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,  2003

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 (as
defined  in  Rule  12b-2  of  the  Exchange  Act).

                               Yes       No  X
                                  -----    ----

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

                      Class                          Shares  outstanding  as  of
                                                          October  31,  2003
----------------------------------------------       ---------------------------
Common  Stock,  par  value  $.0024  per  share                   10,470,161

                                        1
<PAGE>



                            THE LEATHER FACTORY, INC.

                                    FORM 10-Q

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003


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

<TABLE>
<CAPTION>
<S>                                                                    <C>                                 <C>
                                                                                                      PAGE NO.
                                                                                                      --------

PART I.  FINANCIAL INFORMATION

  Item 1.  Financial Statements

    Consolidated Balance Sheets
    September 30, 2003 and December 31, 2002                           ----------------------------------   3

    Consolidated Statements of Operations
     Three and nine months ended September 30, 2003 and 2002           ----------------------------------   4

    Consolidated Statements of Cash Flows
     Nine months ended September 30, 2003 and 2002                     ----------------------------------   5

    Consolidated Statements of Stockholders' Equity
      Nine months ended September 30, 2003 and 2002                    ----------------------------------   6

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

  Item 2.  Management's Discussion and Analysis of Financial
     Condition and Results of Operations                               ----------------------------------  11

  Item 3.  Quantitative and Qualitative Disclosures About Market Risk  ----------------------------------  18

PART II.  OTHER INFORMATION

  Item 4.  Controls and Procedures                                     ----------------------------------  18

  Item 6.  Exhibits and Reports on Form 8-K                            ----------------------------------  18


SIGNATURES                                                             ----------------------------------  19

</TABLE>

                                        2
<PAGE>
                            THE LEATHER FACTORY, INC.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                               SEPTEMBER 30,    DECEMBER 31,
<S>                                                                           <C>              <C>
                                                                                    2003            2002
                                                                              -------------    -------------
                                                                               (unaudited)
                               ASSETS
CURRENT ASSETS:
Cash                                                                          $      188,199   $     101,557
Cash restricted for payment on revolving credit facility                             510,155         553,839
Accounts receivable-trade, net of allowance for doubtful accounts of
   $45,000 and $78,000, respectively                                               2,329,505       1,938,698
Inventory                                                                         11,621,127      12,695,344
Prepaid income taxes                                                                  52,707          55,644
Deferred income taxes                                                                148,111         159,090
Other current assets                                                                 709,270         672,117
                                                                              ---------------  --------------
                    Total current assets                                          15,559,074      16,176,289
                                                                              ---------------  --------------

PROPERTY AND EQUIPMENT, at cost                                                    5,517,844       5,321,749
Less accumulated depreciation and amortization                                    (3,547,038)     (3,301,898)
                                                                              ---------------  --------------
                    Property and equipment, net                                    1,970,806       2,019,851

GOODWILL, net of accumulated amortization of $753,000 and $734,000
 in 2003 and 2002, respectively                                                      700,262         686,484
OTHER INTANGIBLES, net of accumulated amortization of $151,000 and $113,000
   in 2003 and 2002, respectively                                                    445,289         483,507
OTHER ASSETS                                                                         331,776         309,471
                                                                              ---------------  --------------
                                                                              $   19,007,207   $  19,675,602
                                                                              ===============  ==============

              LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable                                                              $    1,432,291   $   1,594,909
Accrued expenses and other liabilities                                               964,989       2,503,331
Notes payable and current maturities of long-term debt                             2,671,929       4,218,968
                                                                              ---------------  --------------
                    Total current liabilities                                      5,069,209       8,317,208
                                                                              ---------------  --------------

DEFERRED INCOME TAXES                                                                234,605         186,076

NOTES PAYABLE AND LONG-TERM DEBT, net of current maturities                                -           2,256

