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  June  30,  2004

or

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

For  the  transition  period  from  ________ to  _________

Commission  File  Number  1-12368

                            THE LEATHER FACTORY, INC.
             (Exact name of registrant as specified in its charter)

             DELAWARE                                      75-2543540
 (State  or  other  jurisdiction  of                    (I.R.S.   Employer
 Incorporation  or  organization)                     Identification  Number)

                3847 EAST LOOP 820 SOUTH, FT. WORTH, TEXAS  76119
               (Address of principal executive offices) (Zip code)

                                 (817) 496-4414
              (Registrant's telephone number, including area code)

     Indicate  by  check  mark  whether the registrant (1) has filed all reports
required  to  by  filed by Section 13 or 15(d) of the Securities Exchange Act of
1934  during  the  preceding  12  months  (or  for  such shorter period that the
registrant  was required to file such reports), and (2) has been subject to such
filing  requirements  for  the  past  90  days.

                                  Yes   X    No

     Indicate  by  check  mark  whether  the registrant is an accelerated filer.

                              Yes        No  X

     Indicate  the  number of shares outstanding of each of the issuer's classes
of  common  stock,  as  of  the  latest  practicable  date.

                                                       Shares outstanding as
                  Class                                 of  August  6,  2004
Common  Stock,  par  value  $.0024  per share                10,560,661
                                        1
<PAGE>

                            THE LEATHER FACTORY, INC.

                                    FORM 10-Q

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2004

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

<S>                                                                    <C>
                                                                       PAGE NO.

PART I.  FINANCIAL INFORMATION

  Item 1.  Financial Statements

    Consolidated Balance Sheets
     June 30, 2004 and December 31, 2003                                      3

    Consolidated Statements of Operations
     Three and six months ended June 30, 2004 and 2003                        4

    Consolidated Statements of Cash Flows
     Six months ended June 30, 2004 and 2003                                  5

    Consolidated Statements of Stockholders' Equity
     Six months ended June 30, 2004 and 2003                                  6

    Notes to Consolidated Financial Statements                                7

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

  Item 3.  Quantitative and Qualitative Disclosures About Market Risk        15

  Item 4.  Controls and Procedures                                           15

PART II.  OTHER INFORMATION

  Item 4.  Submission of Matters to a Vote of Security Holders               15

  Item 5.  Other Information                                                 16

  Item 6.  Exhibits and Reports on Form 8-K                                  16

SIGNATURES                                                                   16
</TABLE>
                                        2
<PAGE>

                            THE LEATHER FACTORY, INC.
                           CONSOLIDATED BALANCE SHEETS
                                  (unaudited)
<TABLE>
<CAPTION>
<S>                                                                           <C>           <C>
                                                                                JUNE 30,     DECEMBER 31,
                                                                                  2004           2003
                                                                              ------------  --------------
                             ASSETS
CURRENT ASSETS:
Cash                                                                          $ 1,181,604   $   1,728,344
Accounts receivable-trade, net of allowance for doubtful accounts of
   $107,000 and $31,000 in 2004 and 2003, respectively                          2,695,997       1,828,738
Inventory                                                                      12,189,111      11,079,893
Prepaid income taxes                                                                4,388         206,023
Deferred income taxes                                                             199,368         134,312
Other current assets                                                              808,784         702,236
                                                                              ------------  --------------
                                      Total current assets                     17,079,252      15,679,546
                                                                              ------------  --------------

PROPERTY AND EQUIPMENT, at cost                                                 5,738,042       5,574,992
Less accumulated depreciation and amortization                                 (3,893,754)     (3,669,099)
                                                                              ------------  --------------
                                   Property and equipment, net                  1,844,288       1,905,893

GOODWILL, net of accumulated amortization of $755,000 and $758,000
   in 2004 and 2003, respectively                                                 729,390         704,235
OTHER INTANGIBLES, net of accumulated amortization of $192,000 and $164,000
   in 2004 and 2003, respectively                                                 425,503         432,549
OTHER ASSETS                                                                      323,896         336,183
                                                                              ------------  --------------
                                                                              $20,402,329   $  19,058,406
                                                                              ============  ==============

                 LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable                                                              $ 1,888,053   $   1,545,079
Accrued expenses and other liabilities                                          1,102,728       1,000,427
Notes payable and current maturities of long-term debt                                  -           1,134
                                                                              ------------  --------------
                    Total current liabilities                                   2,990,781       2,546,640
                                                                              ------------  --------------

DEFERRED INCOME TAXES                                                             207,947         209,289

NOTES PAYABLE AND LONG-TERM DEBT, net of current maturities                     1,100,000       1,792,984

COMMITMENTS AND CONTINGENCIES                                                           -               -

STOCKHOLDERS' EQUITY:
Preferred stock, $0.10 par value; 20,000 shares authorized,
   none issued or outstanding                                                           -               -
Common stock, $0.0024 par value; 25,000,000 shares authorized, 10,560,661
   and 10,487,961 shares issued and outstanding in 2004 and 2003, respectively     25,345          25,171
Paid-in capital                                                                 4,796,999       4,673,158
Retained earnings                                                              11,291,897       9,804,719
Less:  notes receivable secured by common stock                                   (15,000)        (20,000)
Accumulated other comprehensive loss                                                4,360          26,445
                                                                              ------------  --------------
                    Total stockholders' equity                                 16,103,601      14,509,493
                                                                              ------------  --------------
                                                                              $20,402,329   $  19,058,406
                                                                              ============  ==============

</TABLE>

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

                            THE LEATHER FACTORY, INC
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003

<TABLE>
<CAPTION>
                                                     THREE MONTHS                 SIX MONTHS
<S>                                          <C>             <C>           <C>           <C>
                                                  2004          2003          2004          2003
                                             -------------   -----------   -----------   -----------
NET SALES                                    $  10,959,813   $10,460,675   $23,140,689   $21,020,760

COST OF SALES                                    4,978,754     4,739,621    10,434,717     9,654,202
                                             -------------   -----------   -----------   -----------
                     Gross profit                5,981,059     5,721,054    12,705,972    11,366,558

OPERATING EXPENSES                               5,127,223     4,566,590    10,405,002     9,096,422
                                             -------------   -----------   -----------   -----------
INCOME FROM OPERATIONS                             853,836     1,154,464     2,300,970     2,270,136

OTHER INCOME (EXPENSE):
          Interest expense                         (12,471)      (70,468)      (26,109)     (133,820)
          Other, net                               (25,353)       43,705       (27,089)       74,523
                                             -------------   -----------   -----------   -----------
               Total other income (expense)        (37,824)      (26,763)      (53,198)      (59,297)
                                             -------------   -----------   -----------   -----------
INCOME BEFORE INCOME TAXES                         816,012     1,127,701     2,247,772     2,210,839

