF COMMON STOCK                                     124,015       325,688
                                                                         ------------  ------------
      NET CASH USED IN FINANCING ACTIVITIES                                 (682,241)   (1,155,919)
                                                                         ------------  ------------
NET CHANGE IN CASH                                                          (400,292)       86,642

CASH, BEGINNING OF PERIOD                                                  1,728,344       101,557
                                                                         ------------  ------------
CASH, END OF PERIOD                                                      $ 1,328,052   $   188,199
                                                                         ============  ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  INTEREST PAID DURING THE PERIOD                                        $    43,960   $   178,558
  INCOME TAXES PAID DURING THE PERIOD, NET OF (REFUNDS)                      848,427       809,602
</TABLE>

   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>

                            THE LEATHER FACTORY, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                   (UNAUDITED)
                  NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

<TABLE>
<CAPTION>

                                                                                         TREASURY
<S>                                 <C>                <C>             <C>               <C>
                                    NUMBER OF SHARES   PAR VALUE       PAID-IN CAPITAL    STOCK
                                   -----------------  --------------  ----------------  ---------
BALANCE, DECEMBER 31, 2002                10,149,961  $       24,360  $      4,163,901         -

PAYMENTS ON NOTES RECEIVABLE
SECURED BY COMMON STOCK                            -               -                 -         -

SHARES ISSUED - WARRANTS AND
EMPLOYEE STOCK OPTIONS EXERCISED             320,500             769           198,537         -

WARRANTS TO ACQUIRE 100,000
SHARES OF COMMON STOCK ISSUED                      -               -           126,381         -

NET INCOME                                         -               -                 -         -

TRANSLATION ADJUSTMENT                             -               -                 -         -
                                   -----------------  --------------  ----------------  ---------
BALANCE, SEPTEMBER 30, 2003               10,470,461  $       25,129  $      4,488,819         -
                                   =================  ==============  ================  =========



BALANCE, DECEMBER 31, 2003                10,487,961  $       25,171  $      4,673,158         -

PAYMENTS ON NOTES RECEIVABLE
SECURED BY COMMON STOCK                            -               -                 -         -

SHARES ISSUED - STOCK OPTIONS EXERCISED       72,700             174            74,896         -

WARRANTS TO ACQUIRE 50,000
 SHARES OF COMMON STOCK ISSUED                     -               -            48,945         -

PURCHASE OF TREASURY STOCK                         -               -                 -  $(23,960)

NET INCOME                                         -               -                 -         -

TRANSLATION ADJUSTMENT                             -               -                 -         -
                                   -----------------  --------------  ----------------  ---------
BALANCE, SEPTEMBER 30, 2004               10,560,661  $       25,345  $      4,796,999  $(23,960)
                                   =================  ==============  ================  =========

<S>                                <C>         <C>               <C>                 <C>          <C>
                                               NOTES RECEIVABLE  ACCUMULATED OTHER
                                    RETAINED    SECURED BY           CUMULATIVE                   COMPREHENSIVE
                                    EARNINGS    COMMON STOCK        INCOME (LOSS)        TOTAL      INC(LOSS)
                                   ----------  ----------------  -----------------   -----------  -------------
BALANCE, DECEMBER 31, 2002         $7,064,345  $       (44,003)  $        (38,541)   $11,170,062

PAYMENTS ON NOTES RECEIVABLE
SECURED BY COMMON STOCK                     -           24,003                  -         24,003

SHARES ISSUED - WARRANTS AND
EMPLOYEE STOCK OPTIONS EXERCISED            -                -                  -        199,306

WARRANTS TO ACQUIRE 100,000
SHARES OF COMMON STOCK ISSUED               -                -                  -        126,381

NET INCOME                          2,154,902                -                  -      2,154,902   $  2,154,902

TRANSLATION ADJUSTMENT                      -                -             28,739         28,739         28,739
                                   ----------  ----------------  -----------------   -----------  -------------
BALANCE, SEPTEMBER 30, 2003        $9,219,247  $      (20,000)   $         (9,802)   $13,703,393
                                   ==========  ================  =================   ===========

COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003                                  $  2,183,641
                                                                                                   ============

BALANCE, DECEMBER 31, 2003         $9,804,719  $      (20,000)   $         26,445    $14,509,493

PAYMENTS ON NOTES RECEIVABLE
SECURED BY COMMON STOCK                     -           5,000                   -          5,000

SHARES ISSUED - STOCK OPTIONS
   EXERCISED                                -               -                   -         75,070

WARRANTS TO ACQUIRE 50,000
   SHARES OF COMMON STOCK ISSUED            -               -                   -         48,945

PURCHASE OF TREASURY STOCK                  -               -                   -        (23,960)

NET INCOME                          1,914,563                -                   -     1,914,563  $  1,914,563

TRANSLATION ADJUSTMENT                      -                -               5,869         5,869         5,869
                                   ----------  ----------------  -----------------   -----------  ------------
BALANCE, SEPTEMBER 30, 2004       $11,719,282  $       (15,000)   $         32,314   $16,534,980
                                   ==========  ================  =================   ===========
COMPREHENSIVE INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004                                 $  1,920,432
                                                                                                  ============
</TABLE>

   THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>


                            THE LEATHER FACTORY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  BASIS  OF  PRESENTATION  AND  CERTAIN  SIGNIFICANT  ACCOUNTING  POLICIES

IN THE OPINION OF MANAGEMENT, THE ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS
FOR  THE  LEATHER FACTORY, INC. AND ITS CONSOLIDATED SUBSIDIARIES (THE "COMPANY"
OR  "TLF")  CONTAIN ALL ADJUSTMENTS (CONSISTING OF NORMAL RECURRING ADJUSTMENTS)
NECESSARY  TO PRESENT FAIRLY ITS FINANCIAL POSITION AS OF SEPTEMBER 30, 2004 AND
DECEMBER  31,  2003,  AND ITS RESULTS OF OPERATIONS AND CASH FLOWS FOR THE THREE
AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2004 AND 2003.  OPERATING RESULTS FOR
THE  THREE  AND  NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2004 ARE NOT NECESSARILY
INDICATIVE  OF THE RESULTS THAT MAY BE EXPECTED FOR THE YEAR ENDING DECEMBER 31,
2004.  THESE  CONSOLIDATED  FINANCIAL  STATEMENTS  SHOULD BE READ IN CONJUNCTION
WITH  THE  AUDITED  CONSOLIDATED  FINANCIAL  STATEMENTS  AND  ACCOMPANYING NOTES
INCLUDED IN OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2003.

THE PREPARATION OF FINANCIAL STATEMENTS IN ACCORDANCE WITH ACCOUNTING PRINCIPLES
GENERALLY  ACCEPTED  IN  THE UNITED STATES REQUIRES MANAGEMENT TO MAKE ESTIMATES
AND ASSUMPTIONS THAT AFFECT THE AMOUNTS REPORTED IN THE FINANCIAL STATEMENTS AND
ACCOMPANYING  NOTES.  ACTUAL  RESULTS  COULD  DIFFER  FROM  THOSE  ESTIMATES.

INVENTORY

INVENTORY  IS  STATED AT THE LOWER OF COST OR MARKET AND IS ACCOUNTED FOR ON THE
"FIRST  IN,  FIRST  OUT"  METHOD.  IN  ADDITION,  THE  VALUE  OF  INVENTORY  IS
PERIODICALLY REDUCED FOR SLOW-MOVING OR OBSOLETE INVENTORY BASED ON MANAGEMENT'S
REVIEW  OF  ITEMS  ON  HAND  COMPARED  TO  THEIR ESTIMATED FUTURE DEMAND.    THE
COMPONENTS  OF  INVENTORY  CONSIST  OF  THE  FOLLOWING:
<TABLE>
<CAPTION>



                                             AS OF
<S>                                <C>             <C>
                                   SEPTEMBER 30,   DECEMBER 31,
                                       2004            2003
                                   ------------    ------------
FINISHED GOODS HELD FOR SALE. . .  $ 11,800,258    $  9,902,140
RAW MATERIALS AND WORK IN PROCESS     1,079,987       1,177,753
                                   ------------    ------------
                                   $ 12,880,245    $ 11,079,893
                                   ============    ============
</TABLE>

GOODWILL  AND  OTHER  INTANGIBLES

STATEMENT  OF  FINANCIAL  ACCOUNTING  STANDARDS  ("SFAS") NO. 142, "GOODWILL AND
OTHER  INTANGIBLE ASSETS," PRESCRIBES A TWO-PHASE PROCESS FOR IMPAIRMENT TESTING
OF  GOODWILL,  WHICH IS PERFORMED ONCE ANNUALLY, ABSENT INDICATORS OF IMPAIRMENT
DURING  THE  INTERIM.  THE  FIRST PHASE SCREENS FOR IMPAIRMENT, WHILE THE SECOND
PHASE  (IF  NECESSARY)  MEASURES  THE  IMPAIRMENT.  THE  COMPANY  HAS ELECTED TO
PERFORM THE ANNUAL ANALYSIS DURING THE FOURTH CALENDAR QUARTER OF EACH YEAR.  AS
OF  DECEMBER  31,  2003,  MANAGEMENT  DETERMINED  THAT  THE PRESENT VALUE OF THE
DISCOUNTED  ESTIMATED  FUTURE  CASH  FLOWS  OF  THE  STORES  ASSOCIATED WITH THE
GOODWILL  IS  SUFFICIENT  TO  SUPPORT  THEIR  RESPECTIVE  GOODWILL BALANCES.  NO
INDICATORS  OF  IMPAIRMENT WERE IDENTIFIED DURING THE FIRST NINE MONTHS OF 2004.

