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,  2002
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  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 31, 2002
------------------------------         -----------------------------------------
Common Stock, par value $.0024 per share                   10,134,461
<PAGE>

                            THE LEATHER FACTORY, INC.

                                    FORM 10-Q

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002


                                TABLE OF CONTENTS
                                -----------------

<TABLE>
<CAPTION>
<BTB>

                                                                                                    PAGE NO.
                                                                                                   -------
<S>                                                                    <C>                               <C>
PART I.  FINANCIAL INFORMATION

  Item 1.  Financial Statements

    Consolidated Balance Sheets
    September 30, 2002 and December 31, 2001                            ---------------------------------   3

    Consolidated Statements of Operations
     Three and nine months ended September 30, 2002 and 2001            ---------------------------------   4

    Consolidated Statements of Cash Flows
     Nine months ended September 30, 2002 and 2001                      ---------------------------------   5

    Consolidated Statements of Stockholders' Equity
      Nine months ended September 30, 2002 and 2001                     ---------------------------------   6

    Notes to Consolidated Financial Statements                          ---------------------------------   7

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

  Item 3.  Quantitative and Qualitative Disclosures About Market Risk   ---------------------------------  20

PART II.  OTHER INFORMATION

  Item 4.  Controls and Procedures                                      ---------------------------------  20

   Item 6.  Exhibits and Reports on Form 8-K                            ---------------------------------  20


SIGNATURES                                                              ---------------------------------  21

</TABLE>
                                        2
<PAGE>
<TABLE>
<CAPTION>
<BTB>
                                      THE LEATHER FACTORY, INC.
                                     CONSOLIDATED BALANCE SHEETS



                                                                       September 30,    December 31,
                                                                           2002             2001
                                                                       -------------    ------------
                                                                        (UNAUDITED)
                                                                       -------------    ------------
<S>                                                                   <C>              <C>
ASSETS
CURRENT ASSETS:
  Cash                                                                $      112,100   $     409,040
  Cash restricted for payment on revolving credit facility                   486,637         491,729
  Accounts receivable-trade, net of allowance for doubtful accounts
      of $142,000 and $191,000 in 2002 and 2001, respectively              2,400,411       2,297,953
  Inventory                                                               10,375,786       9,054,269
  Prepaid income taxes                                                        78,232               -
  Deferred income taxes                                                      170,941         128,111
  Other current assets                                                       822,491         479,390
                                                                      --------------   --------------
    Total current assets                                                  14,446,598      12,860,492
                                                                      ---------------  --------------

PROPERTY AND EQUIPMENT, at cost                                            4,645,296       4,201,368
  Less-accumulated depreciation and amortization                          (3,193,698)     (2,858,869)
                                                                      --------------   --------------
    Property and equipment, net                                            1,451,598       1,342,499


GOODWILL, net of accumulated amortization of $733,000
  and $1,583,000 in 2002 and 2001, respectively                              607,898       4,535,412
OTHER INTANGIBLES, net of accumulated amortization of
  $100,000 and $66,000, in 2002 and 2001, respectively                       474,446         476,908
OTHER assets                                                                 710,840         333,012
                                                                      --------------   --------------
                                                                      $   17,691,380   $  19,548,323
                                                                      ==============   ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable                                                    $    1,625,484   $   1,303,596
  Accrued expenses and other liabilities                                   1,416,078       1,171,152
  Income taxes payable                                                             -          52,662
  Notes payable and current maturities of long-term debt                   3,904,727       4,527,904
                                                                      --------------   --------------
    Total current liabilities                                              6,946,289       7,055,314
                                                                      ---------------  --------------

DEFERRED INCOME TAXES                                                         97,168          61,647

NOTES PAYABLE AND LONG-TERM DEBT, net of current maturities                    3,917           7,691

COMMITMENTS AND CONTINGENCIES                                                      -               -

STOCKHOLDERS' EQUITY:
  Preferred stock, $0.10 par value; 20,000,000
      Shares authorized, none issued or outstanding                                -               -
  Common stock, $0.0024 par value; 25,000,000 shares
      authorized, 10,134,461 and 9,991,161 shares issued
      and outstanding at 2002 and 2001, respectively                          24,323          23,979
  Paid-in capital                                                          4,150,464       4,030,508
  Retained earnings                                                        6,554,800       8,478,187
  Less: Notes receivable - secured by common stock                           (45,653)        (71,939)
  Accumulated other comprehensive loss                                       (39,928)        (37,064)
                                                                      --------------   --------------
    Total stockholders' equity                                            10,644,006      12,423,671
                                                                      --------------   --------------
                                                                      $   17,691,380   $  19,548,323
                                                                      ==============   ==============
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                        3
<PAGE>

<TABLE>
<CAPTION>
<BTB>
                                                    THE LEATHER FACTORY, INC.
                                              CONSOLIDATED STATEMENTS OF OPERATIONS
                                                           (UNAUDITED)
                                     THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001



                                                                                   THREE MONTHS               NINE MONTHS
                                                                                   ------------               -----------
                                                                               2002           2001          2002         2001
<S>                                                                        <C>            <C>           <C>           <C>
NET SALES                                                                  $   9,484,730  $  9,198,401  $29,740,717   $27,930,907

COST OF SALES                                                                  4,396,332     4,586,827   13,848,098    13,456,322
                                                                           -------------  ------------  -----------   -----------
    Gross profit                                                               5,088,398     4,611,574   15,892,619    14,474,585

OPERATING EXPENSES                                                             4,246,873     3,823,038   12,646,486    11,533,970
                                                                            ------------  ------------  -----------    ----------
INCOME FROM OPERATIONS                                                           841,525       788,536    3,246,133     2,940,615

OTHER EXPENSE:
  Interest expense                                                                54,108       102,235      191,419       375,442
  Other, net                                                                      18,578        20,317       45,199        31,959
                                                                            ------------  ------------  -----------    ----------
    Total other expense                                                           72,686       122,552      236,618       407,401
                                                                            ------------  ------------  -----------    ----------

INCOME BEFORE INCOME TAXES and CUMULATIVE
EFFECT OF CHANGE IN ACCOUTNING PRINCIPLE                                         768,839       665,984    3,009,515     2,533,214

PROVISION FOR INCOME TAXES                                                       234,747       269,456      924,071     1,017,492
                                                                            ------------  ------------  -----------    ----------

INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE                534,092       396,528    2,085,444     1,515,722

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET OF INCOME TAXES               -             -   (4,008,831)            -
                                                                            ------------  ------------  -----------    ----------
NET INCOME (LOSS)                                                          $     534,092  $    396,528  $(1,923,387)  $ 1,515,722
                                                                           =============  ============  ===========   ===========


NET INCOME (LOSS) PER COMMON SHARE - BASIC:

  INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE        $        0.05  $       0.04  $      0.21   $      0.15

  CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET                             -             -        (0.40)            -
                                                                           -------------  ------------  ------------  -----------
NET INCOME (LOSS) PER COMMON SHARE                                         $        0.05  $       0.04  $     (0.19)  $      0.15
                                                                           =============  ============  ============  ===========

NET INCOME (LOSS) PER COMMON SHARE - ASSUMING DILUTION:

  INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE        $        0.05  $       0.04  $      0.19   $      0.15

  CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET                             -             -        (0.37)            -
                                                                           -------------  ------------  ------------  -----------
NET INCOME (LOSS) PER COMMON SHARE-DILUTED                                 $        0.05  $       0.04  $     (0.18)  $      0.15
                                                                           =============  ============  ============  ===========

</TABLE>

The accompanying notes are an integral part of these financial statements.
                                        4
<PAGE>

<TABLE>
<CAPTION>
<BTB>
                                    THE LEATHER FACTORY, INC.
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           (UNAUDITED)
                          NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001