PROVISION FOR INCOME TAXES                         299,799       348,997       760,594       657,617
                                             -------------   -----------   -----------   -----------
NET INCOME                                   $     516,213   $   778,704   $ 1,487,178   $ 1,553,222
                                             =============   ===========   ===========   ===========


NET INCOME PER COMMON SHARE-BASIC            $        0.05   $      0.08   $      0.14   $      0.15
                                             =============   ===========   ===========   ===========
NET INCOME PER COMMON SHARE-DILUTED          $        0.05   $      0.07   $      0.14   $      0.14
                                             =============   ===========   ===========   ===========


WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
  Basic                                         10,553,243    10,234,054    10,530,119    10,205,900
  Diluted                                       11,006,638    10,805,019    11,011,525    10,802,677
</TABLE>

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


                            THE LEATHER FACTORY, INC
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                     SIX MONTHS ENDED JUNE 30, 2004 AND 2003

<TABLE>
<CAPTION>
<S>                                                                      <C>           <C>
                                                                             2004          2003
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                             $ 1,487,178   $ 1,553,222
  Adjustments to reconcile net income to net
   cash (used in) provided by operating activities-
     Depreciation & amortization                                             252,701       275,127
     Loss on disposal of assets                                                    -         9,372
     Deferred income taxes                                                   (66,398)       47,818
     Other                                                                   (19,240)        7,843
     Net changes in assets and liabilities:
       Accounts receivable-trade, net                                       (867,259)     (882,519)
       Inventory                                                          (1,064,766)      531,217
       Income taxes                                                          201,635        50,479
       Other current assets                                                 (106,548)      (86,169)
       Accounts payable                                                      342,974      (280,681)
       Accrued expenses and other liabilities                                102,301    (1,652,021)
                                                                         ------------  ------------
     Total adjustments                                                    (1,224,599)   (1,979,534)
                                                                         ------------  ------------
      Net cash (used in) provided by operating activities                    262,578      (426,312)
                                                                         ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                                        (131,050)     (270,377)
  Payments in connection with businesses acquired                           (125,452)            -
  Proceeds from sale of assets                                                     -         6,217
  Increase in other assets                                                    12,287       (16,966)
                                                                         ------------  ------------
      Net cash used in investing activities                                 (244,215)     (281,126)
                                                                         ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase (decrease) in revolving credit loans                         (692,684)      550,201
  Payments on notes payable and long-term debt                                (1,134)       (3,226)
  Decrease in cash restricted for payment on revolving credit facility             -        83,718
  Payments received on notes secured by common stock                           5,000        24,003
  Proceeds from issuance of common stock                                     124,015       111,806
                                                                         ------------  ------------
      Net cash provided by (used in) financing activities                   (565,103)      766,502
                                                                         ------------  ------------
NET CHANGE IN CASH                                                          (546,740)       59,064

CASH, beginning of period                                                  1,728,344       101,557
                                                                         ------------  ------------
CASH, end of period                                                      $ 1,181,604   $   160,621
                                                                         ============  ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Interest paid during the period                                        $    29,639   $   131,122
  Income taxes paid during the period, net of (refunds)                      577,678       512,151
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                        5
<PAGE>

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

<TABLE>
<CAPTION>

                                                               COMPREHENSIVE
<S>                                                          <C>                <C>         <C>               <C>
                                                             NUMBER OF SHARES   PAR VALUE   PAID-IN CAPITAL   RETAINED EARNINGS
                                                             ----------------- -----------  ----------------  ------------------
BALANCE, December 31, 2002                                         10,149,961  $   24,360  $      4,163,901  $        7,064,345
Payments on notes receivable-secured by common stock                        -           -                 -                   -
Shares issued - stock options exercised                               120,500         289           111,517                   -
Warrants to acquire 100,000 shares of common stock issued                   -           -           126,381                   -
Net income                                                                  -           -                 -           1,553,222
Translation adjustment                                                      -           -                 -                   -
                                                             ----------------- -----------  ----------------  ------------------
BALANCE, June 30, 2003                                             10,270,461  $   24,649  $      4,401,799  $        8,617,567
                                                             =================  ==========  ================  ==================

BALANCE, December 31, 2003                                         10,487,961  $   25,171  $      4,673,158  $        9,804,719
Payments on notes receivable-secured by common stock                        -           -                 -                   -
Shares issued - stock options exercised                                72,700         174            74,896                   -
Warrants to acquire 50,000 shares of common stock issued                    -           -            48,945                   -
Net income                                                                  -           -                 -           1,487,178
Translation adjustment                                                      -           -                 -                   -
                                                             ----------------- -----------  ----------------  -----------------
BALANCE, June 30, 2004                                             10,560,661  $   25,345  $      4,796,999  $       11,291,897
                                                             =================  ==========  ================  =================

<S>                                                          <C>                 <C>                 <C>           <C>
                                                             NOTES RECEIVABLE    ACCUMULATED OTHER
                                                               SECURED BY           CUMULATIVE                     COMPREHENSIVE
                                                              COMMON STOCK         INCOME (LOSS)        TOTAL      INCOME (LOSS)
                                                             ----------------    ------------------  -----------   --------------
BALANCE, December 31, 2002                                   $       (44,003)    $         (38,541)  $11,170,062
Payments on notes receivable-secured by common stock                  24,003                     -        24,003
Shares issued - stock options exercised                                    -                     -       111,806
Warrants to acquire 100,000 shares of common stock issued                  -                     -       126,381
Net income                                                                 -                     -     1,553,222   $   1,553,222
Translation adjustment                                                     -                21,751        21,751          21,751
                                                             ----------------    ------------------  -----------
BALANCE, June 30, 2003                                       $       (20,000)    $         (16,790)  $13,007,225
                                                             ================    ==================  ============  --------------
Comprehensive income for the six months ended June 30, 2003                                                        $   1,574,973
                                                                                                                   ==============

BALANCE, December 31, 2003                                   $       (20,000)    $          26,445   $14,509,493
Payments on notes receivable=secured by common stock                   5,000                     -         5,000
Shares issued = stock options exercised                                    -                     -        75,070
Warrants to acquire 50,000 shares of common stock issued                   -                     -        48,945
Net income                                                                 -                     -     1,487,178   $   1,487,178
Translation adjustment                                                     -               (22,085)      (22,085)        (22,085)
                                                             ----------------    ------------------  -----------
BALANCE, June 30, 2004                                       $       (15,000)    $           4,360   $16,103,601
                                                             ================    ==================  ============  --------------
Comprehensive income for the six months ended June 30, 2004                                                        $   1,465,093
                                                                                                                   ==============
</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  AND  CERTAIN  SIGNIFICANT  ACCOUNTING  POLICIES

In the opinion of management, the accompanying consolidated financial statements
for  The  Leather  Factory, Inc. and its consolidated subsidiaries (TLF) contain
all  adjustments  (consisting  of  normal  recurring  adjustments)  necessary to
present fairly its financial position as of June 30, 2004 and December 31, 2003,
and its results of operations and cash flows for the three and six-month periods
ended  June  30,  2004  and 2003.  Operating results for the three and six-month
periods  ended  June 30, 2004 are not necessarily indicative of the results that
may  be  expected  for  the  year  ending December 31, 2004.  These consolidated
financial statements should be read in conjunction with the audited consolidated
financial  statements  and  accompanying  notes included in our Annual Report on
Form  10-K  for  the  year  ended  December  31,  2003.