OTHER  INTANGIBLES  CONSIST  OF  THE  FOLLOWING:
<TABLE>
<CAPTION>

                             AS OF SEPTEMBER 30, 2004            AS OF DECEMBER 31, 2003
                        ---------------------------------     ---------------------------------
                                    ACCUMULATED                          ACCUMULATED
<S>                     <C>        <C>           <C>          <C>        <C>           <C>
                        GROSS      AMORTIZATION    NET          GROSS    AMORTIZATION    NET
                        ---------  ------------  --------     ---------  ------------  --------
TRADEMARKS, COPYRIGHTS  $ 544,369  $    165,538  $378,831     $ 544,369  $    138,320  $406,049
NON-COMPETE AGREEMENTS     78,000        40,600    37,400        52,000        25,500    26,500
                        ---------  ------------  --------     ---------  ------------  --------
                        $ 622,369  $    206,138  $416,231     $ 596,369  $    163,820  $432,549
                        =========  ============  ========     ========== ============  ========
</TABLE>

THE  COMPANY  RECORDED  AMORTIZATION  EXPENSE  OF  $42,318 DURING THE FIRST NINE
MONTHS  OF  2004  COMPARED TO $39,161 DURING THE FIRST NINE MONTHS OF 2003.  THE
COMPANY  HAS  NO  INTANGIBLE  ASSETS NOT SUBJECT TO AMORTIZATION UNDER SFAS 142.
BASED  ON  THE  CURRENT AMOUNT OF INTANGIBLE ASSETS SUBJECT TO AMORTIZATION, THE
ESTIMATED  AMORTIZATION  EXPENSE  FOR  EACH  OF  THE SUCCEEDING FIVE YEARS IS AS
FOLLOWS:
<TABLE>
<CAPTION>

                                                 ROBERTS,
<S>            <C>               <C>             <C>       <C>
               LEATHER FACTORY.  TANDY LEATHER   CUSHMAN   TOTAL
               ----------------  --------------  --------  -------
2004           $          5,954  $       41,670  $      0  $47,624
2005                      5,954          33,004         0   38,958
2006                      5,954          32,337         0   38,291
2007                      5,954          31,837         0   37,791
2008                      5,954          30,337         0   36,291
</TABLE>

REVENUE  RECOGNITION

THE  COMPANY'S SALES GENERALLY OCCUR VIA TWO METHODS:  (1) AT THE COUNTER IN THE
COMPANY'S  STORES, AND (2) SHIPMENT BY COMMON CARRIER.  SALES AT THE COUNTER ARE
RECORDED  AND TITLE PASSES AS TRANSACTIONS OCCUR.  OTHERWISE, SALES ARE RECORDED
AND TITLE PASSES WHEN THE MERCHANDISE IS SHIPPED TO THE CUSTOMER.  THE COMPANY'S
SHIPPING  TERMS  ARE  FOB  SHIPPING  POINT.

THE  COMPANY'S  OFFERS  AN UNCONDITIONAL SATISFACTION GUARANTEE TO ITS CUSTOMERS
AND  ACCEPTS  ALL  PRODUCT  RETURNS.  NET  SALES  REPRESENT  GROSS  SALES  LESS
NEGOTIATED  PRICE  ALLOWANCES,  PRODUCT  RETURNS,  AND  ALLOWANCES FOR DEFECTIVE
MERCHANDISE.

RECENT  ACCOUNTING  PRONOUNCEMENTS

IN  JANUARY  2003,  THE FINANCIAL ACCOUNTING STANDARDS BOARD ("FASB") ISSUED FIN
46,  "CONSOLIDATION OF VARIABLE INTEREST ENTITIES (VIE'S)," AN INTERPRETATION OF
ACCOUNTING  RESEARCH BULLETIN NO. 51.  FIN 46 REQUIRES CERTAIN VARIABLE INTEREST
ENTITIES  TO  BE  CONSOLIDATED  BY  THE PRIMARY BENEFICIARY OF THE ENTITY IF THE
EQUITY  INVESTORS IN THE ENTITY DO NOT HAVE THE CHARACTERISTICS OF A CONTROLLING
FINANCIAL  INTEREST  OR  DO NOT HAVE SUFFICIENT EQUITY AT RISK FOR THE ENTITY TO
FINANCE  ITS  ACTIVITIES  WITHOUT ADDITIONAL SUBORDINATED FINANCIAL SUPPORT FROM
OTHER  PARTIES.  IN  DECEMBER  2003,  THE  FASB ISSUED FIN 46R (REVISED DECEMBER
2003)  WHICH  DELAYED  THE APPLICATION OF FIN 46 TO TLF UNTIL THE INTERIM PERIOD
ENDED  MARCH  31,  2004,  AND  PROVIDES  ADDITIONAL  TECHNICAL CLARIFICATIONS TO
IMPLEMENTATION  ISSUES.  THE  APPLICATION  OF THIS INTERPRETATION DID NOT HAVE A
MATERIAL  IMPACT  ON  THE  COMPANY'S  CONSOLIDATED  FINANCIAL  STATEMENTS.

2.  STOCK-BASED  COMPENSATION

THE  COMPANY  ACCOUNTS  FOR STOCK OPTIONS GRANTED TO ITS DIRECTORS AND EMPLOYEES
USING  THE  INTRINSIC  VALUE  METHOD  PRESCRIBED  BY  APB  NO. 25 WHICH REQUIRES
COMPENSATION  EXPENSE  BE  RECOGNIZED  FOR  STOCK OPTIONS WHEN THE QUOTED MARKET
PRICE  OF  THE  COMPANY'S COMMON STOCK ON THE DATE OF GRANT EXCEEDS THE OPTION'S
EXERCISE  PRICE.  NO  COMPENSATION COST HAS BEEN REFLECTED IN NET INCOME FOR THE
GRANTING  OF  DIRECTOR  AND EMPLOYEE STOCK OPTIONS AS ALL OPTIONS GRANTED HAD AN
EXERCISE PRICE EQUAL TO THE QUOTED MARKET PRICE OF THE COMPANY'S COMMON STOCK ON
THE  DATE  THE  OPTIONS  WERE  GRANTED.

HAD COMPENSATION COST FOR THE COMPANY'S STOCK OPTIONS BEEN DETERMINED CONSISTENT
WITH  THE  SFAS 123 FAIR VALUE APPROACH, THE COMPANY'S NET INCOME AND NET INCOME
PER  COMMON  SHARE  FOR  THE  THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND
2003,  ON  A  PRO  FORMA  BASIS,  WOULD  HAVE  BEEN  AS  FOLLOWS:
<TABLE>
<CAPTION>

                                               THREE MONTHS ENDED            NINE MONTHS ENDED
                                                  SEPTEMBER 30,                 SEPTEMBER 30,
<S>                                         <C>                <C>         <C>          <C>
                                                 2004          2003          2004          2003
                                            ------------  ------------     ----------   ----------

NET INCOME, AS REPORTED                     $    427,385  $    601,680     $1,914,563   $2,154,902

ADD: STOCK-BASED COMPENSATION EXPENSE
     INCLUDED IN REPORTED NET INCOME                   -             -              -            -

DEDUCT: STOCK-BASED COMPENSATION EXPENSE
     DETERMINED UNDER FAIR VALUE METHOD           29,361        24,546         88,083       73,639
                                            ------------  ------------     ----------   ----------
NET INCOME, PRO FORMA                       $    398,024  $    577,134     $1,826,480   $2,081,263
                                            ------------  ------------     ----------   ----------





NET INCOME PER SHARE:
BASIC - AS REPORTED                         $       0.04  $       0.06     $     0.18   $     O.21
BASIC - PRO FORMA                           $       0.04  $       0.06     $     0.17   $     0.20

DILUTED - AS REPORTED                       $       0.04  $       0.06     $     0.17   $     0.20
DILUTED - PRO FORMA                         $       0.04  $       0.05     $     0.17   $     0.19
</TABLE>

THE  FAIR  VALUES  OF STOCK OPTIONS GRANTED WERE ESTIMATED ON THE DATES OF GRANT
USING THE BLACK-SCHOLES OPTION PRICING MODEL WITH THE FOLLOWING WEIGHTED AVERAGE
ASSUMPTIONS:  RISK-FREE  INTEREST  RATE  OF 3.375% AND 3.125% FOR 2004 AND 2003,
RESPECTIVELY; DIVIDEND YIELDS OF 0% FOR BOTH PERIODS; VOLATILITY FACTORS OF .364
FOR  2004 AND .706 FOR 2003; AND AN EXPECTED LIFE OF THE VALUED OPTIONS OF THREE
TO  FIVE  YEARS.