                                                                           2002         2001
<S>                                                                    <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                    $(1,923,387)  $1,515,722
  Adjustments to reconcile net income (loss) to net
   cash provided by operating activities-
     Depreciation & amortization                                           370,234      550,024
     Gain on disposal of assets                                                  -         (333)
     Amortization of deferred financing costs                               37,038       34,316
     Other                                                                 (45,827)     (27,174)
    Cumulative effect of change in accounting principle                  4,008,831            -
     Net changes in assets and liabilities:
       Accounts receivable-trade, net                                     (102,459)    (644,963)
       Inventory                                                        (1,222,308)    (260,127)
       Income taxes                                                        (94,697)    (145,750)
       Other current assets                                               (343,101)      (2,558)
       Accounts payable                                                    321,886      305,060
       Accrued expenses and other liabilities                              244,926     (284,853)
                                                                       -----------   -----------
     Total adjustments                                                   3,174,523     (476,358)
                                                                       -----------   -----------
      Net cash provided by operating activities                          1,251,136    1,039,364
                                                                       -----------   -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                                      (429,250)    (628,543)
  Proceeds from sales of assets                                                  -        2,000
  Payments in connection with businesses acquired                         (227,747)           -
  Increase in other assets                                                (415,809)      (1,391)
                                                                       -----------   -----------
      Net cash used in investing activities                             (1,072,806)    (627,934)
                                                                       -----------   -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net decrease in revolving credit loans                                  (601,043)    (722,814)
  Proceeds from notes payable and long-term debt                                 -       18,676
  Payments on notes payable and long-term debt                             (25,905)     (74,981)
  Change in cash restricted for payment on revolving credit facility         5,092       31,883
  Payments received on notes secured by common stock                        26,286       17,566
  Proceeds from issuance of common stock                                   120,300       84,099
                                                                       -----------   -----------
      Net cash used in financing activities                               (475,270)    (645,571)
                                                                       -----------   -----------
NET DECREASE IN CASH                                                      (296,940)    (234,141)

CASH, beginning of period                                                  409,040      234,141
                                                                       -----------   -----------
CASH, end of period                                                    $   112,100   $        -
                                                                       ===========   ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Interest paid during the period                                      $   157,916   $  365,660
  Income taxes paid during the period                                  $ 1,076,313   $  990,311
</TABLE>
                                        5
<PAGE>
<TABLE>
<CAPTION>
<BTB>
                                              THE LEATHER FACTORY, INC.
                                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                     (UNAUDITED)
                                    NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001


                                             Common Stock                                    Notes        Accumulated
                                         --------------------                             Receivable        Other
                                           Number       Par     Paid-in      Retained     secured by       Cumulative
                                         of shares     value    capital      Earnings     common stock       Loss
<S>                                     <C>           <C>      <C>         <C>           <C>             <C>
BALANCE, December 31, 2000                9,908,161   $23,780  $3,946,608  $ 6,471,754   $    (120,339)  $   (26,166)

  Payments on notes receivable -
       secured by common stock                    -         -           -            -          17,566             -

  Shares issued - employee
       Stock options exercised               83,000       199      83,900            -               -             -

  Net Income                                      -         -           -    1,515,722               -             -

  Translation adjustment                          -         -           -            -               -        (9,729)
                                          ---------   -------  ---------- ------------   --------------  ------------
BALANCE, September 30, 2001               9,991,161   $23,979  $4,030,508  $ 7,987,476   $    (102,773)  $   (35,895)
                                          =========   =======  ==========  ===========   ==============  ============

BALANCE, December 31, 2001                9,991,161   $23,979  $4,030,508  $ 8,478,187   $     (71,939)  $   (37,064)

  Payments on notes receivable -
       secured by common stock                    -         -           -            -          26,286             -

  Shares issued - employee
       Stock options exercised              143,300       344     119,956            -               -             -

  Net Loss                                        -         -           -   (1,923,387)              -             -

  Translation adjustment                          -         -           -            -               -        (2,864)
                                          ---------   -------  ---------- ------------   --------------  ------------
BALANCE, September 30, 2002              10,134,461   $24,323  $4,150,464  $ 6,554,800   $     (45,653)  $   (39,928)
                                          =========   =======  ==========  ===========   ==============  ============

                                                         Comprehensive
                                             Total       Income (Loss)
<S>                                     <C>              <C>
BALANCE, December 31, 2000                  10,295,637

  Payments on notes receivable -
       secured by common stock                  17,566

  Shares issued - employee
       Stock options exercised                  84,099

  Net Income                                 1,515,722     $1,515,722

  Translation adjustment                        (9,729)        (9,729)
                                        --------------     ----------
BALANCE, September 30, 2001             $   11,903,295
                                        ==============
  Comprehensive income for the
  nine months ended September 30, 2001                     $1,505,993
                                                           ==========

BALANCE, December 31, 2001              $   12,423,671

  Payments on notes receivable -
       secured by common stock                  26,286

  Shares issued - employee
       Stock options exercised                 120,300

  Net Loss                                  (1,923,387)   $(1,923,387)

  Translation adjustment                        (2,864)        (2,864)
                                        --------------     ----------
BALANCE, September 30, 2002             $   10,644,006
                                        ==============
  Comprehensive loss for the
  nine months ended September 30, 2002                    $(1,926,251)
                                                           ==========

</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                        6
<PAGE>

                            THE LEATHER FACTORY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  BASIS  OF  PRESENTATION

In  the  opinion  of  The  Leather  Factory,  Inc. ("TLF" or the "Company"), the
accompanying  consolidated  financial  statements  contain  all  adjustments
(consisting  of  those  of  a  normal  recurring nature) considered necessary to
present  fairly its financial position as of September 30, 2002 and December 31,
2001,  and the results of operations and cash flows for the three and nine month
periods  ended  September  30,  2002 and 2001. The results of operations for the
three and nine month periods are not necessarily indicative of the results to be
expected  for the full fiscal year. The consolidated financial statements should
be  read  in conjunction with the financial statements and disclosures contained
in  the  Company's  2001  Annual  Report  on  Form  10-K  ("Annual  Report").

In  June  2001,  the  FASB  issued  Statements of Financial Accounting Standards
("SFAS")  No. 142, Goodwill and Other Intangible Assets.  This standard requires
companies  to  stop  amortizing  goodwill  and  certain  intangible  assets with
indefinite useful lives.  Instead, goodwill and intangible assets deemed to have
indefinite  useful lives will be subject to an annual review of impairment.  The
new  standard  was effective for the Company in the first quarter of 2002.  Upon
adoption  of  SFAS  No.  142,  TLF  recorded  a  one-time,  noncash  charge  of
approximately  $4.0  million  to  eliminate  the  carrying value of its goodwill
relating  to  its  subsidiary,  Roberts,  Cushman  &  Co.,  Inc.  This charge is
non-operational  in  nature  and  is  reflected  as  a  cumulative  effect of an
accounting change in the accompanying consolidated statement of operations.  For
additional  discussion  on  the  impact  of  adopting  SFAS No. 142, see Note 5.

Certain  reclassifications  have  been  made  to  conform  the  2001  financial
statements  to the presentation in 2002.  The reclassifications had no effect on
net  income.