The preparation of financial statements in accordance with accounting principles
generally  accepted  in  the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying  notes.  Actual  results  could  differ  from  those  estimates.

Inventory

Inventory  is  stated at the lower of cost or market and is accounted for on the
"first  in,  first  out"  method.  In  addition,  the  value  of  inventory  is
periodically reduced for slow-moving or obsolete inventory based on management's
review  of  items  on  hand  compared  to  their estimated future demand.    The
components  of  inventory  consist  of  the  following:

<TABLE>
<CAPTION>
                                               AS OF
<S>                                <C>               <C>
                                      JUNE 30,        DECEMBER 31,
                                       2004               2003
                                   -------------     -------------
Finished goods held for sale       $  11,145,271     $   9,902,140
Raw materials and work in process      1,043,840         1,177,753
                                   -------------     -------------
                                   $  12,189,111     $  11,079,893
                                   =============     =============
</TABLE>

Goodwill  and  Other  Intangibles

Statement  of  Financial  Accounting  Standards  ("SFAS") No. 142, "Goodwill and
Other  Intangible Assets," prescribes a two-phase process for impairment testing
of  goodwill,  which is performed once annually, absent indicators of impairment
during  the  interim.  The  first phase screens for impairment, while the second
phase  (if  necessary)  measures  the  impairment.  The  Company  has elected to
perform the annual analysis during the fourth calendar quarter of each year.  As
of  December  31,  2003,  management  determined  that  the present value of the
discounted  estimated  future  cash  flows  of  the  stores  associated with the
goodwill  is  sufficient  to  support  their  respective  goodwill balances.  No
indicators  of  impairment  were  identified  during  the  first  half  of 2004.

Other  intangibles  consist  of  the  following:

<TABLE>
<CAPTION>

                                 AS OF JUNE 30, 2004                    AS OF DECEMBER 31, 2003
                        -------------------------------------       ---------------------------------
<S>                     <C>            <C>           <C>            <C>       <C>            <C>
                                        ACCUMULATED                            ACCUMULATED
                            GROSS      AMORTIZATION    NET           GROSS     AMORTIZATION    NET
                        -------------  ------------  --------       --------  -------------  --------
Trademarks, Copyrights  $     544,369  $    156,366  $388,003       $544,369  $     138,320  $406,049
Non=Compete Agreements         73,000        35,500    37,500         52,000         25,500    26,500
                        -------------  ------------  --------       --------  -------------  --------
                        $     617,369  $    191,866  $425,503       $596,369  $     163,820  $432,549
                        =============  ============  ========       ========  =============  ========
</TABLE>
                                        7
<PAGE>

The Company recorded amortization expense of $28,046 during the first six months
of  2004  compared to $38,256 during the first half of 2003.  The Company has no
intangible  assets  not  subject  to  amortization under SFAS 142.  Based on the
current  amount  of  intangible  assets  subject  to amortization, the estimated
amortization  expense  for  each  of  the  succeeding  5  years  is  as follows:

<TABLE>
<CAPTION>

<S>             <C>               <C>             <C>                <C>
                LEATHER FACTORY   TANDY LEATHER   ROBERTS, CUSHMAN    TOTAL
               ----------------   -------------   ----------------   -------
   2004        $          5,954   $      54,004   $              0   $59,958
   2005                   5,954          38,004                  0    43,958
   2006                   5,954          37,337                  0    43,291
   2007                   5,954          36,504                  0    42,458
   2008                   5,954          33,337                  0    39,291
</TABLE>
Revenue  Recognition

The  Company recognizes revenue for over-the-counter sales as transactions occur
and  other sales upon shipment of product provided that there are no significant
post-delivery  obligations to the customer and collection is reasonably assured,
which  generally  is  the case.  Net sales represent gross sales less negotiated
price  allowances,  product  returns,  and allowances for defective merchandise.

Recent  Accounting  Pronouncements

In  January 2003, the Financial Accounting Standards Board (FASB) issued FIN 46,
"Consolidation  of  Variable  Interest  Entities  (VIE's)," an Interpretation of
Accounting  Research Bulletin No. 51.  FIN 46 requires certain variable interest
entities  (VIEs)  to be consolidated by the primary beneficiary of the entity if
the  equity  investors  in  the  entity  do  not  have  the characteristics of a
controlling  financial interest or do not have sufficient equity at risk for the
entity  to  finance  its  activities  without  additional subordinated financial
support  from other parties.  In December 2003, the FASB issued FIN 46R (revised
December  2003) which delayed the application of FIN 46 to TLF until the interim
period ended March 31, 2004, and provides additional technical clarifications to
implementation  issues.  The  application  of this interpretation did not have a
material  impact  on  the  Company's  consolidated  financial  statements.

2.  STOCK-BASED  COMPENSATION

The  Company  accounts  for stock options granted to its directors and employees
using  the  intrinsic  value  method  prescribed  by  APB  No. 25 which requires
compensation  expense  be  recognized  for  stock options when the quoted market
price  of  the  Company's common stock on the date of grant exceeds the option's
exercise  price.  No  compensation cost has been reflected in net income for the
granting  of  director  and employee stock options as all options granted had an
exercise price equal to the quoted market price of the Company's common stock on
the  date  the  options  were  granted.

Had compensation cost for the Company's stock options been determined consistent
with  the  SFAS 123 fair value approach, the Company's net income and net income
per common share for the three and six months ended June 30, 2004 and 2003, on a
pro  forma  basis,  would  have  been  as  follows:
                                        8
<PAGE>

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED            SIX MONTHS ENDED
                                                          JUNE 30,                     JUNE 30,
<S>                                             <C>           <C>             <C>           <C>
                                                     2004         2003           2004          2003
                                                ------------  ------------    ----------    ----------
Net income, as reported                         $    516,213  $    778,704    $1,487,178    $1,553,222

Add: Stock-based compensation expense
included in reported net income                            -             -             -             -

Deduct: Stock-based compensation expense
 determined under fair value method                   27,145        20 266        54,290        40,533
                                                ------------  ------------    ----------    ----------
Net income, pro forma                           $    489,068  $    758,438    $1,432,888    $1,512,689
                                                ============  ============    ==========    ==========

Net income per share:
Basic - as reported                             $       0.05  $       0.08    $    0.14     $     0.15
Basic - pro forma                               $       0.05  $       0.07    $    0.14     $     0.15

Diluted - as reported                           $       0.05  $       0.07    $    0.14     $     0.14
Diluted - pro forma                             $       0.04  $       0.07    $    0.13     $     0.14

</TABLE>
The  fair  values  of stock options granted were estimated on the dates of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions:  risk-free  interest  rate  of  3.125% and 2.62% for 2004 and 2003,
respectively; dividend yields of 0% for both periods; volatility factors of .696
for  2004  and  .725  for  2003; and an expected life of the valued options of 5
years.