3.  EARNINGS  PER  SHARE

THE FOLLOWING TABLE SETS FORTH THE COMPUTATION OF BASIC AND DILUTED EARNINGS PER
SHARE  ("EPS"):
<TABLE>
<CAPTION>

                                                               THREE MONTHS ENDED                 NINE MONTHS ENDED
<S>                                                   <C>                  <C>                 <C>          <C>
                                                                    SEPTEMBER 30,                   SEPTEMBER 30,
                                                              2004                2003            2004         2003
                                                                                               -----------  -----------
NUMERATOR:
  NET  INCOME                                         $           427,385  $          601,680  $ 1,914,563  $ 2,154,902
                                                      -------------------  ------------------  -----------  -----------
  NUMERATOR FOR BASIC AND DILUTED EARNINGS PER SHARE              427,385             601,680    1,914,563    2,154,902
                                                      -------------------  ------------------  -----------  -----------

DENOMINATOR:
  WEIGHTED-AVERAGE SHARES OUTSTANDING-BASIC                    10,560,661          10,394,374   10,540,374   10,269,415

EFFECT OF DILUTIVE SECURITIES:
  STOCK OPTIONS                                                   352,595             422,000      413,576      425,818
  WARRANTS                                                         18,684              86,420       32,591      145,531
                                                      -------------------  ------------------  -----------  -----------
DILUTIVE POTENTIAL COMMON SHARES                                  371,279             508,420      446,167      571,349
                                                      -------------------  ------------------  -----------  -----------
  DENOMINATOR FOR DILUTED EARNINGS PER SHARE-
  WEIGHTED-AVERAGE SHARES                                      10,931,940          10,902,794   10,986,541   10,840,764
                                                      -------------------  ------------------  -----------  -----------
  BASIC EARNINGS PER SHARE                            $              0.04  $             0.06  $      0.18  $      0.21
                                                      ===================  ==================  ===========  ===========
  DILUTED EARNINGS PER SHARE                          $              0.04  $             0.06  $      0.17  $      0.20
                                                      ===================  ==================  ===========  ===========
</TABLE>

THE  NET  EFFECT  OF  CONVERTING  STOCK  OPTIONS TO PURCHASE 825,200 AND 924,700
SHARES  OF COMMON STOCK AT OPTION PRICES LESS THAN THE AVERAGE MARKET PRICES HAS
BEEN INCLUDED IN THE COMPUTATIONS OF DILUTED EPS FOR THE PERIODS ENDED SEPTEMBER
30,  2004  AND  2003,  RESPECTIVELY.


4.  SEGMENT  INFORMATION

THE  COMPANY  IDENTIFIES  ITS SEGMENTS BASED ON THE ACTIVITIES OF THREE DISTINCT
BUSINESSES:

A.     THE LEATHER FACTORY, WHICH SELLS PRIMARILY TO WHOLESALE CUSTOMERS THROUGH
A  CHAIN  OF  WHOLESALE  CENTERS  LOCATED  IN  THE  UNITED  STATES  AND  CANADA;

B.     TANDY  LEATHER COMPANY, WHICH SELLS PRIMARILY TO RETAIL CUSTOMERS THROUGH
A  CHAIN  OF  RETAIL  STORES  LOCATED  IN  THE  UNITED  STATES;  AND

C.     ROBERTS,  CUSHMAN  &  COMPANY,  MANUFACTURER OF DECORATIVE HAT TRIMS SOLD
DIRECTLY  TO  HAT  MANUFACTURERS  AND  DISTRIBUTORS.

THE  COMPANY'S  REPORTABLE OPERATING SEGMENTS HAVE BEEN DETERMINED AS SEPARATELY
IDENTIFIABLE BUSINESS UNITS.  THE COMPANY MEASURES SEGMENT EARNINGS AS OPERATING
EARNINGS,  DEFINED  AS  INCOME  BEFORE  INTEREST  AND  INCOME  TAXES.
<TABLE>
<CAPTION>

                                                LEATHER       TANDY      ROBERTS,
<S>                                           <C>           <C>          <C>         <C>
                                                FACTORY       LEATHER     CUSHMAN       TOTAL
                                              -----------   ----------   ----------  ------------
FOR THE QUARTER ENDED SEPTEMBER 30, 2004
NET SALES                                     $ 7,067,483   $3,053,712   $  458,879  $10,580,074
GROSS PROFIT                                    3,861,917    1,934,296      143,220    5,939,433
OPERATING EARNINGS                                583,253      168,459       23,531      775,243
INTEREST EXPENSE                                   14,910            -            -       14,910
OTHER, NET                                        (28,995)      (1,605)           -      (30,600)
INCOME BEFORE INCOME TAXES                        597,338      170,064       23,531      790,933
     DEPRECIATION AND AMORTIZATION                 79,937       30,724        2,715      113,376
     FIXED ASSET ADDITIONS                 .       66,883       67,752        1,867      136,502
     TOTAL ASSETS                             $16,399,199   $3,399,499   $  842,998  $20,641,696
                                              -----------   ----------   ----------  ------------
FOR THE QUARTER ENDED SEPTEMBER 30, 2003
NET SALES                                     $ 7,372,159   $2,334,127   $  412,784  $10,119,070
GROSS PROFIT                                    3,996,866    1,475,312      117,634    5,589,812
OPERATING EARNINGS                                784,322      117,514       15,156      916,992
 INTEREST EXPENSE                                 (40,735)           -            -      (40,735)
OTHER, NET                                         (6,315)         226            -       (6,089)
INCOME BEFORE INCOME TAXES                        737,272      117,740       15,156      870,168
     DEPRECIATION AND AMORTIZATION                 99,489       20,978        2,365      122,832
     FIXED ASSET ADDITIONS                         33,230       21,300        1,377       55,907
     TOTAL ASSETS                             $15,300,407   $2,802,218   $  904,582  $19,007,207
                                              -----------   ----------   ----------  ------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004
NET SALES                                     $22,934,369   $9,193,196   $1,593,199  $33,720,764
GROSS PROFIT                                   12,416,110    5,709,563      519,732   18,645,405
OPERATING EARNINGS                              2,306,807      660,782      108,625    3,076,214
INTEREST EXPENSE                                   41,019            -            -       41,019
OTHER, NET                                           (996)      (2,513)           -       (3,509)
INCOME BEFORE INCOME TAXES                      2,266,784      663,295      108,625    3,038,704
     DEPRECIATION AND AMORTIZATION                275,216       83,693        7,168      366,077
     FIXED ASSET ADDITIONS                        114,592      143,143        9,817      267,552
     TOTAL ASSETS                             $16,399,199   $3,399,499   $  842,998  $20,641,696
                                              -----------   ----------   ----------  ------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
NET SALES                                     $23,375,158   $6,312,145   $1,452,527  $31,139,830
GROSS PROFIT                                   12,447,180    3,981,715      497,475   16,956,370
OPERATING EARNINGS                              2,626,394      430,737      129,998    3,187,129
INTEREST EXPENSE                                 (174,555)           -            -     (174,555)
OTHER, NET                                         68,064          369            -       68,433
INCOME BEFORE INCOME TAXES                      2,519,903      431,106      129,998    3,081,007
     DEPRECIATION AND AMORTIZATION                335,184       55,064        7,711      397,959
     FIXED ASSET ADDITIONS                        201,862      122,189        2,233      326,284
     TOTAL ASSETS                             $15,300,407   $2,802,218   $  904,582  $19,007,207
                                              -----------   ----------   ----------  ------------
</TABLE>

NET  SALES  FOR  GEOGRAPHIC  AREAS  WERE  AS  FOLLOWS:
<TABLE>
<CAPTION>
                       THREE MONTHS ENDED           NINE MONTHS ENDED
                           SEPTEMBER 30,              SEPTEMBER 30,
<S>                  <C>           <C>                 <C>          <C>
                          2004          2003         2004         2003
                     ------------  ------------  -----------  -----------
UNITED STATES . . .  $  9,729,500  $  9,456,440  $31,213,487  $29,038,861
ALL OTHER COUNTRIES       850,574       662,630    2,507,277    2,100,969
                     ------------  ------------  -----------  -----------
                     $ 10,580,074  $ 10,119,070  $33,720,764  $31,139,830
                     ============  ============  ===========  ===========
</TABLE>
GEOGRAPHIC  SALES  INFORMATION  IS  BASED  ON THE LOCATION OF THE CUSTOMER.  NET
SALES  FROM NO SINGLE FOREIGN COUNTRY WAS MATERIAL TO THE COMPANY'S CONSOLIDATED
NET  SALES  FOR  THE  THREE  AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2004 AND
2003.  THE  COMPANY  DOES  NOT HAVE ANY SIGNIFICANT LONG-LIVED ASSETS OUTSIDE OF
THE  UNITED  STATES.


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

WE  ARE  A  DELAWARE CORPORATION WHOSE COMMON STOCK TRADES ON THE AMERICAN STOCK
EXCHANGE  UNDER  THE  SYMBOL "TLF".  OUR COMPANY IS MANAGED ON A BUSINESS ENTITY
BASIS,  WITH THOSE BUSINESSES BEING THE LEATHER FACTORY,  TANDY LEATHER COMPANY,
AND  ROBERTS,  CUSHMAN & COMPANY, INC.  SEE NOTE 4 TO THE CONSOLIDATED FINANCIAL
STATEMENTS  FOR ADDITIONAL INFORMATION CONCERNING OUR BUSINESS SEGMENTS, AS WELL
AS  OUR  FOREIGN  OPERATIONS.