2.  INVENTORY

The  components  of  inventory  consist  of  the  following:
<TABLE>
<CAPTION>
                                              AS OF
                                   SEPTEMBER 30,   DECEMBER 31,
                                   ------------   -------------
                                        2002           2001
                                   ------------   -------------
<S>                                <C>             <C>
Finished goods held for sale       $    9,429,013  $   8,025,845
Raw materials and work in process         946,773      1,028,424
                                   --------------  -------------
                                   $   10,375,786  $   9,054,269
                                   *=============  =============
</TABLE>

                                        7
<PAGE>

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
                                                                    SEPTEMBER 30,                     SEPTEMBER 30,
                                                       ---------------------------------------  -------------------------
                                                              2002                 2001             2002         2001
                                                       -------------------  -----------------   -----------   -----------
<S>                                                    <C>                  <C>                 <C>           <C>
Numerator:
  Net  income (loss)                                   $           534,092  $          396,528  $(1,923,387)  $ 1,515,722
                                                       -------------------  -----------------   -----------   -----------
  Numerator for basic and diluted earnings per share               534,092             396,528   (1,923,387)    1,515,722

Denominator:
  Weighted-average shares outstanding-basic                     10,064,249           9,991,052   10,035,890     9,970,985

Effect of dilutive securities:
  Stock options                                                    448,836             427,831      483,760       228,346
  Warrants                                                         210,318             237,976      240,027       201,027
                                                       -------------------  -----------------   -----------   -----------
Dilutive potential common shares                                   659,154             665,807      723,787       429,373
                                                       -------------------  ------------------  ------------  -----------

  Denominator for diluted earnings per share-
  weighted-average shares                                       10,723,403          10,656,859   10,759,677    10,400,358
                                                       ===================  ==================  ===========   ===========
  Basic earnings per share                             $              0.05  $             0.04  $     (0.19)  $      0.15
                                                       ===================  ==================  ===========   ===========
  Diluted earnings per share                           $              0.05  $             0.04  $     (0.18)  $      0.15
                                                       ===================  ==================  ===========   ===========

</TABLE>

The  net  effect of converting stock options to purchase 1,081,000 and 1,154,000
of  common  stock  at option prices less than the average market prices has been
included  in the computation of diluted EPS for the three and nine month periods
ended  September  30,  2002  and  2001,  respectively.


4.  SEGMENT  INFORMATION

The  Company  identifies  its segments based on the activities of three distinct
businesses:  The  Leather  Factory,  which  sells  product to both wholesale and
retail  customers and consists of a chain of sales/distribution units located in
the  United  States  and  Canada;  Tandy  Leather  Company,  which sells product
throughout the United States via retail stores, the Internet and mail-order, and
internationally  through  authorized  dealers;  and  Roberts, Cushman & Company,
which  manufactures  decorative hat trims sold directly to hat manufacturers and
distributors.

                                        8
<PAGE>

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>
                                                THE LEATHER FACTORY     TANDY LEATHER COMPANY   ROBERTS, CUSHMAN & CO
                                              ---------------------    ----------------------   ---------------------
<S>                                           <C>                      <C>                      <C>
FOR THE QUARTER ENDED SEPTEMBER 30, 2002
Net Sales                                                  7,244,610                1,727,925                  512,195
Gross Profit                                               3,848,893                1,026,681                  212,824
Operating earnings                                           631,125                   76,231                  134,169
Interest expense                                             (53,995)                    (113)                       -
Other, net                                                   (18,578)                       -                        -
Income before income taxes                                   558,552                   76,118                  134,169
     Depreciation and amortization                            94,369                   29,612                    3,399
     Fixed asset additions                                   139,454                   55,050                    1,936
                                              ----------------------    ----------------------   ---------------------
     Total assets                             $           14,528,938   $            2,241,064   $              921,378
                                              ----------------------   -----------------------  ----------------------

FOR THE QUARTER ENDED SEPTEMBER 30, 2001
Net Sales                                     $            7,266,214   $            1,453,959   $              478,228
Gross Profit                                               3,656,235                  827,881                  127,458
Operating earnings                                           700,505                   73,303                   14,728
Interest expense                                            (102,235)                       -                        -
Other, net                                                   (20,065)                    (252)                       -
Income before income taxes                                   578,205                   73,051                   14,728
     Depreciation and amortization                           130,711                   24,267                   38,330
     Fixed asset additions                                    96,299                        -                      485
                                              ----------------------    ----------------------  ----------------------
     Total assets                             $           12,864,099   $            2,572,448   $            4,995,347
                                              ----------------------   -----------------------  ----------------------


                                                THE LEATHER FACTORY     TANDY LEATHER COMPANY   ROBERTS, CUSHMAN & CO
                                              ---------------------    ----------------------   ---------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
Net Sales                                     $           22,769,549   $            5,420,108   $            1,551,060
Gross Profit                                              12,151,507                3,179,498                  561,614
Operating earnings                                         2,625,651                  315,268                  305,214
Interest expense                                            (190,903)                    (516)                       -
Other, net                                                   (44,566)                    (633)                       -
Income before income taxes                                 2,390,182                  314,119                  305,214
     Depreciation and amortization                           316,071                   81,256                    9,945
     Fixed asset additions                                   267,823                  157,953                    3,474
                                              ----------------------    ----------------------  ----------------------
     Total assets                             $           14,528,938   $            2,241,064   $              921,378
                                              -----------------------  -----------------------  ----------------------

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
Net Sales                                     $           21,385,770   $            5,016,601   $            1,528,536
Gross Profit                                              11,203,925                2,809,848                  460,812
Operating earnings                                         2,761,863                  127,401                   51,351
Interest expense                                            (375,442)                       -                        -
Other, net                                                   (31,830)                    (129)                       -
Income before income taxes                                 2,354,591                  127,272                   51,351
     Depreciation and amortization                           356,676                   78,651                  114,697
     Fixed asset additions                                   454,419                  172,434                    1,690
                                              ----------------------    ----------------------  ----------------------
     Total assets                             $           12,864,099   $            2,572,448   $            4,995,347
                                              -----------------------  -----------------------  ----------------------



                                                 TOTAL
                                              ------------
<S>                                           <C>
FOR THE QUARTER ENDED SEPTEMBER 30, 2002
Net Sales                                     $ 9,484,730
Gross Profit                                    5,088,398
Operating earnings                                841,525
Interest expense                                  (54,108)
Other, net                                        (18,578)
                                              ------------
Income before income taxes                        768,839
     Depreciation and amortization                127,380
     Fixed asset additions                        196,440
                                              ------------
     Total assets                             $17,691,380
                                              ------------

FOR THE QUARTER ENDED SEPTEMBER 30, 2001
Net Sales                                     $ 9,198,401
Gross Profit                                    4,611,574
Operating earnings                                788,536
Interest expense                                 (102,235)
Other, net                                        (20,317)
                                              ------------
Income before income taxes                        665,984
     Depreciation and amortization                193,308
     Fixed asset additions                         96,784
                                              ------------
     Total assets                             $20,431,894
                                              ------------

                                                  TOTAL
                                              ------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
Net Sales                                     $29,740,717
Gross Profit                                   15,892,619
Operating earnings                              3,246,133
Interest expense                                 (191,419)
Other, net                                        (45,199)
                                              ------------
Income before income taxes                      3,009,515
     Depreciation and amortization                407,272
     Fixed asset additions                        429,250
                                              ------------
     Total assets                             $17,691,380
                                              ------------

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
Net Sales                                     $27,930,907
Gross Profit                                   14,474,585
Operating earnings                              2,940,615
Interest expense                                 (375,442)
Other, net                                        (31,959)
                                              ------------
Income before income taxes                      2,533,214
     Depreciation and amortization                550,024
     Fixed asset additions                        628,543
                                              ------------
     Total assets                             $20,431,894
                                              ------------
</TABLE>
                                        9
<PAGE>

Net  sales  for  geographic  areas  was  as  follows:
<TABLE>
<CAPTION>

                                                  QUARTER ENDED SEPTEMBER 30,
                                                       2002         2001
                                                    -----------  -----------
<S>                                                 <C>          <C>
United States                                       $ 8,941,654  $ 8,631,554
All other countries                                     543,076      566,847
                                                    -----------  -----------
                                                    $ 9,484,730  $ 9,198,401
                                                    ===========  ===========

                                                NINE MONTHS ENDED SEPTEMBER 30,
                                                        2002         2001
                                                    -----------  -----------
United States                                       $28,052,774  $26,324,849
All other countries                                   1,687,943    1,606,058
                                                    -----------  -----------
                                                    $29,740,717  $27,930,907
                                                    ===========  ===========
</TABLE>


5.  GOODWILL  AND  OTHER  INTANGIBLES

As  discussed  in  Note  1, in January 2002, the Company adopted SFAS 142, which
requires  companies  to  stop  amortizing goodwill and certain intangible assets
with indefinite lives.  Instead, it requires that goodwill and intangible assets
deemed  to have indefinite useful lives be reviewed for impairment upon adoption
(January  1,  2002)  and  annually  thereafter.