3.  EARNINGS  PER  SHARE
The following table sets forth the computation of basic and diluted earnings per
share  ("EPS"):
<TABLE>
<CAPTION>

                                                        THREE MONTHS ENDED         SIX MONTHS ENDED
                                                             JUNE 30,                   JUNE 30,
<S>                                                   <C>         <C>           <C>          <C>
                                                          2004       2003         2004         2003
                                                      ----------  ----------    -----------  -----------
Numerator:
  Net  income                                         $  516,213  $  778,704    $ 1,487,178  $ 1,553,222
                                                      ----------  ----------    -----------  -----------
  Numerator for basic and diluted earnings per share     516,213     778,704      1,487,178    1,553,222

Denominator:
  Weighted-average shares outstanding-basic           10,553,243  10,234,054     10,530,119   10,205,900

Effect of dilutive securities:
  Stock options                                          416,580     398,684        441,999      423,109
  Warrants                                                36,815     172,281         39,407      173,668
                                                      ----------  ----------    -----------  -----------
Dilutive potential common shares                         453,395     570,965        481,406      596,777
                                                      ----------  ----------    -----------  -----------
Denominator for diluted earnings per share:
  Weighted-average shares                             11,006,638  10,805,019     11,011,525   10,802,677
                                                      ==========  ==========    ===========  ===========

  Basic earnings per share                            $     0.05  $     0.08    $      0.14  $      0.15
                                                      ==========  ==========    ===========  ===========
  Diluted earnings per share                          $     0.05  $     0.07    $      0.14  $      0.14
                                                      ==========  ==========    ===========  ===========
</TABLE>
The  net  effect  of  converting  stock  options to purchase 637,500 and 684,700
shares  of common stock at option prices less than the average market prices has
been  included  in  the computations of diluted EPS for the three and six months
ended  June  30,  2004  and  2003,  respectively.

                                        9
<PAGE>

4.  SEGMENT  INFORMATION

The  Company  identifies  its segments based on the activities of three distinct
businesses:

a.     The Leather Factory, which sells primarily to wholesale customers through
a  chain of 30  wholesale centers located  in  the  United  States  and  Canada;

b.     Tandy  Leather Company, which sells primarily to retail customers through
a  chain  of  retail  stores  located  in  the  United  States;  and

c.     Roberts,  Cushman  &  Company,  manufacturer of decorative hat trims sold
directly  to  hat  manufacturers  and  distributors.

The  Company's  reportable operating segments have been determined as separately
identifiable business units.  The Company measures segment earnings as operating
earnings,  defined  as  income  before  interest  and  income  taxes.

<TABLE>
<CAPTION>
<S>                                   <C>               <C>             <C>               <C>
                                      LEATHER FACTORY   TANDY LEATHER   ROBERTS,CUSHMAN      TOTAL
                                      ---------------   -------------   ---------------   ------------
FOR THE QUARTER ENDED JUNE 30, 2004
Net sales                             $     7,423,795   $   2,972,746   $       563,272   $10,959,813
Gross profit                                3,978,355       1,848,618           154,086     5,981,059
Operating earnings                            645,146         190,756            17,934       853,836
Interest expense                              (12,471)              -                 -       (12,471)
Other, net                                    (26,196)            843                 -       (25,353)
                                                                                          ------------
Income before income taxes                    606,479         191,599            17,934       816,012
                                                                                          ------------
     Depreciation and amortization             93,351          27,716             2,216       123,283
     Fixed asset additions                      7,972          37,348             3,615        48,935
     Total assets                     $    16,224,401   $   3,248,015  $        929,913   $20,402,329
                                      ---------------   -------------  ----------------   ------------

FOR THE QUARTER ENDED JUNE 30, 2003
Net sales                             $     7,801,742   $   2,113,479  $        545,454   $10,460,675
Gross profit                                4,182,812       1,325,072           213,170     5,721,054
Operating earnings                            918,434         166,230            69,800     1,154,464
Interest expense                              (70,468)              -                 -       (70,468)
Other, net                                     43,091             614                 -        43,705
                                                                                          ------------
Income before income taxes                    891,057         166,844            69,800     1,127,701
                                                                                          ------------
     Depreciation and amortization            129,328          18,247             2,521       150,096
     Fixed asset additions                    112,605          62,944               856       176,405
     Total assets                         $16,163,098   $   3,078,121  $        925,018   $20,166,237
                                      ---------------   -------------  ----------------   ------------

                                      LEATHER FACTORY   TANDY LEATHER   ROBERTS,CUSHMAN      TOTAL
                                      ---------------   -------------   ---------------   ------------
FOR THE SIX MONTHS ENDED JUNE 30, 2004
Net sales                             $    15,866,885   $   6,139,484  $      1,134,320   $23,140,689
Gross profit                                8,554,193       3,775,267           376,512    12,705,972
Operating earnings                          1,718,178         492,322            90,470     2,300,970
Interest expense                              (26,109)              -                 -       (26,109)
Other, net                                    (27,998)            909                 -       (27,089)
                                                                                          ------------
Income before income taxes                  1,664,071         493,231            90,470     2,247,772
                                                                                          ------------
     Depreciation and amortization            195,379          52,869             4,453       252,701
     Fixed asset additions                     47,709          75,391             7,950       131,050
     Total assets                     $    16,224,401   $   3,248,015  $        929,913   $20,402,329
                                      ---------------   -------------  ----------------   ------------

FOR THE SIX MONTHS ENDED JUNE 30, 2003
Net sales                             $    16,003,000   $   3,978,018  $      1,039,742   $21,020,760
Gross profit                                8,480,314       2,506,403           379,841    11,366,558
Operating earnings                          1,842,071         313,223           114,842     2,270,136
Interest expense                             (133,820)              -                 -      (133,820)
Other, net                                     74,381             142                 -        74,523
                                                                                          ------------
Income before income taxes                  1,782,632         313,365           114,842     2,210,839
                                                                                          ------------
     Depreciation and amortization            235,695          34,086             5,346       275,127
     Fixed asset additions                    152,102         117,419               856       270,377
     Total assets                     $    16,163,098   $   3,078,121  $        925,018   $20,166,237
                                      ---------------   -------------  ----------------   ------------
</TABLE>

Net  sales  for  geographic  areas  were  as  follows:
<TABLE>
<CAPTION>
                     THREE MONTHS ENDED JUNE 30,        SIX MONTHS ENDED JUNE 30,
                     --------------------------        --------------------------
<S>                  <C>            <C>                <C>           <C>
                         2004           2003               2004          2003
United States        $ 10,198,130   $ 9,711,785        $21,483,986   $19,582,421
All other countries       761,683       748,890          1,656,703     1,438,339
                     ------------   -----------        -----------   -----------
                     $ 10,959,813   $10,460,675        $23,140,689   $21,020,760
                     ============   ===========        ===========   ===========
</TABLE>
Geographic  sales  information  is  based  on the location of the customer.  Net
sales  from no single foreign country was material to the Company's consolidated
net sales for the three and six month periods ended June 30, 2004 and 2003.  The
Company  does  not  have any significant long-lived assets outside of the United
States.