LEATHER  FACTORY,  FOUNDED  IN  1980,  DISTRIBUTES LEATHER AND RELATED PRODUCTS,
INCLUDING  LEATHERWORKING  TOOLS, BUCKLES AND ADORNMENTS FOR BELTS, LEATHER DYES
AND  FINISHES,  SADDLE AND TACK HARDWARE, AND DO-IT-YOURSELF KITS.  THE PRODUCTS
ARE  SOLD  PRIMARILY  THROUGH  THIRTY  COMPANY-OWNED  WHOLESALE  CENTERS LOCATED
THROUGHOUT  NORTH  AMERICA AND ONE COMPANY-OWNED RETAIL STORE LOCATED IN CANADA.

TANDY  LEATHER,  FOUNDED  IN  1919,  IS  THE  BEST-KNOWN SUPPLIER OF LEATHER AND
RELATED  SUPPLIES  USED  IN THE LEATHERCRAFT INDUSTRY.  PRODUCTS INCLUDE QUALITY
TOOLS,  LEATHER,  ACCESSORIES,  KITS  AND TEACHING MATERIALS.  IN EARLY 2002, WE
INITIATED  A PLAN TO EXPAND TANDY BY OPENING RETAIL STORES.  AS OF SEPTEMBER 30,
2004  WE  HAVE  OPENED THIRTY-SIX TANDY LEATHER RETAIL STORES LOCATED THROUGHOUT
THE  UNITED  STATES.

ROBERTS,  CUSHMAN,  WHOSE ORIGINS DATE BACK TO THE MID-1800S, CUSTOM DESIGNS AND
MANUFACTURES  A PRODUCT LINE OF DECORATIVE HAT TRIMS FOR HEADWEAR MANUFACTURERS.

CRITICAL  ACCOUNTING  POLICIES

A  DESCRIPTION  OF  OUR  CRITICAL  ACCOUNTING  POLICIES  APPEARS  IN  "ITEM  2.
MANAGEMENT'S  DISCUSSIONS  AND  ANALYSIS  OF  FINANCIAL CONDITION AND RESULTS OF
OPERATIONS"  IN  OUR  ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
2003.

FORWARD-LOOKING  STATEMENTS
---------------------------

CERTAIN STATEMENTS CONTAINED IN THIS REPORT AND OTHER MATERIALS WE FILE WITH THE
SECURITIES  AND  EXCHANGE  COMMISSION,  AS  WELL AS INFORMATION INCLUDED IN ORAL
STATEMENTS  OR  OTHER  WRITTEN  STATEMENTS  MADE OR TO BE MADE BY US, OTHER THAN
STATEMENTS OF HISTORICAL FACT, ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES  EXCHANGE  ACT  OF  1934,  AS  AMENDED.  FORWARD-LOOKING  STATEMENTS
GENERALLY  ARE  ACCOMPANIED  BY  WORDS SUCH AS "MAY," "WILL," "COULD," "SHOULD,"
"ANTICIPATE,"  "BELIEVE,"  "BUDGETED,"  "EXPECT,"  "INTEND,"  "PLAN," "PROJECT,"
"POTENTIAL,"  "ESTIMATE,"  "CONTINUE,"  OR  "FUTURE"  OR  THE  NEGATIVE,  OTHER
VARIATIONS  THEREOF  OR OTHER OR SIMILAR STATEMENTS. THERE ARE CERTAIN IMPORTANT
RISKS  THAT  COULD  CAUSE RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED BY
SOME  OF  THE  FORWARD-LOOKING  STATEMENTS.  SOME, BUT NOT ALL, OF THE IMPORTANT
RISKS WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE SUGGESTED
BY  THE  FORWARD-LOOKING  STATEMENTS  INCLUDE,  AMONG  OTHER  THINGS:

     WE  MAY  FAIL  TO  REALIZE THE ANTICIPATED BENEFITS OF THE OPENING OF TANDY
LEATHER  RETAIL STORES OR WE MAY BE UNABLE TO OBTAIN SUFFICIENT NEW LOCATIONS ON
ACCEPTABLE  TERMS  TO MEET OUR GROWTH PLANS.  ALSO, OTHER RETAIL INITIATIVES MAY
NOT  BE  SUCCESSFUL.

WHEN  WE  ACQUIRED  THE  ASSETS  OF TANDY LEATHER IN LATE 2000, THERE WAS ONLY A
SINGLE  TANDY  LEATHER  DISTRIBUTION  CENTER AND NO RETAIL OUTLETS.  IN 2002, WE
BEGAN A PROGRAM OF DEVELOPING TANDY LEATHER RETAIL STORES, AND THROUGH SEPTEMBER
30,  2004,  WE  HAVE  ADDED  THIRTY-SIX  TANDY  LEATHER  STORES  AND  CLOSED THE
DISTRIBUTION CENTER.  WE BELIEVE THAT THESE STORE OPENINGS AND ACQUISITIONS HAVE
BEEN  SUCCESSFUL,  BUT THERE CAN BE NO ASSURANCE THAT THIS SUCCESS WILL CONTINUE
OR  THAT WE WILL BE ABLE TO FIND ADDITIONAL LOCATIONS FOR NEW STORES OR EXISTING
LEATHERCRAFT STORES TO ACQUIRE ON ECONOMICALLY VIABLE TERMS.  BECAUSE, IN RECENT
YEARS,  THE  EXPANSION OF TANDY LEATHER HAS PRODUCED MUCH OF THE INCREASE IN OUR
PROFITS, DISRUPTION OF THIS EXPANSION WOULD LIKELY SLOW OR STOP THIS INCREASE IN
PROFITS.

     RECENT  DECLINES  IN  SALES  TO  NATIONAL  ACCOUNTS  BY OUR LEATHER FACTORY
OPERATION  COULD  CONTINUE.
SALES TO NATIONAL ACCOUNTS BY OUR LEATHER FACTORY OPERATION DECREASED AT THE END
OF  2003 AND WERE ALSO DOWN IN THE FIRST NINE MONTHS OF 2004.  WE ARE WORKING TO
REVERSE  THIS  TREND, BUT, IF IT CONTINUES, OUR CONSOLIDATED NET INCOME COULD BE
REDUCED.

     POLITICAL  CONSIDERATIONS  HERE  AND  ABROAD  COULD  DISRUPT OUR SOURCES OF
SUPPLIES  FROM  ABROAD  OR  AFFECT  THE  PRICES  WE  PAY  FOR  GOODS.  CONTINUED
INVOLVEMENT  BY  THE  UNITED  STATES IN WAR AND OTHER MILITARY OPERATIONS IN THE
MIDDLE  EAST AND OTHER AREAS ABROAD COULD DISRUPT INTERNATIONAL TRADE AND AFFECT
OUR  INVENTORY  SOURCES.

RECENT  POLITICAL  DISCUSSIONS  HAVE  SUGGESTED  THAT  THE  UNITED STATES IMPOSE
BARRIERS ON THE IMPORTATION OF CERTAIN GOODS.  WE RELY HEAVILY ON IMPORTED GOODS
AS SOURCES OF THE INVENTORY WE SELL.  TARIFFS, TAXES AND LIMITS ON THESE IMPORTS
COULD  AFFECT  OUR  ABILITY TO OBTAIN INVENTORY OR INCREASE THE PRICE WE PAY FOR
INVENTORY.  IF  THESE  DISRUPTIONS  OCCUR,  OUR  OPERATIONS  COULD  BE ADVERSELY
AFFECTED.

ALSO,  THE  INVOLVEMENT  OF  THE  UNITED  STATES  IN  THE  WAR  IN  IRAQ AND THE
ANTI-TERRORIST  ACTIVITIES  IN  AFGHANISTAN  HAVE PRODUCED POLITICAL UNCERTAINTY
AND, IN CERTAIN COUNTRIES, RESENTMENT AGAINST THE UNITED STATES AND ITS CITIZENS
AND COMPANIES.  THESE ISSUES MAY ALSO AFFECT OUR ABILITY TO OBTAIN PRODUCTS FROM
ABROAD.

     IF,  FOR  WHATEVER  REASON,  THE  COSTS  OF OUR RAW MATERIALS AND INVENTORY
INCREASE,  WE  MAY  NOT  BE  ABLE  TO  PASS  THOSE  COSTS  ON  TO OUR CUSTOMERS,
PARTICULARLY  IF  THE  ECONOMY  HAS  NOT  RECOVERED  FROM  ITS  DOWNTURN.
THE  PRICES  OF  HIDES  AND  LEATHERS  FLUCTUATE  IN  NORMAL  TIMES,  AND  THESE
FLUCTUATIONS  CAN AFFECT OUR BUSINESS.  LIVESTOCK DISEASES SUCH AS MAD COW COULD
REDUCE  THE  AVAILABILITY  OF  HIDES  AND  LEATHERS  OR  INCREASE  THEIR  COST.

     WE BELIEVE THAT THE RECENT RISE IN OIL AND NATURAL GAS PRICES WILL INCREASE
THE COSTS OF THE GOODS THAT WE SELL, INCLUDING THE COSTS OF SHIPPING THOSE GOODS
FROM  THE  MANUFACTURER  TO  OUR  STORES  AND  CUSTOMERS.

VARIOUS  OILS  USED TO MANUFACTURE CERTAIN LEATHER AND LEATHERCRAFTS ARE DERIVED
FROM PETROLEUM AND NATURAL GAS.  ALSO, THE CARRIERS WHO TRANSPORT OUR GOODS RELY
ON  PETROLEUM-BASED  FUELS  TO  POWER  THEIR SHIPS, TRUCKS AND TRAINS.  THEY ARE
LIKELY  TO  PASS THEIR INCREASED COSTS ON TO US.  WE ARE UNSURE HOW MUCH OF THIS
INCREASE  WE  WILL  BE  ABLE  TO  PASS  ON  TO  OUR  CUSTOMERS.