Under  SFAS 142, goodwill impairment is deemed to exist if the net book value of
a  reporting  unit  exceeds  its  estimated fair value.  The Company's reporting
units  are  generally  the same as the operating segments identified in Note 4 -
Segment Information.  The new methodology in SFAS 142 differs from the Company's
prior  policy,  which was permitted under earlier accounting standards, of using
undiscounted  cash  flows  of  the  acquired  asset  to determine if goodwill is
recoverable.

Upon  adoption  of SFAS 142, the Company recorded a one-time, non-cash charge of
approximately  $4.0  million in the first quarter of 2002 to reduce the carrying
value  of  its  goodwill.  This  charge  in  non-operational  in  nature  and is
reflected  as  a  cumulative  effect of an accounting change in the accompanying
consolidated  statement  of  operations  for the nine months ended September 30,
2002.

The  SFAS  142  goodwill impairment is associated solely with goodwill resulting
from  the  acquisition of Roberts, Cushman & Co., Inc. ("Cushman") in 1995.  The
current  fair  value  of  Cushman and its assets was estimated by an independent
third  party using projected discounted future operating cash flows.  The amount
of  the  impairment  primarily reflects the decline in Cushman's sales since the
acquisition  occurred.

A  summary  of  changes  in  the Company's goodwill during the nine-month period
ended  September  30,  2002  is  as  follows:
<TABLE>
<CAPTION>

                  JANUARY 1,   ACQUISITIONS &                 SEPTEMBER 30,
                     2002       ADJUSTMENTS     IMPAIRMENTS        2002
                  -----------  --------------  -------------  -------------
<S>               <C>          <C>                 <C>        <C>
Leather Factory   $   332,630  $         252             -         $332,882
Tandy Leather         193,951         81,065             -         $275,016
Roberts, Cushman    4,008,831              -  $ (4,008,831)               -
                  -----------  -------------  -------------   -------------
Total             $ 4,535,412  $      81,317  $ (4,008,831)        $607,898
                  ===========  =============  =============   =============
</TABLE>
                                       10
<PAGE>


As  of  September 30, 2002 and December 31, 2001, the Company's intangible assts
and  related  accumulated  amortization  consisted  of  the  following:
<TABLE>
<CAPTION>
                                  AS OF SEPTEMBER 30, 2002
                        ---------------------------------------------
                         GROSS    ACCUMULATED AMORTIZATION     NET
                        --------  -------------------------  --------
<S>                     <C>       <C>                        <C>
Trademarks, Copyrights  $542,744  $                  92,964  $449,780
Non-Compete Agreements    32,000                      7,334    24,666
                        --------  -------------------------  --------
                        $574,744  $                 100,298  $474,446
                        ========  =========================  ========
</TABLE>

<TABLE>
<CAPTION>

                                  AS OF DECEMBER 31, 2001
                        ---------------------------------------------
                         GROSS    ACCUMULATED AMORTIZATION     NET
                        --------  -------------------------  --------
<S>                     <C>       <C>                        <C>
Trademarks, Copyrights  $542,744  $                  65,836  $476,908
                        ========  =========================  ========
</TABLE>

The Company recorded amortization expense of $12,027 during the third quarter of
2002  compared  to  $9,354 during the third quarter of 2001.  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  5  years  are as follows:
<TABLE>
<CAPTION>

<C>   <S>               <C>             <C>       <C>
      LEATHER FACTORY   TANDY LEATHER   CUSHMAN   TOTAL
      ----------------  --------------  --------  ------
2002  $        5,837    $       40,337  $     0  $46,174
2003           5,809            41,004        0   46,813
2004           5,809            41,004        0   46,813
2005           5,809            31,004        0   36,813
2006           5,809            30,339        0   36,148
</TABLE>

During  2002,  the  Company  acquired  the  following  intangible  assets:
<TABLE>
<CAPTION>
<S>                     <C>                   <C>
                        AMORTIZATION PERIOD
                        --------------------
Non-Compete Agreements  $             32,000  3 years
</TABLE>

The 2001 results on a historical basis do not reflect the provision of SFAS 142.
Had  the  Company adopted SFAS 142 on January 1, 2001, the historical net income
and  basic and diluted net income per common share (without giving effect to the
charge  relating  to  the  reduction of goodwill) would have been changed to the
adjusted  amounts  indicated  below:
<TABLE>
<CAPTION>

                                               THREE MONTHS ENDED SEPTEMBER 30, 2001
                               -----------------------------------------------------------------------------
<S>                            <C>                <C>                          <C>
                                   NET INCOME      EARNINGS PER SHARE - BASIC   EARNINGS PER SHARE - DILUTED
                               -----------------  ---------------------------  -----------------------------
Reported net income            $         396,528  $                      0.04  $                        0.04
Addback goodwill amortization             50,742                         0.00                           0.00
                               -----------------  ---------------------------  -----------------------------
Adjusted net income            $         447,270  $                      0.04  $                        0.04
                               =================  ===========================  =============================
</TABLE>

<TABLE>
<CAPTION>

                                               NINE MONTHS ENDED SEPTEMBER 30, 2001
                               -------------------------------------------------------------------------
<S>                            <C>             <C>                          <C>
                                 NET INCOME    EARNINGS PER SHARE - BASIC   EARNINGS PER SHARE - DILUTED
                               --------------  --------------------------  -----------------------------
Reported net income            $    1,515,722  $                     0.15   $                       0.15
Addback goodwill amortization         163,027                        0.02                           0.01
                               --------------  --------------------------   ----------------------------
Adjusted net income            $    1,678,749  $                     0.17   $                       0.16
                               ==============  ==========================   ============================
</TABLE>


                                       11
<PAGE>

6.  NEW  AUTHORITATIVE  PRONOUNCEMENTS

In  August 2001, the FASB issued Statement of Financial Accounting Standards No.
143,  Accounting  for  Asset  Retirement  Obligations  ("SFAS  143").  SFAS  143
addresses financial accounting and reporting for obligations associated with the
retirement  of  tangible  long-lived  assets and the associated asset retirement
costs  and  applies  to all entities. It applies to legal obligations associated
with  the  retirement  of  long-lived  assets  that result from the acquisition,
construction,  development  and/or  the  normal operation of a long-lived asset,
except for certain obligations of lessees. SFAS 143 requires that the fair value
of a liability for an asset retirement obligation be recognized in the period in
which  it  is  incurred  if a reasonable estimate of fair value can be made. The
associated asset retirement costs are capitalized as part of the carrying amount
of  the  long-lived asset. SFAS 143 is effective for financial statements issued
for  fiscal  years  beginning  after June 15, 2002. The Company expects to adopt
SFAS  143  in  January  2003 and believes that the adoption of SFAS 143 will not
have  a  material  effect  on  the  Company's results of operations or financial
position.