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

The  Leather  Factory,  Inc.  ("TLF" or the "Company") 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" or
"Tandy  Leather"), and Roberts, Cushman & Company, Inc. ("Cushman").  See Note 4
to  the  Consolidated Financial Statements for additional information concerning
the  Company's  segments,  as  well  as  its  foreign  operations.

Leather  Factory,  founded  in  1980,  distributes leather and related products,
including  leatherworking  tools, buckles and adornments for belts, leather dyes
and  finishes,  saddle  and tack hardware, and do-it-yourself kits. The products
are sold primarily through 30 company-owned wholesale centers located throughout
the  United  States  and  Canada.

Tandy  Leather,  founded  in  1919,  is  the  best-known supplier of leather and
related  supplies  used  in the leathercraft industry.  Products include quality
tools,  leather,  accessories,  kits  and teaching materials.  In early 2002, we
initiated a plan to expand Tandy by opening retail stores.  As of June 30, 2004,
we  have  opened  32  Tandy  Leather retail stores located throughout the United
States.

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

CRITICAL  ACCOUNTING  POLICIES

A  description of the Company's critical accounting policies appears in "Item 2.
Management's  Discussions  and  Analysis  of  Financial Condition and Results of
Operations"  in  the  Company's  Annual  Report  on Form 10-K for the year ended
December  31,  2003.

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

The following tables present selected financial data on the operating results of
each  of the Company's three segments for the quarters and six months ended June
30,  2004  and  2003:

<TABLE>
<CAPTION>

                  QUARTER ENDED JUNE 30, 2004        QUARTER ENDED JUNE 30, 2003
                  --------------------------         ---------------------------
                                  OPERATING                           OPERATING
                     SALES          INCOME                SALES        INCOME
                  -------------   ----------           -----------   ----------
<S>               <C>             <C>                  <C>           <C>
Leather Factory   $   7,423,795   $  645,146           $ 7,801,742   $  918,434
Tandy                 2,972,746      190,756             2,113,479      166,230
Cushman                 563,272       17,934               545,454       69,800
                  -------------   ----------           -----------   ----------
Total Operations  $  10,959,813   $  853,836           $10,460,675   $1,154,464
                  =============   ==========           ===========   ==========

                SIX MONTHS ENDED JUNE 30, 2004      SIX MONTHS ENDED JUNE 30, 2003
                ------------------------------      ------------------------------
                                  OPERATING                           OPERATING
                     SALES          INCOME                SALES        INCOME
                  -------------   ----------           -----------   ----------
Leather Factory   $  15,866,885  $ 1,718,178           $16,003,000   $1,842,071
Tandy                 6,139,484      492,322             3,978,018      313,223
Cushman               1,134,320       90,470             1,039,742      114,842
                  -------------   ----------           -----------   ----------
Total Operations  $  23,140,689  $ 2,300,970           $21,020,760   $2,270,136
                  =============   ==========           ===========   ==========
</TABLE>
                                       10
<PAGE>

Consolidated  net  sales for the quarter ended June 30, 2004 increased $499,000,
or  4.8%,  compared  to the same period in 2003.  Tandy contributed $859,000 and
Cushman recorded a gain of $18,000.  Leather Factory's sales were down $378,000.
Operating income on a consolidated basis for the quarter ended June 30, 2004 was
down  26%  or  $300,000  over  the  second  quarter  of  2003.

Consolidated  net  sales  for  the six months ended June 30, 2004 increased $2.1
million,  or  10%,  compared to the same period in 2003.  Tandy contributed $2.2
million  of  the sales gain while Cushman added $95,000.  Leather Factory's 2004
sales  were  down  $136,000  from  those  of  a year ago.  Operating income on a
consolidated basis for the six months ended June 30, 2004 was up 1.4% or $31,000
over  last  year.

The  following  table  shows in comparative form our consolidated net income for
the  second  quarter  and  six  months  ended  June  30,  2004  and  2003:

<TABLE>
<CAPTION>

<S>                 <C>                      <C>                   <C>
                    QUARTER ENDED            QUARTER ENDED
                       06/30/04                06/30/03            % CHANGE
                    -------------            -------------         --------
Net income          $     516,213            $     778,704          (33.7%)
                    =============            =============         ========

                   SIX MONTHS ENDED        SIX MONTHS ENDED
                       06/30/04                06/30/03            % CHANGE
                    -------------            -------------         --------
Net income          $   1,487,178            $   1,553,222           (4.2%)
                    =============            =============         ========
</TABLE>

LEATHER  FACTORY  OPERATIONS

Net  sales  from  Leather  Factory's 30 wholesale centers decreased 4.8% for the
second  quarter  of  2004  as  follows:

<TABLE>
<CAPTION>
                                       QUARTER ENDED
<S>                                 <C>         <C>         <C>         <C>
                                     06/30/04    06/30/03   $  CHANGE   % CHANGE
                                    ----------  ----------  ---------   --------
Sales, excluding NATIONAL ACCOUNTS  $6,223,275  $5,952,823  $ 270,452        4.5%
NATIONAL ACCOUNT sales               1,200,520   1,848,919   (648,399)    (35.1)%
                                    ----------  ----------  ---------   --------
Total sales                         $7,423,795  $7,801,742  $(377,947)     (4.8)%
                                    ==========  ==========  ==========  =========
</TABLE>

As  shown  by  the  table  above, the Leather Factory wholesale centers achieved
solid  sales gains, excluding the impact of the NATIONAL ACCOUNT customer group.
The  4.5%  increase  is  at the upper end of management's expectations for sales
growth  of  2-4%.  Sales  to our WHOLESALE customer group continues its positive
momentum  as  we  are  still  benefiting from the advertising initiatives put in
place  in  late 2003.  Sales to our NATIONAL ACCOUNTS were down significantly in
the second quarter of 2004 and were also down in the first quarter of this year.
Although  there can be no assurance, we are optimistic that these decreases are
only  temporary.  For  example, we understand that there have been some internal
changes with several national customers, such as changes in purchasing personnel
and  the  implementation of new automated inventory and purchasing systems, that
have  impacted  the  timing and amount of their purchases from us.  Even if this
optimism  is  correct, we may not see any significant improvement in these sales
until  the  fourth  quarter  of 2004 or later.  We are currently redesigning our
sales  strategy in order to increase the customer base and diversify the revenue
from  this  customer  group.