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,
   10,470,461 and 10,149,961 shares issued                                            25,129          24,360
Paid-in capital                                                                    4,488,819       4,163,901
Retained earnings                                                                  9,219,247       7,064,345
Less:  notes receivable secured by common stock                                      (20,000)        (44,003)
Accumulated other comprehensive loss                                                  (9,802)        (38,541)
                                                                              ---------------  --------------
                    Total stockholders' equity                                    13,703,393      11,170,062
                                                                              ---------------  --------------
                                                                              $   19,007,207   $  19,675,602
                                                                              ===============  ==============
</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 NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                            THREE MONTHS                  NINE MONTHS
                                                                    ----------------------------  ---------------------------
<S>                                                                 <C>             <C>            <C>           <C>
                                                                         2003           2002          2003           2002
                                                                    --------------  -------------  ------------  ------------
NET SALES                                                           $  10,119,070   $  9,484,730   $31,139,830   $ 29,740,717

COST OF SALES                                                           4,529,258      4,396,332    14,183,460     13,848,098
                                                                    --------------  -------------  ------------  ------------
          Gross profit                                                  5,589,812      5,088,398    16,956,370     15,892,619

OPERATING EXPENSES                                                      4,672,820      4,246,873    13,769,241     12,646,486
                                                                    --------------  -------------  ------------  ------------
INCOME FROM OPERATIONS                                                    916,992        841,525     3,187,129      3,246,133

OTHER INCOME (EXPENSE):
          Interest expense                                                (40,735)       (54,108)     (174,555)     (191,419)
          Other, net                                                       (6,089)       (18,578)       68,433       (45,199)
                                                                    --------------  -------------  ------------  ------------
               Total other income (expense)                               (46,824)       (72,686)     (106,122)     (236,618)
                                                                    --------------  -------------  ------------  ------------

INCOME BEFORE INCOME TAXES and CUMULATIVE EFFECT
  OF CHANGE IN ACCOUNTING PRINCIPLE.                                      870,168        768,839     3,081,007      3,009,515

PROVISION FOR INCOME TAXES                                                268,488        234,747       926,105        924,071
                                                                    --------------  -------------  ------------  ------------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE         601,680        534,092     2,154,902   $  2,085,444

CUMULATIVE EFFECT OF CHANGE IN ACCTG PRINCIPLE, net of income taxes             -              -             -    (4,008,831)
                                                                    --------------  -------------  ------------  ------------
NET INCOME (LOSS)                                                   $     601,680   $    534,092   $ 2,154,902   $(1,923,387)
                                                                    ==============  =============  ============  ============
</TABLE>

NET  INCOME  (LOSS)  PER  COMMON  SHARE  -  BASIC:
<TABLE>
<CAPTION>
<S>                                                                <C>    <C>    <C>    <C>
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE  $0.06  $0.05  $0.21  $ 0.21

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET. . . . .      -      -      -   (0.37)
                                                                   -----  -----  -----  -------
NET INCOME (LOSS) PER COMMON SHARE-BASIC  . . . . . . . . . . . .  $0.06  $0.05  $0.21  $(0.19)
                                                                   =====  =====  =====  =======
</TABLE>

NET  INCOME  (LOSS)  PER  COMMON  SHARE  -  DILUTED:
<TABLE>
<CAPTION>
<S>                                                                <C>    <C>    <C>    <C>
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE  $0.06  $0.05  $0.20  $ 0.19

CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET. . . . .      -      -      -   (0.37)
                                                                   -----  -----  -----  -------
NET INCOME (LOSS) PER COMMON SHARE-DILUTED. . . . . . . . . . . .  $0.06  $0.05  $0.20  $(0.18)
                                                                   =====  =====  =====  =======
</TABLE>

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


                            THE LEATHER FACTORY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                  NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