     THE  RECENT  ECONOMY  DOWNTURN IN THE UNITED STATES, AS WELL AS ABROAD, MAY
CAUSE  OUR  SALES  TO DECREASE OR NOT TO INCREASE OR ADVERSELY AFFECT THE PRICES
CHARGED  FOR  OUR  PRODUCTS.  ALSO, HOSTILITIES, TERRORISM OR OTHER EVENTS COULD
WORSEN  THIS  CONDITION.

RECENTLY,  THE  WORLD  ECONOMY  HAS  SHOWN  SIGNS OF RECOVERING FROM AN ECONOMIC
SLUMP.  HOWEVER,  THIS  RECOVERY  IS  NOT  YET  COMPLETE,  AND  THERE  CAN BE NO
ASSURANCE  THAT  INCREASED  OIL AND GAS PRICES, TERRORISM, OR OTHER FACTORS WILL
NOT  IMPEDE  THIS RECOVERY.  CONTINUATION OR WORSENING OF THE ECONOMIC CONDITION
IN  THE  UNITED  STATES  OR  INTERNATIONALLY  IS LIKELY TO LIMIT OR DECREASE OUR
PROFITS.

IN  ADDITION,  TERRORISM OR THE THREAT OF TERRORIST ATTACKS IN THE UNITED STATES
OR  AGAINST UNITED STATES INTERESTS ABROAD COULD CAUSE CONSUMER BUYING HABITS TO
CHANGE  AND  DECREASE  OUR  SALES.  WE  BELIEVE  THAT MAJOR DISRUPTIONS (SUCH AS
TERRORIST  ATTACKS)  COULD  REDUCE  CONSUMER SPENDING, PARTICULARLY PURCHASES OF
NON-ESSENTIAL  PRODUCTS  SUCH  AS  OURS.

OTHER  FACTORS  COULD  CAUSE  EITHER FLUCTUATIONS IN BUYING PATTERNS OR POSSIBLE
NEGATIVE  TRENDS  IN  THE  CRAFT  AND  WESTERN  RETAIL MARKETS. IN ADDITION, OUR
CUSTOMERS  MAY CHANGE THEIR PREFERENCES TO PRODUCTS OTHER THAN OURS, OR THEY MAY
NOT  ACCEPT  NEW  PRODUCTS  AS  WE  INTRODUCE  THEM.

WE  ASSUME  NO  OBLIGATION  TO  UPDATE  OR  OTHERWISE REVISE OUR FORWARD-LOOKING
STATEMENTS EVEN IF EXPERIENCE OR FUTURE CHANGES MAKE IT CLEAR THAT ANY PROJECTED
RESULTS,  EXPRESS  OR  IMPLIED,  WILL  NOT  BE  REALIZED.

RESULTS  OF  OPERATIONS
-----------------------

THE FOLLOWING TABLES PRESENT SELECTED FINANCIAL DATA ON THE OPERATING RESULTS OF
EACH  OF OUR THREE SEGMENTS FOR THE QUARTERS AND NINE MONTHS ENDED SEPTEMBER 30,
2004  AND  2003:

<TABLE>
<CAPTION>
                  QUARTER ENDED SEPTEMBER 30, 2004       QUARTER ENDED SEPTEMBER 30, 2003
                                       OPERATING                                OPERATING
<S>               <C>                  <C>               <C>                     <C>
                      SALES              INCOME            SALES                  INCOME
                  -------------        -----------       -------------           --------
Leather Factory.  $   7,067,483        $   583,253       $   7,372,159           $784,322
Tandy                 3,053,712            168,459           2,334,127            117,514
Roberts, Cushman        458,879             23,531             412,784             15,156
                  -------------        -----------       -------------           --------
Total Operations  $  10,580,074        $   775,243       $  10,119,070           $916,992
                  =============        ============      =============           ========
</TABLE>

<TABLE>
<CAPTION>
                  NINE MONTHS ENDED SEPTEMBER 30, 2004   NINE MONTHS ENDED SEPTEMBER 30, 2003
                  ------------------------------------   ------------------------------------
                                             OPERATING                              OPERATING
<S>               <C>                      <C>           <C>                       <C>
                      SALES                  INCOME         SALES                    INCOME
                  ------------             -----------   ------------              ----------
Leather Factory.  $ 22,934,369             $ 2,306,807   $ 23,375,158              $2,626,394
Tandy                9,193,196                 660,782      6,312,145                 430,737
Roberts, Cushman     1,593,199                 108,625      1,452,527                 129,998
                  ------------             -----------   ------------              ----------
Total Operations  $ 33,720,764             $ 3,076,214   $ 31,139,830              $3,187,129
                  ============             ===========   ============              ==========
</TABLE>

Consolidated  net  sales  for  the  quarter  ended  September 30, 2004 increased
$461,000,  or  4.6%,  compared  to  the  same  period  in  2003.  Tandy  Leather
contributed  $720,000  and Roberts, Cushman recorded a gain of $46,000.  Leather
Factory's  sales  were  down $305,000.  Operating income on a consolidated basis
for  the quarter ended September 30, 2004 was down 15% or $141,000 compared with
the  third  quarter  of  2003.

Consolidated  net  sales  for the nine months ended September 30, 2004 increased
$2.6  million,  or  8.3%,  compared  to  the same period in 2003.  Tandy Leather
contributed  $2.9  million  of  the  sales  gain  while  Roberts,  Cushman added
$141,000.  Leather  Factory's 2004 sales were down $440,000 from those of a year
ago.  Operating  income  on  a  consolidated  basis  for  the  nine months ended
September  30,  2004  was  down  3.5%  or  $111,000  over  last  year.

The  following  table  shows in comparative form our consolidated net income for
the  third  quarter  and  nine  months  ended  September  30,  2004  and  2003:
<TABLE>
<CAPTION>

<S>                           <C>                     <C>                       <C>
                              QUARTER ENDED 09/30/04  QUARTER ENDED 09/30/03    % CHANGE
                              ----------------------  ----------------------    --------
Net income                    $              427,385  $              601,680     (28.9%)
                              ======================  ======================    ========
                                NINE MONTHS ENDED      NINE MONTHES ENDED
                                    09/30/04                09/30/03            % CHANGE
                              ----------------------  ----------------------    --------
Net income                    $            1,914,563  $            2,154,902     (11.2%)
                              ======================  ======================    ========
</TABLE>

LEATHER  FACTORY  OPERATIONS

Net  sales from Leather Factory's wholesale centers decreased 4.1% for the third
quarter  of  2004  compared  to  the  sale  period  in  2003  as  follows:
<TABLE>
<CAPTION>
QUARTER ENDED
<S>                                 <C>         <C>         <C>         <C>
                                     09/30/04    09/30/03   $  CHANGE   % CHANGE
                                    ----------  ----------  ----------  ---------
Sales, excluding NATIONAL ACCOUNTS  $5,910,887  $5,862,053  $  48,834        1.0%
NATIONAL ACCOUNT sales               1,156,596   1,510,106   (353,510)    (23.4)%
                                    ----------  ----------  ----------  ---------
Total sales                         $7,067,483  $7,372,159  $(304,676)     (4.1)%
                                    ==========  ==========  ==========  =========
</TABLE>

As  shown  by  the table above, the Leather Factory wholesale centers, excluding
the impact of the NATIONAL ACCOUNT customer group, achieved a modest sales gain.
We  recorded  sales  gains  totaling $157,000 in our WHOLESALE and MANUFACTURERS
customer  groups but those gains were partially offset by a sales decline to our
RETAIL  and  INSTITUTION customer groups of $110,000.  We believe the decline in
these  customer  categories is primarily due to the continued expansion of Tandy
Leather  into  the  market.  Sales  to our NATIONAL ACCOUNTS continue to decline
this  year  compared  to  last  year as discussed in previous filings.  We still
believe  that  these  decreases  are  temporary  but  do  not  expect to see any
significant  improvement  in  these  sales  until  2005.

The  following table presents Leather Factory's sales mix by customer categories
for  the  quarters  ended  September  30,  2004  and  2003:
<TABLE>
<CAPTION>
                                                                                         QUARTER ENDED
                                                                                      --------------------
<S>                                                                                    <C>        <C>
CUSTOMER GROUP                                                                           9/30/04   9/30/03
-------------------------------------------------------------------------------------  ---------  --------
  RETAIL (end users, consumers, individuals)                                                22%       22%
  INSTITUTION (prisons, prisoners, hospitals, schools, youth organizations, etc.)            7         7
  WHOLESALE (resellers & distributors, saddle & tack shops, authorized dealers, etc.)       48        45
  NATIONAL ACCOUNTS                                                                         15        20
  MANUFACTURERS                                                                              8         6
                                                                                      ---------  --------
                                                                                           100%      100%
                                                                                      =========  ========
</TABLE>

Operating  income  for  Leather Factory decreased $201,000 for the third quarter
compared  to  2003, a decline of 25%.  Gross profit margins improved slightly to
54.6%  for  the  current  quarter compared to 54.2% a year ago.  The decrease in
sales  resulted  in  a  decline  in gross profit dollars of $135,000.  Operating
expenses  increased $66,000, or 2.1%, in the third quarter of 2004.  The cost of
health  care benefits for employees continues to rise and accounted for $130,000
in  additional  expenses over last year.  In addition, we incurred approximately
$50,000  in  fees  related  to  Sarbanes-Oxley 404 compliance during the current
quarter.  These  additional  expenses were offset somewhat by decreases in other
areas,  such  as  telephone  and  utilities  ($12,000), bad debts ($92,000), and
miscellaneous  fees  ($10,000).