The  following  table  presents  TLF's  sales mix by customer categories for the
quarters  ended  June  30,  2004  and  2003:
<TABLE>
<CAPTION>
                                                                                         QUARTER  ENDED
<S>                                                                                    <C>         <C>
CUSTOMER GROUP                                                                         06/30/04    06/30/03
--------------                                                                         --------    --------
  RETAIL (end users, consumers, individuals)                                                21%         19%
  INSTITUTION (prisons, prisoners, hospitals, schools, youth organizations, etc)             9          10
  WHOLESALE (resellers & distributors, saddle & tack shops, authorized dealers, etc)        45          39
  NATIONAL ACCOUNTS                                                                         18          24
  MANUFACTURERS                                                                              7           8
                                                                                       --------    --------
                                                                                           100%        100%
                                                                                       ========    ========
</TABLE>

Operating  income  for Leather Factory decreased $273,000 for the second quarter
compared  to  2003,  a  decline of 30%.  Gross profit margins remained steady at
53.6%  for the second quarters of 2004 and 2003.  The decrease in sales resulted
in  a decline in gross profit dollars of $204,000.  Operating expenses increased
$69,000,  or  2.1%, in the second quarter of 2004.  The cost of health insurance
benefits  for  employees  accounted  for  the majority of the increase over last
year.  Management  is  cautiously  optimistic  with the progress we have made to
contain  our  operating  expenses  during  the quarter.  However, our success is
somewhat  clouded  by  the sales loss as the percentage of operating expenses to
sales  appears  to  be high.  A large number of expenses actually decreased this
quarter  compared  to  a  year  ago.
                                       11
<PAGE>

TANDY  LEATHER  OPERATIONS

The  Tandy  Leather retail store chain has grown from 22 stores at June 30, 2003
to  32  a  year  later.  Net  sales  for Tandy were up approximately 41% for the
second  quarter  of  2004  over  the  same  quarter  last  year.

<TABLE>
<CAPTION>

<S>                                      <C>         <C>         <C>        <C>
                                         QTR ENDED   QTR ENDED   $   INCR   % INCR
                                            6/30/04     6/30/03     (DECR)   (DECR)
                                         ----------  ----------  --------   -------
Same store sales (22 stores)             $2,306,231  $2,112,150  $194,081      9.2%
New or acquired store sales (10 stores)     666,515           -   666,515      ***
Closed store (order fulfillment house)            -       1,329    (1,329)  (100.0)
                                         ----------  ----------  --------   -------
Total sales                              $2,972,746  $2,113,479  $859,267     40.7%
                                         ==========  ==========  =========  =======
</TABLE>

Sales  in the current quarter showed healthy growth.  The "same stores" continue
to  post  strong  gains.  Average sales per month for stores that have been open
for  at least six months as of June 30, 2004 is $36,000, which continues to beat
our  internal  expectations  of  $30,000  per  month  per  store.

The  following  table  presents Tandy Leather's sales mix by customer categories
for  the  quarters  ended  June  30,  2004  and  2003:

<TABLE>
<CAPTION>
                                                                                         QUARTER  ENDED
<S>                                                                                    <C>         <C>
CUSTOMER GROUP                                                                         06/30/04    06/30/03
--------------                                                                         --------    --------
  RETAIL (end users, consumers, individuals)                                                68%         67%
  INSTITUTION (prisons, prisoners, hospitals, schools, youth organizations, etc)            10          10
  WHOLESALE (resellers & distributors, saddle & tack shops, authorized dealers, etc)        22          23
  NATIONAL ACCOUNTS                                                                          *           *
  MANUFACTURERS                                                                              *           *
                                                                                       --------    --------
                                                                                           100%        100%
                                                                                       ========    ========
<FN>
     *  less  than  1%
</TABLE>

Second  quarter operating income for Tandy Leather increased $25,000 or 15% over
operating  income  in last year's second quarter.  Gross profit margins declined
0.5%  from  62.7%  to  62.2%  for  the  quarter  due primarily to limitations in
increasing  selling prices to match cost increases.   Tandy's selling prices are
set  at  the  time  the  product  catalog  is  produced.  The latest catalog was
distributed  in  January  2004.  As  a result, it is difficult to initiate price
increases  to  customers  until  we  distribute a new catalog.  Historically, we
distribute our new catalog at the beginning of each calendar year.  However, due
to  the  cost  increases in metals, etc. this year and the need to pass on these
increases,  we  will  be  distributing  a  new  catalog  on  November  1.

Operating  expenses were 55.8% of sales in the current quarter compared to 54.8%
in the same quarter last year.  The expenses associated with opening the six new
stores  so  far  in  2004, such as additional personnel, rents, utilities, etc.,
accounted  for  the  operating  expense  increase  over  last  year.

ROBERTS,  CUSHMAN  OPERATIONS

Net  sales for Cushman increased $18,000 for the second quarter of 2004 over the
second  quarter  of  2003,  although  operating  income  decreased $52,000.  The
increase in sales is the result of an increase in orders from hat manufacturers.
However,  the  sales mix is more heavily weighted toward the production of bands
(pure  manufacturing  achieves lower margins) rather than the sale of components
that  require  no  manufacturing (and as a result, earn higher margins).   Also,
due to the nature of this business, samples are made and product is priced up to
six  months  before  the bands are actually produced.  As a result, there is the
possibility  that,  if cost of raw materials increases from the time of quote to
the  time  of  production  and  that  cost  increase  cannot be passed on to the
customer, our gross profit margin will decrease.  We experienced this during the
second  quarter  due  to fluctuations in metal prices, etc. and should have been
more  aggressive with our vendors and customers to try to minimize the impact to
us.  Operating  expenses  decreased  $7,000  for  the  quarter.

OTHER  EXPENSES

Interest expense in the second quarter of 2004 was $12,000, down from $70,000 in
the  second  quarter  of 2003.  The decrease was attributable to the decrease in
our  average  debt  balance  for  the  first six months of 2004 to $1.4 million,
compared  to $4.5 million for the first six months of 2003.  We added $75,000 to
our  reserve for uncollectible accounts in 2004 in connection with the increased
investment  in  accounts  receivable  described  below.
                                       12
<PAGE>

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

On  our consolidated balance sheet, total assets increased from $19.0 million at
year-end  2003  to  $20.4 million at June 30, 2004.  An increase in inventory of
$1.1  million  and accounts receivable of $867,000 accounted for the increase in
total  assets,  partially  offset  by  a  decrease  in  cash of $546,000.  Total
stockholders'  equity increased from $14.5 million at December 31, 2003 to $16.1
million  at  June  30,  2004.  The  increase  in  equity  is attributable to the
earnings  in  the  first  half  of  the  year.