Also  in  August  2001,  the  FASB  issued  Statement  of  Financial  Accounting
Standards  No.  144,  Accounting  for  the  Impairment or Disposal of Long-Lived
Assets  ("SFAS  144"). SFAS 144 addresses financial accounting and reporting for
the  impairment  or disposal of long-lived assets. SFAS 144 establishes a single
accounting  model,  based on the framework established in Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets
and  for Long-Lived Assets to be Disposed Of ("SFAS 121"), for long-lived assets
to be disposed of by sale. SFAS 121 did not address the accounting for a segment
of  a  business  accounted for as a discontinued operation under APB Opinion No.
30,  Reporting the Results of Operations- Reporting the Effects of Disposal of a
Segment  of  a  Business,  and Extraordinary, Unusual and Infrequently Occurring
Events  and  Transactions  ("APB  30")  so two accounting models existed for the
disposal  of  long-lived  assets. SFAS 144 replaces both SFAS 121 and APB 30, so
that  only  one  accounting  model exists for the disposal of long-lived assets.
SFAS 144 also resolves implementation issues related to SFAS 121. The provisions
of  SFAS  144  are  effective  for  financial statements issued for fiscal years
beginning  after December 15, 2001. The provisions of SFAS 144 are to be applied
prospectively.  The Company adopted SFAS 144 on January 1, 2002. The adoption of
SFAS  144  did not have a material effect on the Company's results of operations
or  financial  position.

In  April  2002, the FASB issued Statement of Financial Accounting Standards No.
145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement
No.  13,  and  Technical  Corrections.  This  statement provides guidance on the
classification  of  gains  and losses from the extinguishment of debt and on the
accounting  for  certain  specified  lease  transactions.  The  adoption of this
statement  is  not  expected  to have a material impact on the Company's current
financial  position  and  results  of  operations.

In  July  2002,  the FASB issued Statement of Financial Accounting Standards No.
146,  Accounting for Costs Associated with Exit or Disposal Activities (SFAS No.
146).  SFAS 146 nullifies FASB Emerging Issues Task Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to  Exit  an Activity (including Certain Costs Incurred in a Restructuring)". It
requires  that a liability be recognized for those costs only when the liability
is  incurred, that is, when it meets the definition of a liability in the FASB's
conceptual  framework. SFAS No. 146 also establishes fair value as the objective
for  initial  measurement of liabilities related to exit or disposal activities.
SFAS  146  is effective for exit or disposal activities that are initiated after
December 31, 2002, with earlier adoption encouraged. The Company does not expect
that  the  adoption  of  SFAS  146  will have a material impact on its financial
position  or  results  from  operations.

                                       12
<PAGE>

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


GENERAL
-------

The  Leather  Factory,  Inc.  ("TLF,"  the  "Company"  or  "we")  is  a Delaware
corporation  whose  common stock trades on the American Stock Exchange under the
symbol  "TLF".  The  Company  is  managed on a business entity basis, with those
businesses  being The Leather Factory ("Leather Factory"), Tandy Leather Company
("Tandy"),  and Roberts, Cushman & Company, Inc. ("Cushman").  See Note 4 to the
Consolidated  Financial  Statements  for  additional  information concerning the
Company's  segments.

Leather Factory, founded in 1980 by Wray Thompson and Ron Morgan, is the premier
distributor  of leather products to customers worldwide.  Its marketing focus is
primarily  toward the wholesale and business customers, although Leather Factory
stores  also  sell  to  retail  customers.  Products  are  distributed primarily
through  30  sales  units located in twenty states and Canada.  Products include
leather,  leatherworking  tools,  buckles and adornments for belts, leather dyes
and finishes, shoe repair supplies, saddle and tack hardware, and do-it-yourself
kits.

Tandy,  which  was acquired in November 2000, is the most recognized supplier in
the leathercraft industry. From its founding in 1919, Tandy has been the primary
resource  for  leathercrafters  world  wide.  Products  include  quality  tools,
leather, accessories, kits and teaching materials and are distributed through 13
company-owned  retail  stores,  including  10 opened in the first nine months of
2002..  Its marketing focus is primarily toward the traditional retail customer.

The  flagship  Leather  Factory store located in Fort Worth, Texas and the three
Canadian  locations  operate as "combination" stores - offering complete product
lines  of  both  entities.  These stores are equipped to service both retail and
wholesale  customers.

Cushman,  whose  origins  date  back  to  the  mid-1800's,  custom  designs  and
manufactures  a product line of decorative hat trims for headwear manufacturers.



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

The  following  tables  present selected financial data of each of the Company's
three  segments:

<TABLE>
<CAPTION>
                            QUARTER ENDED                  QUARTER ENDED
                         SEPTEMBER 30, 2002              SEPTEMBER 30, 2001
                 ---------------  --------------     -----------  -----------
                                     OPERATING                      OPERATING
                       SALES           INCOME             SALES       INCOME
                  --------------  --------------      ----------   -----------
<S>               <C>             <C>                 <C>          <C>
Leather Factory   $    7,244,610  $      631,125      $7,266,214   $   700,505
Tandy                  1,727,925          76,231       1,453,959        73,303
Cushman                  512,195         134,169         478,228        14,728
                  --------------  --------------      ----------   -----------
Total Operations  $    9,484,730  $      841,525      $9,198,401   $   788,536
                  --------------  --------------      ----------   -----------
</TABLE>
                                       13
<PAGE>

<TABLE>
<CAPTION>

                          NINE MONTHS ENDED                NINE MONTHS ENDED
                         SEPTEMBER 30, 2002               SEPTEMBER 30, 2001
                  -------------------------------     -------------------------
                                      OPERATING                       OPERATING
                         SALES         INCOME            SALES         INCOME
                  --------------  ---------------     -----------    ----------
<S>               <C>             <C>                 <C>            <C>
Leather Factory   $   22,769,549  $    2,625,651      $21,385,770    $2,761,863
Tandy                  5,420,108         315,268        5,016,601       127,401
Cushman                1,551,060         305,214        1,528,536        51,351
                  --------------  --------------      -----------    ----------
Total Operations  $   29,740,717  $    3,246,133      $27,930,907    $2,940,615
                  ==============  ==============      ===========    ==========
</TABLE>

Consolidated  net  sales  for  the  quarter  ended  September 30, 2002 increased
$286,000,  or  3.1%,  compared  to  the  same  period  in  2001.  Tandy's  sales
contributed  $274,000  to  the  increase due to new store sales, while Cushman's
sales  added  $34,000  and Leather Factory's sales were down $22,000.  Operating
income  increased  $53,000  for  the  quarter ended 2002 compared to the quarter
ended  2001.  The  increase  in Cushman's operating income contributed $119,000.
Tandy  contributed  $3,000  to  the  increase  while Leather Factory's operating
income  was  down  $69,000.

Consolidated  net  sales  for the nine months ended September 30, 2002 increased
$1,810,000,  or  6.5%,  compared  to  the  same period in 2001.  Leather Factory
contributed $1,384,000 to the increase.  Tandy added $404,000 in increased sales
and Cushman added $22,000 in sales.  Operating income increased $305,000 for the
first  nine  months  of  2002  over  the  first  nine months of 2001.  Cushman's
increased  operating  income contributed $254,000; Tandy contributed $187,000 to
the  increase  while Leather Factory's operating income was down for the year by
$136,000.

As  shown  below,  our net sales increased 6.5% in the first nine months of 2002
over  the  same  period  in  2001.  Comparing these same periods, costs of sales
increased only 2.9%. An even more dramatic change is seen in a comparison of the
third  quarters  of  2001  and 2002. There net sales were up 3.1% while costs of
sales  were  down 4.2%. These changes are attributable to the continued shift in
our  sales  mix  to  a higher percent of retail sales. This shift is expected to
continue  to  some  degree  as  Tandy's sales, which are predominately to retail
customers,  become  a  larger part of our total sales. Sales to retail customers
bring  a  higher  gross  profit than sales to whole customers. Therefore, we can
sell  the  same  product  to  a retail customer and earn a higher margin than by
selling  the  product  to  a  wholesale  customer.