<TABLE>
<CAPTION>

                                                                             2003          2002
<S>                                                                      <C>           <C>
                                                                         ------------  ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                      $ 2,154,902   $(1,923,387)
  Adjustments to reconcile net income (loss) to net
   cash (used in) provided by operating activities-
     Depreciation & amortization                                             397,959       370,234
     Loss on disposal of assets                                                9,372             -
     Amortization of deferred financing costs                                      -        37,038
     Deferred income taxes                                                    59,508       (42,711)
     Other                                                                    14,960        (3,116)
     Cumulative effect of change in accounting principle                           -     4,008,831
     Net changes in assets and liabilities:
       Accounts receivable-trade, net                                       (390,808)     (102,459)
       Inventory                                                           1,074,217    (1,222,308)
       Income taxes                                                            2,936       (94,697)
       Other current assets                                                  (37,153)     (343,101)
       Accounts payable                                                     (162,618)      321,886
       Accrued expenses and other liabilities                             (1,538,342)      244,926
                                                                         ------------  ------------
     Total adjustments                                                      (569,969)    3,174,523
                                                                         ------------  ------------
      Net cash provided by operating activities                            1,584,933     1,251,136
                                                                         ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of property and equipment                                        (326,284)     (429,250)
  Payments in connection with businesses acquired                                  -      (227,747)
  Proceeds from sale of assets                                                 6,217             -
  Increase in other assets                                                   (22,305)     (415,809)
                                                                         ------------  ------------
      Net cash used in investing activities                                 (342,372)   (1,072,806)
                                                                         ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase (decrease) in revolving credit loans                       (1,544,417)     (601,043)
  Payments on notes payable and long-term debt                                (4,878)      (25,905)
  Decrease in cash restricted for payment on revolving credit facility        43,685         5,092
  Payments received on notes secured by common stock                          24,003        26,286
  Proceeds from issuance of common stock                                     325,688       120,300
                                                                         ------------  ------------
      Net cash used in financing activities                               (1,155,919)     (475,270)
                                                                         ------------  ------------
NET CHANGE IN CASH                                                            86,642      (296,940)

CASH, beginning of period                                                    101,557       409,040
                                                                         ------------  ------------
CASH, end of period                                                      $   188,199   $   112,100
                                                                         ============  ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Interest paid during the period                                        $   178,558   $   157,916
  Income taxes paid during the period, net of (refunds)                      819,602     1,076,313
</TABLE>

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

                            THE LEATHER FACTORY, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                   (UNAUDITED)
                  NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002

<TABLE>
<CAPTION>


                                                        Common Stock
                                             ---------------------------------
                                                  Number             Par           Paid-in       Retained
                                                of shares           value          capital       Earnings
                                             --------------  -----------------  --------------  -----------
<S>                                          <C>             <C>                <C>             <C>
BALANCE, December 30, 2001                       9,991,161   $          23,979  $    4,030,508  $ 8,478,187

Payments on notes receivable -
secured by common stock                                  -                   -               -            -

Shares issued - warrants and
employee stock options exercised                    73,000                 175          76,320            -

Net loss                                                 -                   -               -  (2,457,479)

Translation adjustment                                   -                   -               -            -
                                             --------------  -----------------  --------------  -----------
BALANCE, September 30, 2002                     10,064,161   $          24,154  $    4,106,828  $ 6,020,708
                                             ==============  =================  ==============  ===========

                                                            Notes         Accumulated
                                                         receivable         other
                                                        - secured by    comprehensive                    Comprehensive
                                                        common stock        loss             Total       Income (Loss)
                                                       --------------  ---------------  ---------------  -------------
<S>                                                    <C>             <C>              <C>              <C>
BALANCE, December 30, 2001                             $     (71,939)  $      (37,064)  $   12,423,671

Payments on notes receivable -
secured by common stock                                       24,636                -           24,636

Shares issued - warrants and
employee stock options exercised                                   -                -           76,495

Net loss                                                           -                -       (2,457,479)  $ (2,457,479)