Net  sales  for  the nine months ended September 30, 2004 decreased less than 1%
from  the  same  period  in  2003  as  follows:
<TABLE>
<CAPTION>

                                       NINE MONTHS ENDED
<S>                                 <C>          <C>          <C>           <C>
                                     09/30/04     09/30/03    $    CHANGE   % CHANGE
                                    -----------  -----------  ------------  ---------
Sales, excluding NATIONAL ACCOUNTS  $18,645,805  $17,904,519  $   741,286        4.1%
NATIONAL ACCOUNT sales                4,288,564    5,470,639   (1,182,075)    (21.6)%
                                    -----------  -----------  ------------  ---------
Total sales                         $22,934,369  $23,375,158  $  (440,789)     (1.9)%
                                    ===========  ===========  ============  =========
</TABLE>

The  Leather Factory wholesale centers achieved solid sales gains, excluding the
impact  of  the  NATIONAL  ACCOUNT  customer  group.  The  4.1%  sales growth is
consistent  with management's expectations of 2 to 4% annually.  Similar to that
of  the third quarter, we recorded sales gains to our WHOLESALE and MANUFACTURER
customer  groups  of approximately $785,000 but those gains were offset slightly
by  sales declines to our RETAIL and INSTITUTION customers of $45,000.  Sales to
our  NATIONAL  ACCOUNTS  for  the first nine months of this year have been lower
than  expectations.  We  are  working on the development of some new products to
present  to these customers.  Assuming these new products are well-received when
presented,  we would still not expect to see any positive impact to our sales to
this  customer  group  until  some  time  in  2005.

Operating  income  for  Leather  Factory  decreased $320,000 for the nine months
ended  September  30,  2004  compared  to  2003, a decline of 12%.  Gross profit
margins  improved  from  53.4%  at  September 30, 2003 to 54.1% at September 30,
2004.  The  cost of health care is up $330,000 for the first nine months of 2004
compared  to  that of the same period in 2003 which accounts for the decrease in
operating  income.  We continue to analyze options to control health care costs,
such  as  increasing  the  employees' contribution, modifying benefits, or other
similar  measures.  However,  even  if  we  implement these strategies, we still
expect  health  care  to  be  a  significant  expense  to  the  company.

TANDY  LEATHER  OPERATIONS

The  Tandy  Leather  retail  store  chain  has  grown  from twenty-six stores at
September  30,  2003  to  thirty-six  a year later.  Net sales for Tandy were up
approximately 41% for the third quarter of 2004 over the same quarter last year.
<TABLE>
<CAPTION>
<S>                                      <C>         <C>         <C>           <C>
                                         QTR ENDED   QTR ENDED
                                            9/30/04     9/30/03  $INCR (DECR)  % INCR(DECR)
                                         ----------  ----------  ------------  ------------
Same store sales (24 stores)             $2,323,564  $2,269,179  $    54,385           2.4%
New or acquired store sales (12 stores)     730,148      62,404      667,744           ***
Closed store (order fulfillment house            -       2,544       (2,544)       (100.0)
                                         ----------  ----------  ------------  ------------
Total sales                              $3,053,712  $2,334,127  $   719,585          30.8%
                                         ==========  ==========  ============  ============
</TABLE>

Sales  in the third quarter showed healthy growth.  The older stores continue to
post  sales gains despite the fact that they are competing against the dozen new
stores.  Average sales per month for stores that have been open for at least six
months as of September 30, 2004 is $33,000, which continues to beat our internal
expectations  of  $30,000  per  month  per  store.

The  following  table  presents Tandy Leather's sales mix by customer categories
for  the  quarters  ended  September  30,  2004  and  2003:
<TABLE>
<CAPTION>



                                                                                             QUARTER ENDED
                                                                                            ------------------
<S>                                                                                         <C>       <C>
CUSTOMER GROUP                                                                              09/30/04  09/30/03
-------------------------------------------------------------------------------------       --------  --------
  RETAIL (end users, consumers, individuals)                                                    70%       72%
  INSTITUTION (prisons, prisoners, hospitals, schools, youth organizations, etc.)                7         7
  WHOLESALE (reseller & distributors, saddle & tack stores, authorized dealers, etc.)           23        20
  NATIONAL ACCOUNTS                                                                              *         *
  MANUFACTURERS                                                                                  *         1
                                                                                            --------  --------
                                                                                               100%      100%
                                                                                            ========  ========
<FN>
     *  less  than  1%
</TABLE>

Third  quarter  operating income for Tandy Leather increased $51,000 or 43% over
operating  income  in  last year's third quarter.  Gross profit margins improved
minimally  from  63.2%  to  63.3%  for  the  quarter.  Operating expenses in the
current  quarter  were  $400,000  higher than last year's quarter, although as a
percentage  of  sales,  operating expenses dropped from 58.2% last year to 57.8%
this  year.  Expenses  incurred this quarter related to stores open now that did
not  exist  at  September  2003,  including  such  expenses as personnel, rents,
utilities,  etc., totaled approximately $310,000.  Additionally, manager bonuses
are  up  approximately  $30,000  in the third quarter 2004 compared to the third
quarter  2003  due  to  the  increase  in  operating  profit at the store level.
Finally,  advertising  and  marketing expenses increased $50,000 compared to the
same  period  in  2003  as  the  result  of  the  new  stores.

Net  sales for Tandy Leather were up approximately 46% for the first nine months
of  2004  over  the same period last year.  New stores are defined as those that
were  operated  less  than  half  of  the  comparable  period in the prior year.
Specifically,  stores  that  opened  in  May 2003 or later are classified as new
stores  in  the  following  table:
<TABLE>
<CAPTION>

<S>                                      <C>                 <C>                 <C>           <C>
                                         NINE MONTHS ENDED   NINE MONTHS ENDED
                                               9/30/04             9/30/03       $INCR (DECR)  % INCR(DECR)
                                         ------------------  ------------------  ------------  ------------
Same store sales (20 stores)             $        6,380,603  $        5,914,463  $   466,140           7.9%
New or acquired store sales (16 stores)           2,812,593             392,750    2,419,843           ***
Closed store (order fulfillment center)                   -               4,932       (4,932)       (100.0)
                                         ------------------  ------------------  ------------  ------------
Total sales                              $        9,193,196  $        6,312,145  $ 2,881,051          45.6%
                                         ==================  ==================  ============  ============
</TABLE>

Operating income for the nine months ended September 30, 2004 increased $230,000
or  53%  over  operating  income in last year's comparable period.  Gross profit
margins  declined  from  63.1%  to  62.1%  due  to  limitations in selling price
increases  to  match  cost increases.  Operating expenses were 54.9% of sales in
the  first  nine  months of 2004 compared to 56.3% in the same period last year.

ROBERTS,  CUSHMAN  OPERATIONS

Net  sales  for Roberts, Cushman increased $46,000 for the third quarter of 2004
over  the  third  quarter  of 2003 and operating income increased $8,000.  Gross
profit  margins  improved  from  28.5%  to 31.2%.  The volume of orders from hat
manufacturers  continued its positive momentum during the quarter which resulted
in  the sales increase.  We have been able to adjust our selling prices slightly
which  contributed  to  the improvement in our gross profit margin this quarter.
Operating  expenses  increased  $17,000  for  the  quarter due to an increase in
employee  benefits  ($10,000), additional bonuses accrued for employees ($3,000)
and  sales  commissions  ($3,000).

Net  sales  for Roberts, Cushman increased $140,000 for the first nine months of
2004  over  the  first  nine months of 2003, although operating income decreased
$21,000.  We are experiencing an increase in orders from hat manufacturers which
accounts  for  the sales increase.  Gross profit margins decreased from 34.2% at
September  30,  2004  to 32.6% at September 30, 2004.  We have been slow to pass
cost  increases on to our customers which explains the decline in gross margins.
However,  we  began  to  remedy  that  situation late in the third quarter in an
attempt  to  stabilize our margins.  Operating expenses increased $43,000 during
the  first  nine  months  of  2004  primarily due to an increase in salaries and
bonuses  ($13,000),  as  well  as  health  care  and  other  benefits ($30,000).

OTHER  EXPENSES

Interest  expense in the third quarter of 2004 was $15,000, down from $41,000 in
the  third  quarter  of  2003.  The  decrease  was attributable to the continued
reduction  in  our  debt  balance.  Interest expense in the first nine months of
2004  was  $41,000,  down  from  $175,000 in the first nine months of 2003.  Our
average  debt  balance  for  the  first  nine  months  of 2004 was $1.4 million,
compared  to  $3.0  million  for  the  first  nine  months  of  2003.