<TABLE>
<CAPTION>

                                          % OF NET SALES
                                     QUARTERLY PERIOD ENDED
                                           SEPTEMBER 30,             CHANGE IN $ AND %
                               --------------------------------    ---------------------
                                      2002            2001          $ CHANGE    % CHANGE
                               ----------------  --------------    ----------  ---------
<S>                            <C>               <C>               <C>         <C>
Net sales                               100.00%         100.00%    $ 286,329       3.11%
Cost of sales                            46.35           49.87      (190,495)     (4.15)
                               ---------------   -------------     ---------   ---------
Gross profit                             53.65           50.13       476,824      10.34
Operating expenses                       44.78           41.56       423,835      11.09
                               ---------------   -------------     ---------   ---------
Income from operations                    8.87            8.57        52.989       6.72
Interest expense and other                0.77            1.33       (49,866)    (40.69)
                               ---------------   -------------     ---------   ---------
Income before income taxes and
cumulative effect of change in
accounting principle                      8.11            7.24       102,855      15.44
Income tax provision                      2.47            2.93       (34,709)    (12.88)
                               ---------------   -------------     ---------   ---------
Net income before cumulative
effect of change in accounting
principle                                 5.63            4.31       137,564      34.69
Cumulative effect of change                -               -            -           -
                               ---------------   -------------     ---------   ---------
Net income (loss)                         5.63%           4.31%    $ 137,564      34.69%
                               ===============   =============     =========   =========
</TABLE>
                                       14
<PAGE>

<TABLE>
<CAPTION>

                                                              % OF NET SALES
                                                             NINE MONTHS ENDED
                                                                 SEPTEMBER 30,               CHANGE IN $ AND %
                                                      --------------------------------    -----------------------
                                                           2002              2001          $ CHANGE     % CHANGE
                                                      ----------------   -------------    ------------  ---------
<S>                                                   <C>                <C>               <C>          <C>
Net sales                                                       100.00%         100.00%    $ 1,809,810      6.48%
Cost of sales                                                    46.56           48.18         391,776      2.91
                                                      ----------------   -------------     -----------   --------
Gross profit                                                     53.44           51.82       1,418,034      9.80
Operating expenses                                               42.52           41.29       1,112,516      9.65
                                                      ----------------   -------------     -----------   --------
Income from operations                                           10.91           10.53         305,518     10.39
Interest expense and other                                        0.80            1.46        (170,783)   (41.92)
                                                      ----------------   -------------     -----------   --------
Income before income taxes and cumulative effect of
change in accounting principle                                   10.12            9.07         476,301     18.80
Income tax provision                                              3.11            3.64         (93,421)    (9.18)
                                                      ----------------   -------------     -----------   --------
Net income before cumulative effect of change in
accounting principle                                              7.01            5.43         569,722     37.59
Cumulative effect of change in accounting principle             (13.48)             -       (4,008,831)     N/A
                                                      ----------------   -------------     -----------   --------
Net income (loss)                                               (6.47%)           5.43%    $(3,439,109) (123.13%)
                                                      ================   =============     ===========  =========
</TABLE>


LEATHER  FACTORY  OPERATIONS

Net sales from Leather Factory's 30 sales/distribution units decreased 0.30% for
the  third  quarter  of  2002  as  follows:
<TABLE>
<CAPTION>

                                                                   $change    % of sales
                                                                  ----------  -----------
<S>                                                               <C>         <C>
Same store sales                                                  $  12,110         0.20%
New store sales (2 stores - opened 9/01 & 8/02)                      81,459          1.1%
"Transferred" store (became Tandy Leather store in 2nd qtr. '02)   (115,173)       (1.6)%
                                                                  ---------   -----------
                                                                  $ (21,604)      (0.30)%
                                                                  =========   ===========
</TABLE>

The  following table presents Leather Factory's sales mix by customer categories
for  the  quarters  ended  September  30,  2002  and  2001:
<TABLE>
<CAPTION>
                                                                                                    QUARTER ENDED
CUSTOMER GROUP                                                                                   9/30/02      9/30/01
--------------                                                                                  ---------    ---------
<S>                                                                                             <C>          <C>
  RETAIL (end users, consumers, individuals)                                                          17%          19%
  INSTITUTION (prisons, prisoners, hospitals, schools, YMCA, Boy Scouts, etc.)                         7%           6%
  WHOLESALE (saddle & tack stores, resellers & distributors, shoe repair shops, dealers, etc.)        34%          32%
  CRAFT (craft and fabric stores)                                                                     28%          27%
  MIDAS (small manufacturers)                                                                          8%          10%
  ASC (Authorized Sales Centers)                                                                       6%           6%
                                                                                                ---------    ---------
                                                                                                     100%         100%
                                                                                                =========    =========
</TABLE>

As  the table indicates, Leather Factory 's sales mix this quarter varied little
from the same quarter in 2001.  Sales to all customer groups, with the exception
of  Midas  (small manufacturers), increased in dollars over the third quarter of
2001.  Orders from our small manufacturer-type customers have decreased recently
as  these  customers  are  experiencing  reductions  in orders from their retail
customers.  We  believe  this  is  the result of the sluggishness in the overall
economy.

Operating  income for Leather Factory decreased $69,400 or 9.9% of sales for the
current  quarter  compared to 2001.  Operating expenses as a percentage of sales
were  44.4%  compared  to 40.7% a year ago.  Personnel and related costs account
for  the  majority  of  the increase as the number of employees has increased 8%
over  the  past  year.  Increased advertising costs have also contributed to the
increase  in  operating  expenses.

15
<PAGE>

TANDY  LEATHER  OPERATIONS

Net  sales  for  Tandy, which consisted of ten retail stores as of September 30,
2002,  increased  18.8% for the third quarter of 2002 over the same quarter last
year.  The  increase  in  sales  consists  of  the  following:
<TABLE>
<CAPTION>

                                                                                   $change    % of sales
                                                                                  ----------  -----------
<S>                                                                               <C>         <C>
Same store sales                                                                  $    -           N/A
New store sales (9 stores opened in 2002)                                           939,504         64.6%
Transferred store sales (former Leather Factory store)                              182,233         12.5%
"Closed" central distribution facility - sales have been absorbed by new stores    (847,771)      (58.3)%
                                                                                  ---------   -----------
                                                                                  $ 273,966         18.8%
                                                                                  =========   ===========
</TABLE>

Effective  April  1,  2002, a change of software allows Tandy to track its sales
mix  in  a  similar  fashion  as  that  of Leather Factory.  The following table
presents  Tandy's  sales  mix  by  customer  categories  for  the  quarter ended
September 30, 2002 with the quarter ended June 30, 2002 presented for comparison
purposes:
<TABLE>
<CAPTION>


                                                                                QUARTER ENDED
CUSTOMER GROUP                                                                     9/30/02
--------------                                                                  -------------
<S>                                                                             <C>
  RETAIL (end users, consumers, individuals)                                              62%
  INSTITUTION (prisons, prisoners, hospitals, schools, YMCA, Boy Scouts, etc.)            12%
  WHOLESALE (saddle & tack stores, resellers & distributors, dealers, etc.)               18%
  CRAFT (craft and fabric stores)                                                          *
  MIDAS (small manufacturers)                                                              *
  ASC (Authorized Sales Centers)                                                           7%
                                                                                -------------
                                                                                         100%
                                                                                =============
</TABLE>
     _________________
     *  less  than  1%

Tandy's  retail  sales  continue  to  increase  which accounts for the continued
improvement  in  its  gross  profit margins.  This sales category is expected to
become  an  even  larger  part  of  Tandy's  sales mix as more retail stores are
opened.  Sales  to  wholesalers  saw  slight  sales  gains  as  well.

Operating  income  for  Tandy increased minimally (3.6%) in the current quarter.
Gross  profit  margins  improved  by  2.48  percentage  points or $199,000.  The
increase  in  operating  expenses  absorbed  the increase in margins, increasing
$196,000.  Tandy's operating expenses were 55.01% of sales for the quarter ended
September  30,  2002  compared  to  51.88%  for the same quarter last year.  The
expenses  associated  with  opening  the  new  stores  (increase  in  personnel,
additional  rents,  telephone  and  utility  services,  etc.)  account  for  the
increase.  Shipping  costs  (paid  to  freight  companies to ship merchandise to
customers)  continue  to decrease as more customers are purchasing in the stores
versus  phone  and  mail  order.