Translation adjustment                                             -            3,197            3,197          3,197
                                                       --------------  ---------------  ---------------
BALANCE, September 30, 2002                            $     (47,303)  $      (33,867)  $   10,070,520
                                                       ==============  ===============  ===============
                                                                                                         -------------
Comprehensive loss for the nine months ended September 30, 2002                                           $(2,454,282)
                                                                                                         =============
</TABLE>

<TABLE>
<CAPTION>
                                                       Common Stock
                                             ---------------------------------
                                                 Number             Par               Paid-in         Retained
                                                of shares           value             capital         Earnings
                                             --------------  -----------------  ------------------  -----------
<S>                                             <C>             <C>                <C>              <C>
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 - warrants and
employee stock options exercised                   320,500                 769             198,537            -

Warrants to acquire 100,000
shares of common stock issued                            -                   -             126,381            -

Net income                                               -                   -                   -    2,154,902

Translation adjustment                                   -                   -                   -            -
                                             --------------  -----------------  ------------------  -----------
BALANCE, September 30, 2003                     10,470,461             $25,129          $4,488,819  $ 9,219,247
                                             ==============  =================  ==================  ===========


                                                  Notes         Accumulated
                                                 receivable         other
                                               - secured by    comprehensive                     Comprehensive
                                                common stock        loss             Total       Income (Loss)
                                               --------------  ---------------  ---------------  -------------
<S>                                            <C>             <C>              <C>              <C>
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 - warrants and
employee stock options exercised                           -                -          199,306

Warrants to acquire 100,000
shares of common stock issued                              -                -          126,381

Net income                                                 -                -        2,154,902   $ 2,154,902

Translation adjustment                                     -           28,739           28,739        28,739
                                               --------------  ---------------  ---------------
BALANCE, September 30, 2003                    $     (20,000)   $      (9,802)  $   13,703,393
                                               ==============  ===============  ===============
                                                                                                 ------------
Comprehensive income for the nine months ended September 30, 2003                                $  2,183,641
                                                                                                 ============
</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  necessary  to  present  fairly  its  financial  position as of
September 30, 2003 and December 31, 2002, and its results of operations and cash
flows  for  the  three and nine month periods ended September 30, 2003 and 2002.
Certain  reclassifications  have  been  made  to  prior year amounts in order to
conform  to  the current year presentation.  Operating results for the three and
nine  month  periods  ended September 30, 2003 are not necessarily indicative of
the  results  that  may be expected for the year ended December 31, 2003.  These
consolidated financial statements should be read in conjunction with the audited
consolidated  financial  and accompanying notes included in our Annual Report on
Form  10-K  for  the  year  ended  December  31,  2002.

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.

Recent  Accounting  Pronouncements

In  December  2002,  the  Financial  Accounting  Standards Board ("FASB") issued
Statement  of  Financial  Accounting  Standards ("SFAS") No. 148, Accounting for
Stock-Based  Compensation  -  Transition  and  Disclosure - an amendment of FASB
Statement  123,  ("SFAS  148").  SFAS  148  amends  SFAS  No.123, Accounting for
Stock-Based  Compensation,  ("SFAS  123"),  to  provide  alternative  transition
methods  for  an  entity's  voluntary change in their accounting for stock-based
compensation from the intrinsic value method prescribed by Accounting Principles
Board  Opinion  No. 25, Accounting for Stock Issued to Employees, ("APB No. 25")
and  related  interpretations  to  the  fair  value  method  under SFAS 123.  In
addition,  SFAS  No.  148  amends the disclosure requirements of SFAS No. 123 to
require  disclosure  of  the pro forma effects of using the fair value method of
accounting  for  stock-based compensation in interim as well as annual financial
statements.  The  Company  currently  accounts  for its stock-based compensation
using  the  intrinsic  value method as prescribed by APB No. 25.  The disclosure
provisions  of  SFAS No. 148 were adopted on December 31, 2002 and are discussed
in  Note  2.