Our investment in inventory was $12.2 million at June 30, 2004 compared to $11.1
million  at  December  31,  2003.  Inventory turnover increased to an annualized
rate of 3.98 times during the first six months of 2004, an improvement from 3.52
times for the first half of 2003 and 3.51 times for all of 2003.  We compute our
inventory turns as sales divided by average inventory.  As we stated in our 2003
Form  10-K,  we  expect  our inventory to slowly trend upward as we continue our
expansion of the Tandy Leather store chain.  However, we continually analyze our
inventory  levels  as  inventory  management  is  a  significant  factor  in our
financial  position.  Our  inventory  at  June  30,  2004  was  within 5% of our
internal  optimal  targets.

Credit  sales  increased  in  the  first  six  months of 2004, and the Company's
investment in accounts receivable was $2.7 million at June 30, 2004, up $867,000
from  $1.8  million  at  year-end  2003.  Consolidated  average  days to collect
accounts  improved  slightly  over the first half of 2003 from 43.3 days to 42.8
days.  Cushman  posted the most improvement in average days to collect accounts,
from  68.2  days  to  51.1  days  outstanding.  Tandy Leather's days outstanding
decreased  in the first half of 2004 compared to 2003, from 43.7 in 2003 to 41.1
days  in 2004, while Leather Factory's days outstanding increased from 40.2 days
in  2003  to  41.7  days  in  2004.

Accounts  payable  increased  $343,000  to $1.9 million at the end of the second
quarter, due primarily to the increase in inventory purchases during the period.
Accrued  expenses and other liabilities increased $102,000, from $1.0 million at
December  31,  2003  to  $1.1  million  at  June  30,  2004.

At  June  30,  2004,  our ratio of debt to equity was 0.07, an improvement from
December 31, 2003 at which time the debt-to-equity ratio was 0.12.  Our current
ratio  fell  to  5.71  at  June  30,  2004,  from  6.16  at  the  end  of  2003.

During  the  first half of 2004, cash flows provided by operating activities was
$263,000.  Net  income,  reduced  by  the increase in inventory from year-end to
June  30, 2004, accounted for the majority of the cash flow.  Cash flows used in
investing  activities  totaled $244,000.  Capital expenditures for the first six
months  of  2004  totaled $131,000.  The asset purchases of the Syracuse, NY and
St. Louis, MO Tandy Leather retail stores required $125,000.  Cash flows used by
financing activities was $565,000 during the first half of 2004.  The funds were
primarily used to reduce the principal balance of our revolving credit facility.

At December 31, 2003, our bank debt totaled $1.8 million.  At June 30, 2004, the
balance  was  $1.1  million,  a decrease of 39% in the first six months of 2004.
From  June  30,  2003,  we  have  repaid  $3.7  million  on  our  bank  debt.

We  expect  to  fund  our  operating  and liquidity needs as well as our current
expansion  of  Tandy  Leather's retail store chain from a combination of current
cash balances, internally generated funds and our revolving credit facility with
our  lender.  The borrowing base on our revolving line of credit is based on the
level  of  our  accounts  receivable  and  inventory.    At  June  30, 2004, the
available, unused portion of the credit facility was approximately $3.9 million.

                                       13
<PAGE>

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

This  report  (particularly  Items  2,  3  and  4  of  this  Part  I)  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 which could cause actual
results  to  differ  materially  from  those  suggested  by  the forward-looking
statements  include,  among  other  things:

     We  may  fail  to  realize the anticipated benefits of the opening of Tandy
Leather  retail stores or we may be unable to obtain sufficient new locations on
acceptable  terms  to meet our growth plans.  Also, other retail initiatives may
not  be  successful.

When  we  acquired  the  assets  of Tandy Leather in late 2000, there was only a
single  Tandy  Leather  distribution  center and no retail outlets.  In 2002, we
began  a program of developing Tandy Leather retail stores, and through June 30,
2004,  we have added 32 Tandy Leather stores and closed the distribution center.

We  believe that these store openings and acquisitions have been successful, but
there  can  be  no  assurance that this success will continue or that we will be
able to find additional locations for new stores or existing leathercraft stores
to  acquire  on  economically  viable  terms.  Because,  in  recent  years,  the
expansion  of  Tandy  Leather  has produced much of the increase in our profits,
disruption of this expansion would likely slow or stop this increase in profits.
Also,  both  our  Leather Factory and Tandy Leather segments depend on marketing
efforts  to support sales.  Recently we conducted an advertising campaign at the
Leather  Factory  that  failed  to generate anticipated sales.  While we believe
this  was  caused  by a change in the format of our advertising, there can be no
assurance  that  future  advertising  will  be  successful.

     Recent  declines  in  sales  to  national  accounts  by our Leather Factory
operation  could  continue.

Sales to national accounts by our Leather Factory operation decreased at the end
of  2003  and were also down in the first six months of 2004.  We are working to
reverse  this  trend, but, if it continues, our consolidated net income could be
reduced.

     Political  considerations  here  and  abroad  could  disrupt our sources of
supplies  from  abroad  or  affect  the  prices  we  pay  for  goods.  Continued
involvement  by  the  United  States in war and other military operations in the
Middle  East and other areas abroad could disrupt international trade and affect
the  Company's  inventory  sources.

Recent  political  discussions  have  suggested  that  the  United States impose
barriers on the importation of certain goods.  We rely heavily on imported goods
as sources of the inventory we sell.  Tariffs, taxes and limits on these imports
could  affect  our  ability to obtain inventory or increase the price we pay for
inventory.  If  these  disruptions  occur,  our  operations  could  be adversely
affected.

Also,  the  involvement  of  the  United  States  in  the  war  in  Iraq and the
anti-terrorist  activities  in  Afghanistan  have produced political uncertainty
and, in certain countries, resentment against the United States and its citizens
and companies.  These issues may also affect our ability to obtain products from
abroad.

     If,  for  whatever  reason,  the  costs  of our raw materials and inventory
increase,  we  may  not  be  able  to  pass  those  costs  on  to our customers,
particularly  if  the  economy  has  not  recovered  from  its  downturn.

The  prices  of  hides  and  leathers  fluctuate  in  normal  times,  and  these
fluctuations  can  affect the Company.  Livestock diseases such as mad cow could
reduce  the  availability  of  hides  and  leathers  or  increase  their  cost.

     We believe that the recent rise in oil and natural gas prices will increase
the costs of the goods that we sell, including the costs of shipping those goods
from  the  manufacturer  to  our  stores  and  customers.

Various  oils  used to manufacture certain leather and leathercrafts are derived
from petroleum and natural gas.  Also, the carriers who transport our goods rely
on  petroleum-based  fuels  to  power  their ships, trucks and trains.  They are
likely  to  pass their increased costs on to us.  We are unsure how much of this
increase  we  will  be  able  to  pass  on  to  our  customers.

     The  recent  slump  in the economy in the United States, as well as abroad,
may  cause  our  sales  to  decrease  or not to increase or adversely affect the
prices  charged  for our products.  Also, hostilities, terrorism or other events
could  worsen  this  condition.