CAPITAL  RESOURCES,  LIQUIDITY  AND  FINANCIAL  CONDITION
---------------------------------------------------------

On  our consolidated balance sheet, total assets increased from $19.0 million at
year-end  2003 to $20.6 million at September 30, 2004.  An increase in inventory
of  $1.8  million and accounts receivable of $414,000 accounted for the increase
in  total  assets,  partially  offset  by  a  decrease in cash of $400,000 and a
reduction  in  prepaid  income  taxes  of  $190,000.  Total stockholders' equity
increased  from $14.5 million at December 31, 2003 to $16.5 million at September
30,  2004.  The  increase in equity is attributable to the earnings in the first
nine  months  of  the  year.

Our  investment in inventory was $12.9 million at September 30, 2004 compared to
$11.1  million  at  December  31,  2003.  Inventory  turnover  increased  to  an
annualized  rate  of  3.75  times  during  the  first  nine  months  of 2004, an
improvement from 3.41 times for the comparable period in 2003 and 3.51 times for
all  of  2003.  We  compute  our  inventory  turns  as  sales divided by average
inventory.  As  we  stated in our 2003 Annual Report on Form 10-K, we expect our
inventory  to  slowly  trend  upward  as  we continue our expansion of the Tandy
Leather  store  chain.  However,  we continually analyze our inventory levels as
inventory  management  is  a  significant factor in our financial position.  Our
inventory  at  September 30, 2004 was within 5% of our internal optimal targets.

Credit  sales  increased in the first nine months of 2004, and our investment in
accounts  receivable  was  $2.2  million at September 30, 2004, up $414,000 from
$1.8  million  at  year-end 2003.  Consolidated average days to collect accounts
remained  virtually  unchanged  for  the  first  nine months of 2004 (41.2 days)
compared  to 41.0 days for the same period in 2003.  Roberts, Cushman posted the
most  improvement  in  average  days to collect accounts, from 72.3 days to 46.2
days  outstanding.  Tandy Leather's days outstanding decreased from 39.2 in 2003
to  36.1  days  in 2004, while Leather Factory's days outstanding increased from
37.4  days  in  2003  to  40.9  days  in  2004.

Accounts  payable  increased  $87,000  to  $1.6  million at the end of the third
quarter compared with December 31, 2003.  Accrued expenses and other liabilities
increased  $178,000,  from  $1.0 million at December 31, 2003 to $1.2 million at
September  30,  2004.

At September 30, 2004, our ratio of debt to equity was 0.06, an improvement from
December  31, 2003 at which time the debt-to-equity ratio was 0.12.  Our current
ratio  remained  steady  at  6.17 at September 30, 2004, from 6.16 at the end of
2003.

During  the  first  thee  quarters  of  2004,  cash  flows provided by operating
activities  was $694,000.  Net income, reduced by the increase in inventory from
year-end  to  September  30,  2004, accounted for the majority of the cash flow.
Cash  flows used in investing activities totaled $413,000.  Capital expenditures
for  the first nine months of 2004 totaled $267,000.  The asset purchases of the
Syracuse,  NY,  St.  Louis,  MO,  and  Santa Fe, NM  Tandy Leather retail stores
required  $156,000.  Cash flows used by financing activities was $682,000 during
the  first  three quarters of 2004.  The funds were primarily used to reduce the
principal  balance  of  our  revolving  credit  facility.

At  December  31,  2003,  our  bank debt totaled $1.8 million.  At September 30,
2004,  the  balance was $1.0 million, a decrease of 44% in the first nine months
of  2004.  In  the  twelve  months ended September 30, 2004, we have repaid $1.7
million  on  our bank debt.   We will continue to repay our bank debt as quickly
as  is  practical  without  compromising  our  operations  and  expansion plans.

We  expect  to  fund  our  operating  and liquidity needs as well as our current
expansion  of  Tandy  Leather's retail store chain from a combination of current
cash balances, internally generated funds and our revolving credit facility with
our  lender.  The borrowing base on our revolving line of credit is based on the
level  of  our  accounts receivable and inventory.    At September 30, 2004, the
available, unused portion of the credit facility was approximately $4.0 million.


ITEM  3.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK.

For  disclosures  about  market  risk  affecting  our  company,  see  Item  7A
"Quantitative  and  Qualitative  Disclosures  About  Market  Risk" in our Annual
Report  on  Form  10-K  for our fiscal year ended December 31, 2003.  We believe
that  our  exposure to market risks has not changed significantly since December
31,  2003.

ITEM  4.  CONTROLS  AND  PROCEDURES

At  the end of the third quarter of 2004, our President, Chief Executive Officer
and  Chief  Financial  Officer  evaluated  the  effectiveness  of the design and
operation  of  our disclosure controls and procedures pursuant to Rule 13a-15(b)
under  the Securities and Exchange Act of 1934, as amended (the "Exchange Act").
Based  upon this evaluation and notwithstanding the limitations contained in the
final  paragraph  of this Item 4, they concluded that, as of September 30, 2004,
our  disclosure  controls  and  procedures  offer  reasonable assurance that the
information  required  to  be  disclosed  by us in the reports we file under the
Exchange  Act  is  recorded, processed, summarized, and reported within the time
period specified in the results and forms adopted by the Securities and Exchange
Commission.

During  the  period  covered  by  this  report,  there has been no change in our
internal  controls  over  financial  reporting  that  materially affected, or is
reasonably  likely  to  materially  affect,  these  controls.

Limitations  on  the  Effectiveness  of Controls.  Our management, including the
President,  Chief Executive Officer and Chief Financial Officer, does not expect
that  our  disclosure  controls and procedures or the our internal controls will
prevent  all error and all fraud.  A well conceived and operating control system
is  based in part upon certain assumptions about the likelihood of future events
and  can provide only reasonable, not absolute, assurance that the objectives of
the  control  system  are  met.  Further,  the  design  of a control system must
reflect  the  fact  that  there  are  resource  constraints, and the benefits of
controls  must  be  considered  relative  to  their  costs.

PART  II.  OTHER  INFORMATION

ITEM  2.  CHANGES  IN  SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASE OF EQUITY
SECURITIES

In  an effort to reduce our administrative and compliance costs for stockholders
who  only  have  a  small investment in our common stock, our Board of Directors
approved  an  offer to purchase the holdings of stockholders who hold fewer than
100  shares of our common stock.  The Board set June 25, 2004 as the record date
for  this  offer,  with the offer to begin July 1, 2004 and the closing price on
July  8, 2004 ($4.35 per share) to be the offer price.  This offer terminated on
September  30, 2004.  As of that date, 5,508 shares of our common stock had been
repurchased  by  us.

The  following  table  sets forth the monthly repurchase of common stock for the
period  covered  by  this  report:
<TABLE>
<CAPTION>




<S>                   <C>                   <C>             <C>                      <C>
                                                            TOTAL NUMBER OF SHARES     MAXIMUM NUMBER OF
                        TOTAL NUMBER OF     AVERAGE PRICE    PURCHASED AS PART OF    SHARES THAT MAY YET BE
                      SHARES PURCHASED (1)  PAID PER SHARE     PUBLICLY ANNOUNCED     PURCHASED UNDER THE
                                                            PLANS OR PROGRAMS (2)     PLANS OR PROGRAMS (2)
                      --------------------  --------------- ---------------------    ----------------------
JULY 1-31, 2004                          0  $         4.35                      0                     5,950
AUGUST 1-31, 2004                    2,853  $         4.35                  2,853                     3,097
SEPTEMBER 1-30, 2004                 2,655  $         4.35                  2,655                       442
<FN>
(1)  The  total  number  of  shares  purchased  includes  all repurchases made during the
periods  indicated.  All  repurchases  were  made  as  part of a publicly announced plan.
(2)  These  publicly announced plans or programs consist of The Leather Factory's Odd-Lot
Purchase  Program.  This  program  was announced on July 1, 2004 and expired on September
30,  2004.
</TABLE>

ITEM  6.  EXHIBITS

Exhibits
--------

3.1          Certificate of Incorporation of The Leather Factory, Inc., filed as
Exhibit  3.1  to the Registration Statement on Form SB-2 of The Leather Factory,
Inc.  (Commission  File  No.  33-81132)  filed  with the Securities and Exchange
Commission  on  July  5,  1994,  and  incorporated  by  reference  herein.

3.2          Bylaws  of  The  Leather Factory, Inc., filed as Exhibit 3.2 to the
Registration  Statement  on  Form  SB-2 of The Leather Factory, Inc. (Commission
File  No. 33-81132) filed with the Securities and Exchange Commission on July 5,
1994,  and  incorporated  by  reference  herein.

4.1          Financial  Advisor's  Warrant  Agreement,  dated February 12, 2003,
between  The  Leather Factory, Inc. and Westminster Securities Corporation filed
as  Exhibit  4.1  to  Form  10-Q  filed  by  The  Leather Factory, Inc. with the
Securities  and  Exchange  Commission  on  May  14,  2003,  and  incorporated by
reference  herein.

4.2          Capital  Markets  Services Engagement Agreement, dated February 12,
2003,  between  The Leather Factory, Inc. and Westminster Securities Corporation
filed  as  Exhibit  4.2 to Form 10-Q filed by The Leather Factory, Inc. with the
Securities  and  Exchange  Commission  on  May  14,  2003,  and  incorporated by
reference  herein.