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  occurs  upon  shipment.  Net  sales represent gross sales less
negotiated  price  allowances,  product  returns,  and  allowances for defective
merchandise.

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  as  of:
<TABLE>
<CAPTION>

<S>                                <C>                  <C>
                                    SEPTEMBER 30,        DECEMBER 31,
                                        2003                 2002
                                   --------------       -------------
Finished goods held for sale       $   10,457,893       $  11,693,868
Raw materials and work in process       1,163,234           1,001,476
                                   --------------       -------------
                                   $   11,621,127       $  12,695,344
                                   ==============       =============
</TABLE>
                                        7
<PAGE>

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.
The  first  phase  screens for impairment, while the second phase (if necessary)
measures  the  impairment.  As  a  result of SFAS 142, we incurred an impairment
write-down  in  the  first  quarter of 2002 of our investment in our subsidiary,
Roberts,  Cushman & Company, Inc., in the amount of $4.0 million.  The remaining
goodwill  on  our  balance  sheet  is  analyzed  by  management  periodically to
determine the appropriateness of its carrying value.  We have elected to perform
our  annual  analysis  during  the  fourth calendar quarter of each year.  As of
December  31,  2002,  management  determined  that  the  present  value  of  the
discounted  estimated  future  cash  flows  of  the  stores  associated with the
goodwill  is  sufficient  to  support  their  respective  goodwill balances.  No
indicators  of  impairment were identified during the first nine months of 2003.

Other  intangibles  consist  of  the  following:
<TABLE>
<CAPTION>
                                AS OF SEPTEMBER 30, 2003               AS OF DECEMBER 31, 2002
                        -------------------------------------       ---------------------------------
<S>                     <C>          <C>             <C>            <C>       <C>            <C>
                        -----------  --------------  --------       --------  -------------  --------
                                       ACCUMULATED                            ACCUMULATED
                           GROSS      AMORTIZATION      NET           GROSS   AMORTIZATION     NET
                        -----------  --------------  --------       --------  ------------   --------
Trademarks, Copyrights  $   544,369  $      129,247  $415,122       $544,369  $     102,029  $442,340
Non-Compete Agreements       52,000          21,833    30,167         52,000         10,833    41,167
                        -----------  --------------  --------       --------  -------------  --------
                        $   596,369  $      151,080  $445,289       $596,369  $     112,862  $483,507
                        ===========  ==============  ========       ========  =============  ========
</TABLE>

The  Company  recorded  amortization  expense  of  $39,161 during the first nine
months  of  2003  compared to $35,401 during the first nine months of 2002.  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>

                                                ROBERTS
<S>           <C>               <C>             <C>          <C>
              LEATHER FACTORY.  TANDY LEATHER   CUSHMAN       TOTAL
              ----------------  --------------  --------     -------
2003          $          5,918  $       45,004  $      0     $50,922
2004                     5,918          45,004         0      50,922
2005                     5,918          35,004         0      40,922
2006                     5,918          34,337         0      40,255
2007                     5,918          33,504         0      39,422
</TABLE>

2.  STOCK-BASED  COMPENSATION

The  Company  accounts  for stock options granted to its directors and employees
using  the  intrinsic  value  method  prescribed  by  APB  No. 25 which requires
compensation  expense  be  recognized  for  stock options when the quoted market
price  of  the  Company's common stock on the date of grant exceeds the option's
exercise  price.  No  compensation cost has been reflected in net income for the
granting  of  director  and employee stock options as all options granted had an
exercise price equal to the quoted market price of the Company's common stock on
the  date  the  options  were  granted.  Had compensation cost for the Company's
stock  options been determined consistent with the SFAS 123 fair value approach,
the  Company's net income and net income per common share for the three and nine
months  ended September 30, 2003 and 2002, on a pro forma basis, would have been
as  follows:
<TABLE>
<CAPTION>