Recently,  the  world  economy  has  shown  signs of recovering from an economic
slump.  However,  this  recovery  is  not  yet  complete,  and  there  can be no
assurance  that  increased  oil and gas prices, terrorism, or other factors will
not  impede  this  recovery.  Continuation or worsening of the economic slump is
likely  to  limit  or  decrease  our  profits.

In  addition,  terrorism or the threat of terrorist attacks in the United States
or  against  U.S.  interests abroad could cause consumer buying habits to change
and  decrease  our  sales.  We believe that major disruptions (such as terrorist
attacks) could reduce consumer spending, particularly purchases of non-essential
products  such  as  ours.

Other  factors  could  cause  either fluctuations in buying patterns or possible
negative  trends  in  the  craft  and  western  retail markets. In addition, our
customers  may change their preferences to products other than ours, or they may
not  accept  new  products  as  we  introduce  them.

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

                                       14
<PAGE>

ITEM  3.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK.

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


ITEM  4.  CONTROLS  AND  PROCEDURES

At the end of the second quarter of 2004, our President, Chief Executive Officer
and  Chief  Financial  Officer  evaluated  the  effectiveness  of the design and
operation  of  our disclosure controls and procedures pursuant to Rule 13a-15(b)
under  the  Securities  Exchange  Act  of 1934, as amended (the "Exchange Act").
Based  upon  this  evaluation,  they  concluded that, subject to the limitations
described  below,  the  Company's  disclosure  controls  and  procedures  offer
reasonable  assurance  that  the  information  required  to  be disclosed by the
Company  in  the reports it files under the Exchange Act is recorded, processed,
summarized,  and  reported  within  the  time periods specified in the rules and
forms  adopted  by  the  Securities  and  Exchange  Commission.

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

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

PART  II.  OTHER  INFORMATION

ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

On  May 26, 2004, the Annual Meeting of the Stockholders of the Company was held
in  the Hall of Fame Room at the Wyndham Hotel, Arlington, Texas to consider and
act on the election of the following individuals to serve as directors until the
Company's 2005 Annual Meeting of Stockholders or until their successors are duly
elected  and  qualified:

          Shannon  L.  Greene     Michael A. Markwardt          Joseph R. Mannes
          T.  Field  Lange        Ronald  C.  Morgan              Wray  Thompson
                       Michael  A.  Nery     H.W.  "Hub"  Markwardt

The  following table shows the votes cast for and against, as well as those that
abstained  from  voting,  the  election of these individuals as directors of the
Company:
<TABLE>
<CAPTION>
<S>                   <C>             <C>           <C>
                         For          Against       Abstaining
                      ---------       -------       ----------
Shannon L Greene      9,556,122         2,930            4,170
T Field Lange         9,548,463         5,585            9,174
Joseph R Mannes       9,548,963         5,085            9,174
HW "Hub" Markwardt    9,338,149       215,899            9,174
Michael A Markwardt   9,548,213         5,835            9,174
Ronald C Morgan       9,556,472         2,580            4,170
Michael A Nery        9,555,967         3,085            4,170
Wray Thompson         9,552,187         3,055           12,984
</TABLE>
The  Company's proxy statement dated April 23, 2004, for the 2004 Annual Meeting
of Stockholders, provided detailed information about this meeting and the action
to  be  taken  there.
                                       15
<PAGE>

ITEM  5.  OTHER  INFORMATION

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

This  offer  terminates  on  August  30,  2004,  unless sooner terminated by the
Company.  At  June 30, 2004 we had approximately 300 registered stockholders who
held  fewer than 100 shares of our common stock and another 200 stockholders who
held  less  than  100  shares  in  brokerage  accounts.

In  addition to benefiting the Company, we believe this offer will be beneficial
to  investors with small holdings by allowing them the opportunity to sell their
shares  without  the  expense  of  selling  them  in  the  market.

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)  Exhibits
     --------
<TABLE>
<CAPTION>

<S>      <C>
EXHIBIT
NUMBER   EXHIBIT
-------- -------
31.1     13a-4(a) Certification by Wray Thompson, Chairman of the Board and Chief Executive Officer
31.2     13a-4(a) Certification by Shannon L Greene, Chief Financial Officer and Treasurer
 32      Certification Pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
</TABLE>

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

On  April 28, 2004, the Company filed a report on Form 8-K in which we furnished
under Items 7 and 12 the press release entitled "The Leather Factory Expects Net
Income  Up 25% for First Quarter 2004" relating to certain preliminary financial
information  for  the  quarter  ended  March  31,  2004.

On  April 29, 2004, the Company filed a report on Form 8-K in which we furnished
under Items 7 and 12 the press release entitled "The Leather Factory Reports 1st
Quarter  2004  Results  -  Net Income up 25% on Record Revenues" relating to the
results  of  our  first  quarter  ended  March  31,  2004.



                                   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:  August  9,  2004            By:   /s/  Wray  Thompson
                                        --------------------
                                        Wray  Thompson
                                        Chairman and Chief Executive Officer

Date:  August  9,  2004            By:  /s/Shannon  L.  Greene
                                        ----------------------
                                        Shannon  L.  Greene
                                        Chief  Financial Officer and Treasurer
                                        (Chief Accounting Officer)

                                       16
<PAGE>



EXHIBIT  31.1
                           RULE 13A-4(A) CERTIFICATION

I,  WRAY  THOMPSON,  certify  that:

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

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

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

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act Rules 13a-15(e) and 15d-15(e)) [language intentionally omitted SEC
Rel.  No.  33-8238]  for  the  registrant  and  have:

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

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

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

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

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

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

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

Date:     August  9,  2004
                                      /s/  Wray  Thompson
                                      -------------------
                                      Wray  Thompson
                                      Chairman  and  Chief  Executive  Officer
                                      (principal  executive  officer)
                                       17
<PAGE>

EXHIBIT  31.2
                           RULE 13A-4(A) CERTIFICATION

I,  SHANNON  L.  GREENE,  certify  that:

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

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

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

4.  The  registrant's  other  certifying  officer  and  I  are  responsible  for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act Rules 13a-15(e) and 15d-15(e)) [language intentionally omitted SEC
Rel.  No.  33-8238]  for  the  registrant  and  have:

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

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

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

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

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

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

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

Date:     August  9,  2004
                                   /s/  Shannon  L.  Greene
                                   -------------------------
                                   Shannon  L.  Greene
                                   Chief  Financial Officer and Treasurer
                                   (principal financial and accounting officer)
                                       18
<PAGE>


EXHIBIT  32.1


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

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

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

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


     August  9,  2004         By:  /s/  Wray  Thompson
                                   -------------------
                              WRAY  THOMPSON
                              CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER


     August  9,  2004         By:  /s/  Shannon  L.  Greene
                                   ------------------------
                              SHANNON  L.  GREENE
                              CHIEF  FINANCIAL  OFFICER  AND  TREASURER
                                       19
<PAGE>