10.1          Credit  Agreement, dated as of November 3, 2003, made by and among
The  Leather  Factory, Inc., a Delaware corporation; Roberts, Cushman & Company,
Inc.,  a  New  York  corporation;  Hi-Line  Leather  &  Manufacturing Company, a
California  corporation,  The  Leather  Factory  of  Nevada Investments, Inc., a
Nevada corporation, The Leather Factory, Inc., a Nevada corporation; The Leather
Factory,  L.P.,  a  Texas  limited  partnership;  The  Leather Factory, Inc., an
Arizona  corporation;  Tandy  Leather  Company  Investments,  Inc., a     Nevada
corporation;  Tandy  Leather  Company, Inc., a Nevada corporation; Tandy Leather
Company, L.P., a Texas limited partnership; and Wells Fargo Bank Texas, National
Association  filed  as  Exhibit  10.1  to  the Current Report on Form 8-K of The
Leather  Factory,  Inc.  (Commission File No. 1-12368) filed with the Securities
and  Exchange  Commission  on  November  7,  2003  and incorporated by reference
herein.

10.2          Revolving  Line  of  Credit  Note,  dated November 3, 2003, in the
principal  amount  of  up to $6,000,000.00 given by The Leather Factory, Inc., a
Delaware  corporation; Roberts, Cushman & Company, Inc., a New York corporation;
Hi-Line  Leather  & Manufacturing Company, a California corporation, The Leather
Factory  of Nevada Investments, Inc., a Nevada corporation, The Leather Factory,
Inc.,  a  Nevada  corporation;  The  Leather  Factory,  L.P.,  a  Texas  limited
partnership;  The  Leather  Factory, Inc., an Arizona corporation; Tandy Leather
Company  Investments, Inc., a Nevada corporation; Tandy Leather Company, Inc., a
Nevada corporation; Tandy Leather Company, L.P., a Texas limited partnership, as
borrowers,  payable to the order of Wells Fargo Bank Texas, National Association
filed  as Exhibit 10.2 to the Current Report on Form 8-K of The Leather Factory,
Inc.  (Commission  File  No.  1-12368)  filed  with  the Securities and Exchange
Commission  on  November  7,  2003  and  incorporated  by  reference  herein.

10.3          First  Amendment  to  Credit  Agreement,  dated as of November 26,
2003,  made  by  and  among  The  Leather Factory, Inc., a Delaware corporation;
Roberts,  Cushman  &  Company,  Inc.,  a New York corporation; Hi-Line Leather &
Manufacturing  Company,  a California corporation, The Leather Factory of Nevada
Investments,  Inc.,  a  Nevada  corporation, The Leather Factory, Inc., a Nevada
corporation; The Leather Factory, L.P., a Texas limited partnership; The Leather
Factory,  Inc., an Arizona corporation; Tandy Leather Company Investments, Inc.,
a  Nevada  corporation; Tandy Leather Company, Inc., a Nevada corporation; Tandy
Leather  Company,  L.P.,  a  Texas  limited  partnership;  and Wells Fargo Bank,
National  Association,  successor  by merger to Wells Fargo Bank Texas, National
Association  filed  as  Exhibit  10.3  to  the Annual Report on Form 10-K of The
Leather  Factory,  Inc.  (Commission File No. 1-12368) filed with the Securities
and  Exchange Commission on March 29, 2004 and incorporated by reference herein.

10.4          First  Modification  to  Promissory Note, dated as of November 26,
2003,  made  by  and  among  The  Leather Factory, Inc., a Delaware corporation;
Roberts,  Cushman  &  Company,  Inc.,  a New York corporation; Hi-Line Leather &
Manufacturing  Company,  a California corporation, The Leather Factory of Nevada
Investments,  Inc.,  a  Nevada  corporation, The Leather Factory, Inc., a Nevada
corporation; The Leather Factory, L.P., a Texas limited partnership; The Leather
Factory,  Inc., an Arizona corporation; Tandy Leather Company Investments, Inc.,
a  Nevada  corporation; Tandy Leather Company, Inc., a Nevada corporation; Tandy
Leather  Company,  L.P.,  a  Texas  Limited  partnership;  and Wells Fargo Bank,
National  Association,  successor  by merger to Wells Fargo Bank Texas, National
Association  filed  as  Exhibit  10.4  to  the Annual Report on Form 10-K of The
Leather  Factory,  Inc.  (Commission File No. 1-12368) filed with the Securities
and  Exchange Commission on March 29, 2004 and incorporated by reference herein.

10.5          Asset Purchase Agreement dated November 30, 2000, by Tandy Leather
Company,  Inc.  (f/k/a  Leather Tan Acquisition, Inc.), a Texas corporation, TLC
Direct,  Inc.,  a  Texas  corporation,  and  Tandy Leather Dealer, Inc., a Texas
corporation,  filed  as Exhibit No. 2.1 to the Current Report on Form 8-K of The
Leather  Factory,  Inc.  (Commission File No. 1-12368) filed with the Securities
and  Exchange  Commission  on  December  15,  2000,  and  incorporated herein by
reference.

10.6          Credit  Agreement,  dated as of October 6, 2004, made by and among
The  Leather  Factory,  Inc.,  a  Delaware  corporation,  and Bank One, National
Association  filed  as  Exhibit  10.1  to  the Current Report on Form 8-K of The
Leather  Factory,  Inc.  (Commission File No. 1-12368) filed with the Securities
and  Exchange  Commission  on  November  5,  2004  and incorporated by reference
herein.

10.7          Line  of  Credit  Note,  dated  October  6, 2004, in the principal
amount  of  up  to  $3,000,000  given  by  The Leather Factory, Inc., a Delaware
corporation  as borrower, payable to the order of Bank One, National Association
filed  as Exhibit 10.2 to the Current Report on Form 8-K of The Leather Factory,
Inc.  (Commission  File  No.  1-12368)  filed  with  the Securities and Exchange
Commission  on  November  5,  2004  and  incorporated  by  reference  herein.

31.1*          13a-14(a)  Certification  by Wray Thompson, Chairman of the Board
and  Chief  Executive  Officer.

31.2*          13a-14(a)  Certification  by  Shannon  L. Greene, Chief Financial
Officer  and  Treasurer.

32*          Certification  Pursuant  to  18  U.S.C.  Section  1350,  as adopted
pursuant  to  Section  906  of  the  Sarbanes-Oxley  Act  of  2002.

*  Filed  herewith.


                                   SIGNATURES

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


                                 THE  LEATHER  FACTORY,  INC.
                                       (Registrant)

Date:  November  12,  2004       By:   /s/  Wray  Thompson
                                      --------------------
                                      Wray  Thompson
                                      Chairman  and  Chief  Executive  Officer

Date:  November  12,  2004       By:  /s/Shannon  L.  Greene
                                      ----------------------
                                      Shannon  L.  Greene
                                      Chief  Financial Officer and Treasurer
                                        (Chief Accounting Officer)


<PAGE>



EXHIBIT  31.1
                          RULE 13A-14(A) CERTIFICATION

I,  WRAY  THOMPSON,  certify  that:

1.  I  have  reviewed this quarterly report on Form 10-Q of The Leather Factory,
Inc.;

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

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

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act Rules 13a-15(e) and 15d-15(e)) [language intentionally omitted SEC
Rel.  33-8238]  for  the  registrant  and  have:

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

(b)  [Left  blank  intentionally  SEC  Rel.  No.  33-8238];

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

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

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

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

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

Date:     November  12,  2004
                                      /s/  Wray  Thompson
                                      -------------------
                                           Wray  Thompson
                                           Chairman and Chief Executive Officer
                                             (principal  executive  officer)

<PAGE>

EXHIBIT  31.2
                          RULE 13A-14(A) CERTIFICATION

I,  SHANNON  L.  GREENE,  certify  that:

1.  I  have  reviewed this quarterly report on Form 10-Q of The Leather Factory,
Inc.;

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

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

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act Rules 13a-15(e) and 15d-15(e)) [language intentionally omitted SEC
Rel.  33-8238]  for  the  registrant  and  have:

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

(b)  [Left  blank  intentionally  SEC  Rel.  No.  33-8238];

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

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

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

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

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

Date:     November  12,  2004
                                    /s/  Shannon  L.  Greene
                                    -------------------------
                                         Shannon  L.  Greene
                                         Chief Financial Officer and Treasurer
                                           (principal financial and accounting
                                              officer)

<PAGE>


EXHIBIT  32.1


                CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
      AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In  connection  with  the  Quarterly Report on Form 10-Q of The Leather Factory,
Inc.  for  the  quarter ended September 30, 2004 as filed with the United States
Securities  and  Exchange  Commission  on  the  date hereof (the "Report"), Wray
Thompson,  as  Chairman  and  Chief Executive Officer, and Shannon L. Greene, as
Treasurer  and  Chief  Financial  Officer, each hereby certifies, pursuant to 18
U.S.C.  Section  1350,  as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act  of  2002,  that:

i.     The Report fully complies with the requirements of section 13(a) or 15(d)
of  the  Securities  Exchange  Act  of  1934;  and

ii.     The  information contained in the Report fully presents, in all material
respects,  the  financial  condition  and  results of operations of the Company.


     November  12,  2004          By:  /s/  Wray  Thompson
                                       -------------------
                                       WRAY  THOMPSON
                                       CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
OFFICER


     November  12,  2004          By:  /s/  Shannon  L.  Greene
                                       ------------------------
                                       SHANNON  L.  GREENE
                                       CHIEF FINANCIAL OFFICER AND TREASURER