                                                                                       THREE MONTHS ENDED
                                                                             ----------------------------------------
<S>                                                                           <C>                  <C>
                                                                                  SEPTEMBER 30,        SEPTEMBER 30,
                                                                                      2003                 2002
                                                                              -------------------  ------------------
Net income (loss), as reported                                                $           601,680  $          534,092

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

Deduct: Stock-based compensation expense determined under fair value method                24,546              25,905
                                                                              -------------------  ------------------
Net income (loss), pro forma                                                  $           577,134  $          508,187

Net income (loss) per share:
Basic - as reported                                                           $              0.06  $             0.05
Basic - pro forma                                                             $              0.06  $             0.05

Diluted - as reported                                                         $              0.06  $             0.05
Diluted - pro forma                                                                          0.05  $             0.05

                                                                                        NINE MONTHS ENDED
                                                                             -----------------------------------------
<S>                                                                           <C>                  <C>
                                                                                  SEPTEMBER 30,        SEPTEMBER 30,
                                                                                      2003                 2002
                                                                              -------------------  -------------------
Net income (loss), as reported                                                $         2,154,902  $       (1,923,387)

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

Deduct: Stock-based compensation expense determined under fair value method                73,639              77,714
                                                                              -------------------  ------------------
Net income (loss), pro forma                                                  $         2,081,263  $       (2,001,101)

Net income (loss) per share:
Basic - as reported                                                           $              0.21  $            (0.19)
Basic - pro forma                                                             $              0.20  $            (0.20)

Diluted - as reported                                                         $              0.20  $            (0.18)
Diluted - pro forma                                                           $              0.19  $            (0.19)

</TABLE>

The  fair  values  of stock options granted were estimated on the dates of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions:  risk-free  interest  rate  of  3.125% for 2003 and 3.00% for 2002;
dividend  yields of 0% for both periods; volatility factors of .706 for 2003 and
..736  for  2002;  and  an  expected  life  of  the  valued  options  of 4 years.
                                        8
<PAGE>

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

<S>                                                    <C>             <C>                 <C>          <C>
                                                             THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                SEPTEMBER 30,                    SEPTEMBER 30,
                                                       -----------------------------       -------------------------
                                                             2003           2002               2003         2002
                                                       --------------  -------------       -----------  ------------
Numerator:
  Net  income (loss)                                   $      601,680  $     534,092       $ 2,154,902  $(1,923,387)
                                                       --------------  -------------       -----------  ------------
  Numerator for basic and diluted earnings per share          601,680        534,092         2,154,902   (1,923,387)

Denominator:
  Weighted-average shares outstanding-basic                10,394,374     10,064,249        10,269,415   10,035,890

Effect of dilutive securities:
  Stock options                                               422,000        448,836           425,818      483,760
  Warrants                                                     86,420        210,318           145,531      240,027
                                                       --------------  -------------       -----------  ------------
Dilutive potential common shares                              508,420        659,154           571,349      723,787
                                                       --------------  -------------       -----------  ------------
  Denominator for diluted earnings per share-
  weighted-average shares                                  10,902,794     10,723,403        10,840,764   10,759,677
                                                       ==============  =============       ===========   ==========

  Basic earnings (loss) per share                      $         0.06  $        0.05       $      0.21  $     (0.19)
                                                       ==============  =============       ===========   ==========
  Diluted earnings (loss) per share                    $         0.06  $        0.05       $      0.20  $     (0.18)
                                                       ==============  =============       ===========   ==========
</TABLE>

The  net  effect  of  converting stock options to purchase 924,700 and 1,081,000
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 nine months
ended  September  30,  2003  and  2002,  respectively.