Tandy has opened (or has announced plans to open) retail stores in the following
locations  since  June  30,  2002:
<TABLE>
<CAPTION>
CITY, STATE              MONTH OPENED  SQ FOOTAGE
-----------------------  ------------  ----------
<S>                      <C>           <C>
Dallas, Texas            August 2002        1,700
Albuquerque, New Mexico  August 2002        1,764
Las Vegas, Nevada        August 2002        1,350
Indianapolis, Indiana    October 2002       1,500
Peoria, Illinois         October 2002       1,350
Memphis, Tennessee       October 2002       2,500
</TABLE>

                                       16
<PAGE>

CUSHMAN  OPERATIONS

Net  sales  for  Cushman  increased  $34,000  for  the  third quarter of 2002, a
improvement of 7.1%. The gross profit margin increased by 14.9 percentage points
resulting  in  an  increase  in  gross  profit  of  $85,000.  This  significant
improvement  is  the  result  of  a  decrease  in  direct labor costs and a more
cost-effective  purchasing  of  goods. Specifically, the number of manufacturing
personnel  has  been reduced slightly and the manufacturing shifts have been cut
from five days per week to four. Also, Cushman is purchasing a larger portion of
its  merchandise  from  outside  vendors  rather  than  manufacturing all of its
products. The company has developed vendor sources for certain products at lower
cost  than  it  can  produce  them  internally.

Operating  income  for  Cushman  increased  $119,000.  The  adoption of SFAS 142
(eliminating the amortization of goodwill beginning in 2002) produced $30,000 of
the  increase  with  gross  profit  margins  accounting  for  the balance of the
increase.  Personnel  costs  are  down  slightly  as  well.

EFFECT  OF  WEST  COAST  DOCK  CLOSING

Management  is closely monitoring the aftereffects of the West Coast dockworkers
lockout  still  unwinding.  The company imports some merchandise from Taiwan and
Hong  Kong  and there were several shipments tied up on the docks at the time of
the  lockout.  Since  the  dockworkers  have  returned  to work, the company has
received  the  majority  of  this  merchandise.

The  dock  closing  doesn't appear to have had any impact on the company's sales
and  profits  in  the  third  quarter;  however,  fourth  quarter sales could be
affected  somewhat  if  additional  merchandise  expected  to be received by the
company  does  not  arrive  on  a  timely  basis.  To help offset that potential
impact,  the  company  is  preparing its light manufacturing facility located in
Fort  Worth  to  produce  certain  products  that  are  normally  imported.


CAPITAL  RESOURCES,  LIQUIDITY  AND  FINANCIAL  CONDITION
---------------------------------------------------------
The  change  in  accounting principle discussed above had significant effects on
our  consolidated  balance  sheet  at  September  30,  2002.  Total goodwill was
reduced  from $4,535,412 at the end of 2001 to $607,898.  This reduction was the
principal  cause  of the decrease in total assets from $19,548,323 at the end of
2001  to  $17,691,380  at  the  end of the third quarter of 2002 (a reduction of
9.5%).  Total  stockholders' equity was reduced from $12,423,671 at December 31,
2001  to  $10,644,006  at  September  30,  2002  (a  reduction  of 14.3%).  This
reduction  was  also attributable to the change in accounting principle, but the
effect  was  partially offset by operating results from the first nine months of
this  year.

The  Company's  investment  in accounts receivable was $2.4 million at September
30,  2002,  up $102,000 from $2.3 million at year-end 2001.  The average days to
collect  accounts  improved  from 47.4 days in the third quarter of 2001 to 42.4
days  in the third quarter of 2002.  Tandy's average days to collect experienced
the  most  improvement,  from  46.8  days  in  2001 to 23.6 days for the current
quarter  of  2002.

Inventory  increased  $1.3  million  to $10.4 million at September 30, 2002 from
$9.1  million  at  year-end 2001. This increase is largely consists of inventory
stocked  at  the  new  Tandy  stores and increases in anticipation of the fourth
quarter  holiday  shopping season. Historically, the company has not experienced
seasonality  in its quarter-to-quarter sales. However, with the new Tandy retail
stores  opened  this  year, management anticipated the possibility of additional
fourth  quarter  sales  as  a  result of holiday shopping and stocked additional
inventory  as  we  headed  into  the  fourth  quarter.  The  inventory  turnover
annualized rate for the first nine months of 2002 held steady at 4.08 times, the
same  as  the turnover rate for the first nine months of 2001 as well as for all
of  2001.

                                       17
<PAGE>

The  Fort  Worth complex houses our corporate and administrative offices as well
as  our  central warehouse and factory.  We have negotiated a new agreement with
the  landlord  extending the lease term through March 2013.  In conjunction with
the  new  agreement,  we have begun a remodeling project to consolidate formerly
separate Leather Factory and Tandy warehouses, to relocate the factory in closer
proximity  to the warehouse, and to remodel the Fort Worth Leather Factory store
into  a  combination  Leather  Factory/Tandy  Leather flagship store with a more
retail-oriented  presentation.  Our estimate of the total cost of the project is
still  expected  to  be  $500,000 to $600,000.  As of September 30, 2002, we had
paid  $405,535  on the renovation work.  The project is expected to be completed
by  the  end  of  2002  and  the  amount  currently  classified  as Other Assets
(non-current)  will  be  reclassified  to  Leasehold  Improvements in the fourth
quarter  of  2002.

Notes payable and current maturities of long-term debt decreased from $4,527,904
at  the  end  of  2001  to  $3,904,727  at September 30, 2002.  Accounts payable
increased  $322,000  to  $1.6  million  at  the  end  of  the third quarter, due
primarily  to  the  increase in inventory.  The Company's current ratio improved
from  1.82  at  December  31,  2001  to  2.08  at  September  30,  2002.

The  primary  sources  of  liquidity and capital resources during the first nine
months  of  2002  were  funds  provided by operating activities in the amount of
$1,251,000 and the Company's Credit and Security Agreement with Wells Fargo Bank
Minnesota,  N.A. ("Wells Fargo"). The Company used its cash flow from operations
and  additional  funds  on  hand  at  the beginning of the year to pay down loan
balances  ($601,043),  to  purchase  equipment  ($429,250),  and to purchase the
assets  of  two  existing  leathercraft  stores  ($227,747).

Approximately  26%  of  the  2002  capital  spending was for computer equipment,
software,  and fixtures for the new Tandy retail stores, 19% was for Tandy's new
point-of-sale software and inventory scanning equipment for the existing Leather
Factory  stores,  29% was for various computer workstation and software upgrades
in  existing  locations  and  departments, and 26% was for various furniture and
fixtures.

The  revolving  credit  facility with Wells Fargo is based upon the level of the
Company's  accounts  receivable  and  inventory.  At  September  30,  2002,  the
available  and  unused  portion  of  the  credit  facility  was  approximately
$2,401,000.

The Company believes that the current sources of liquidity and capital resources
will  be  sufficient to fund current operations and the opening of any potential
new Tandy retail stores or Leather Factory sales/distribution units. In 2002 and
2003  we anticipate the funding for the opening of any new locations is expected
to  be  provided by operating leases, cash flows from operating activities, and,
if  needed,  the  revolving  credit  facility.



                                       18
<PAGE>

FORWARD-LOOKING  STATEMENTS
---------------------------
This  report  (particularly this Item 2: Management's Discussion and Analysis of
Financial  Condition  and  Results  of  Operations)  contains  forward-looking
statements  of  management.  In general, these are predictions or suggestions of
future  events  and  statements or expectations of future trends or occurrences.
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 that could cause actual results to differ materially
from  those  suggested  by  the  forward-looking statements include, among other
things:

-     Changes  in the economic recovery in the United States, as well as abroad,
from  a  recent  downturn  may  cause  our sales to decrease or not to increase.