4.  SEGMENT  INFORMATION

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

a.     The Leather Factory, which sells primarily to wholesale customers through
a  chain  of  30  outlet  stores  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>

                                                                                   ROBERTS,
<S>                                           <C>                <C>              <C>         <C>
                                              LEATHER FACTORY    TANDY LEATHER     CUSHMAN      TOTAL
                                              -----------------  --------------   ----------  -----------
FOR THE QUARTER ENDED SEPTEMBER 30, 2003
Net sales                                     $      7,372,159   $    2,334,127   $  412,784  $10,119,070
Gross profit                                         3,996,866        1,475,312      117,634    5,589,812
Operating earnings                                     784,322          117,514       15,156      916,992
Interest expense                                       (40,735)               -            -      (40,735)
Other, net                                              (6,315)             226            -       (6,089)
                                                                                              ------------
Income before income taxes                             737,272          117,740       15,156      870,168
                                                                                              ------------
     Depreciation and amortization                      99,489           20,978        2,365      122,832
     Fixed asset additions                              33,230           21,300        1,377       55,907
     Total assets                             $     15,300,407   $    2,802,218   $  904,582  $19,007,207
                                              -----------------  --------------   ----------  -----------

FOR THE QUARTER ENDED SEPTEMBER 30, 2002
Net sales                                            7,244,610        1,727,925      512,195  $ 9,484,730
Gross profit                                         3,848,893        1,026,681      212,824    5,088,398
Operating earnings                                     631,125           76,231      134,169      841,525
Interest expense                                       (53,995)            (113)           -      (54,108)
Other, net                                             (18,578)               -            -      (18,578)
                                                                                              ------------
Income before income taxes                             558,552           76,118      134,169      768,839
                                                                                              ------------
     Depreciation and amortization                      94,369           29,612        3,399      127,380
     Fixed asset additions                             139,454           55,050        1,936      196,440
     Total assets                             $     14,528,938   $    2,241,064   $  921,378  $17,691,380
                                              -----------------  --------------   ----------  -----------
                                        9
<PAGE>

                                                                                   ROBERTS,
<S>                                           <C>                <C>              <C>         <C>
                                              LEATHER FACTORY    TANDY LEATHER     CUSHMAN      TOTAL
                                              -----------------  --------------   ----------  -----------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
Net sales                                     $     23,375,158   $    6,312,145   $1,452,527  $31,139,830
Gross profit                                        12,477,180        3,981,715      497,475   16,956,370
Operating earnings                                   2,626,394          430,737      129,998    3,187,129
Interest expense                                      (174,555)               -            -     (174,555)
Other, net                                              68,064              369            -       68,433
                                                                                              ------------
Income before income taxes                           2,519,903          431,106      129,998    3,081,007
                                                                                              ------------
     Depreciation and amortization                     335,184           55,064        7,711      397,959
     Fixed asset additions                             201,862          122,189        2,233      326,284
     Total assets                             $     15,300,407   $    2,802,218   $  904,582  $19,007,207
                                              -----------------  --------------   ----------  -----------

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002
Net sales                                     $     22,769,549   $    5,420,108   $1,551,060  $29,740,717
Gross profit                                        12,151,507        3,179,498      561,614   15,892,619
Operating earnings                                   2,625,651          315,268      305,214    3,246,133
Interest expense                                      (190,903)            (516)           -     (191,419)
Other, net                                             (44,566)            (633)           -      (45,199)
                                                                                              ------------
Income before income taxes                           2,390,182          314,119      305,214    3,009,515
                                                                                              ------------
     Depreciation and amortization                     279,033           81,256        9,945      370,234
     Fixed asset additions                             267,823          157,953        3,474      429,250
     Total assets                             $     14,528,938   $    2,241,064   $  921,378  $17,691,380
                                              -----------------  --------------   ----------  -----------
</TABLE>

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

<S>                  <C>              <C>                  <C>          <C>
                           THREE MONTHS ENDED                 NINE MONTHS ENDED
                               SEPTEMBER 30,                    SEPTEMBER 30,
                            2003           2002                2003         2002
                     ---------------  --------------       -----------  -----------
United States        $     9,456,440  $    8,941,654       $29,038,861  $28,052,774
All other countries          662,630         543,076         2,100,969    1,687,943
                     ---------------  --------------       -----------  -----------
                     $    10,119,070  $    9,484,730       $31,139,830  $29,740,717
                     ===============  ==============       ===========  ===========
</TABLE>