-     The  labor dispute that closed the West Coast docks earlier this year will
have  some  effect  on  the  Company's flow of inventory from Asia in the fourth
quarter of 2002, although the extent of those effects is not known at this time.
A  federal  court  reopened  these  docks  until  December 26, 2002. If the dock
closure  resumes,  we  are  likely  to  encounter additional delays in receiving
inventory.

-      The  anticipated  increases  in retail sales  from our Tandy stores could
fail  to  materialize for a number of reasons, including the inability to locate
suitable  new  locations  or  qualified  personnel  to  manage  them.


-     Recent  favorable  trends  in  the  arts  and  crafts industry may slow or
reverse.

-     If  more  terrorist  activities such as those on September 11, 2001 occur,
consumer-buying habits could change and decrease our sales.  Also, if terrorists
choose  to  target  livestock  in  the  United  States  or  abroad for chemical,
biological  or  other  attacks,  our sources of raw material and inventory could
decrease,  or  these  items  could  become  more  expensive.

-     The prices of hides and leathers also fluctuate in normal times, and these
fluctuations  can affect the Company.  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.

-     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.

-     The  Company  currently  buys  in  22  countries  around the world.   War,
terrorism,  changes  in the internal affairs or international relations of these
countries  (such  as  events  that might affect their Most Favored Nation status
with  the  United  States  of  America)  and other uncertainties can disrupt our
purchases  from  abroad.

-     Tax  or interest  rates might  increase. In particular, interest rates are
likely  to  increase  at  some  point  from  their  present  low levels, thereby
increasing  our  costs  of  borrowing  funds  needed  in  our  business.

-     Other  uncertainties, which are difficult to predict and many of which are
beyond  the  control  of  the  Company,  may  occur  as  well.

The  Company  does  not  intend  to  update  forward-looking  statements.

                                       19
<PAGE>

ITEM  3.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK.

The  Company's Credit Facility includes loans with interest rates that vary with
changes  in  the  prime  rate.  An increase of one percentage point in the prime
rate  would  not  have  a  material  impact  on  the  Company's future earnings.

PART  II.  OTHER  INFORMATION

ITEM  4.  CONTROLS  AND  PROCEDURES

(a)  Evaluation  of  disclosure  controls  and  procedures

Within  the 90 days prior to the date of this report, the Company carried out an
evaluation,  under  the  supervision and with the participation of the Company's
management,  including the Company's Chief Executive Officer and Chief Financial
Officer,  of  the  effectiveness  of  the  design and operation of the Company's
disclosure  controls and procedures pursuant to Exchange Act Rule 13a-14.  Based
upon  that  evaluation,  the Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective in
timely  alerting them to material information relating to the Company (including
its consolidated subsidiaries) required to be included in the Company's periodic
SEC  filings.

(b)  Changes  in  internal  controls.

Not  applicable.

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)  Exhibits
     --------

     None

(b)  Reports  on  Form  8-K
     ----------------------

     None

                                       20
<PAGE>

                                   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  5,  2002             By: /s/  Wray  Thompson
                                          -------------------
                                          Wray  Thompson
                                           Chairman  of  the  Board  and
                                           Chief  Executive  Officer

Date:  November  5,  2002             By: /s/  Shannon  L.  Greene
                                          ------------------------
                                          Shannon  L.  Greene
                                           Chief  Financial  Officer  and
                                           Treasurer (Chief Accounting Officer)

-----------------------------------------------------------

                                  CERTIFICATION

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and only to the extent
required  by  that  provision,  the  undersigned  certify that this report fully
complies  with  the  requirements  of  Section  13(a)  or  Section  15(d) of the
Securities  Exchange  Act  of  1934  and  that all information contained in this
report  fairly  presents  in  all  material respects the financial condition and
results  of  operations  of  the  issuer.

Date:  November  5,  2002

                                     /s/  Wray  Thompson
                                     -------------------
                                     Wray Thompson, Chief Executive Officer

                                     /s/  Shannon  L.  Greene
                                     ------------------------
                                     Shannon L. Greene, Chief Financial Officer

-----------------------------------------------------------
                                       21
<PAGE>

                                 CERTIFICATIONS

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 quarterly 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 quarterly
report;
3.  Based  on  my  knowledge,  the  financial  statements,  and  other financial
information  included  in  this quarterly 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 quarterly report;
4.  The  registrant's  other  certifying  officers  and  I  are  responsible for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rule  13a-14  and  15d-14)  for  the  registrant  and  we  have:
a)  designed  such  disclosure  controls  and procedures to ensure that material
information  relating  to  the  registrant,  including  its  consolidating
subsidiaries,  is made known to us by others within those entities, particularly
during  the  period  in  which  this  quarterly  report  was  prepared;
b)  evaluated  the  effectiveness  of  the  registrant's disclosure controls and
procedures  as  of  a  date  within  90  days  prior  to the filing date of this
quarterly  report  (the  "Evaluation  Date");  and
c)  presented  in  this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on the required evaluation as of
the  Evaluation  Date;
5.  The  registrant's  other  certifying officers and I have disclosed, based on
our  most  recent  evaluation,  to  the   registrant's  auditors  and  the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent  function):
a)  all significant deficiencies in the design or operation of internal controls
which could adversely  affect  the  registrant's  ability  to  record,  process,
summarize  and  report  financial  data and have identified for the registrant's
auditors  any  material  weaknesses  in  internal  controls;  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; and
6.  The  registrant's  other  certifying  officers  and I have indicated in this
quarterly  report  whether  or  not  there  were significant changes in internal
controls  or  in other factors that could significantly affect internal controls
subsequent  to  the date of our most recent evaluation, including any corrective
actions  with  regard  to  significant  deficiencies  and  material  weaknesses.

Date:     November  5,  2002
                                       /s/  Wray  Thompson
                                       -------------------
                                       Wray  Thompson
                                       President  and  Chief  Executive  Officer
                                       (principal  executive  officer)

                                       22
<PAGE>

                                    ********

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 quarterly 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 quarterly
report;
3.  Based  on  my  knowledge,  the  financial  statements,  and  other financial
information  included  in  this quarterly 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 quarterly report;
4.  The  registrant's  other  certifying  officers  and  I  are  responsible for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rule  13a-14  and  15d-14)  for  the  registrant  and  we  have:
a)  designed  such  disclosure  controls  and procedures to ensure that material
information  relating  to  the  registrant,  including  its  consolidating
subsidiaries,  is made known to us by others within those entities, particularly
during  the  period  in  which  this  quarterly  report  was  prepared;
b)  evaluated  the  effectiveness  of  the  registrant's disclosure controls and
procedures  as  of  a  date  within  90  days  prior  to the filing date of this
quarterly  report  (the  "Evaluation  Date");  and
c)  presented  in  this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on the required evaluation as of
the  Evaluation  Date;
5.  The  registrant's  other  certifying officers and I have disclosed, based on
our  most  recent  evaluation,  to  the  registrant's  auditors   and  the audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent  function):
a)  all significant deficiencies in the design or operation of internal controls
which  could  adversely  affect  the  registrant's  ability  to record, process,
summarize  and  report  financial  data and have identified for the registrant's
auditors  any  material  weaknesses  in  internal  controls;  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; and
6.  The  registrant's  other  certifying  officers  and I have indicated in this
quarterly  report  whether  or  not  there  were significant changes in internal
controls  or  in other factors that could significantly affect internal controls
subsequent  to  the date of our most recent evaluation, including any corrective
actions  with  regard  to  significant  deficiencies  and  material  weaknesses.

Date:     November  5,  2002
                                    /s/  Shannon  L.  Greene
                                    -------------------------
                                    Shannon  L.  Greene
                                    Chief  Financial  Officer  and  Treasurer
                                    (principal financial and accounting officer)

                                       23
<PAGE>