Geographic  sales  information  is  based  on the location of the customer.  Net
sales  from no single foreign country was material to the Company's consolidated
net  sales  for  the  three  and nine month periods ended September 30, 2003 and
2002.  The  Company  does  not have any significant long-lived assets outside of
the  United  States.
                                       10
<PAGE>

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 by Wray Thompson and Ron Morgan, 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
outlets  located  throughout  the  United  States  and  Canada.

Tandy Leather is the best-known supplier of leather and related supplies used in
the  leathercraft  industry.  From  its  founding  in  1919,  Tandy has been the
primary  leathercraft  resource  world  wide.  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 October 31, 2003, we
have opened 26 Tandy Leather retail stores located throughout the United States.

Cushman,  whose  origins  date  back  to  the  mid-1800's,  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,  2002.

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

The  following  tables  present selected financial data of each of the Company's
three  segments  for  the  quarters and nine months ended September 30, 2003 and
2002:
<TABLE>
<CAPTION>

<S>               <C>                <C>                <C>                <C>
                  QUARTER ENDED SEPTEMBER 30, 2003      QUARTER ENDED SEPTEMBER 30, 2002
                  --------------------------------      --------------------------------
                                       OPERATING                             OPERATING
                       SALES            INCOME                SALES            INCOME
                  ---------------    -------------      ---------------    -------------
Leather Factory   $     7,372,159    $     784,322      $     7,244,610    $     631,125
Tandy                   2,334,127          117,514            1,727,925           76,231
Cushman                   412,784           15,156              512,195          134,169
                  ---------------    -------------      ---------------    -------------
Total Operations  $    10,119,070    $     916,992      $     9,484,730    $     841,525
                  ===============    =============      ===============    =============
</TABLE>

<TABLE>
<CAPTION>
<S>               <C>                <C>                   <C>                <C>
                  NINE MONTHS ENDED SEPTEMBER 30, 2003     NINE MONTHS ENDED SEPTEMBER 30, 2002
                  ------------------------------------     ------------------------------------
                                       OPERATING                                OPERATING
                       SALES            INCOME                   SALES            INCOME
                  ---------------    -------------         ---------------    -------------
Leather Factory   $     23,375,158    $     784,322         $     7,244,610    $     631,125
Tandy                    6,312,145          117,514               1,727,925           76,231
Cushman                  1,452,527           15,156                 512,195          134,169
                  ----------------    -------------         ---------------    -------------
Total Operations  $     31,139,830    $     916,992         $     9,484,730    $     841,525
                  ================    =============         ===============    =============
</TABLE>
                                       11
<PAGE>

Consolidated  net  sales  for  the  quarter  ended  September 30, 2003 increased
$634,000, or 6.7%, compared to the same period in 2002.  Leather Factory's sales
increase was $127,000; Tandy contributed $606,000 while Cushman recorded a sales
reduction  of $99,000.  Operating income on a consolidated basis for the quarter
ended  September  30,  2003  increased 9.0% or $75,000 over the third quarter of
2002.

Total  consolidated  net  sales  for  the  nine  months ended September 30, 2003
increased  $1.4  million, or 4.7%, compared to the same period in 2002.  Leather
Factory  contributed  $606,000  of  the  sales  gain while Tandy added $892,000.
Cushman's 2003 sales were down $98,000 compared to a year ago.  Operating income
on  a  consolidated  basis for the nine months ended September 30, 2003 was down
1.8%  or  $59,000  over  last  year.

The following table shows in comparative form our consolidated net income (loss)
for  the  third  quarters  of 2003 and 2002 and the first nine months of the two
years,  both  before  and  after the cumulative effect of a previously reporting
change  in  accounting  principle  in  2002:
<TABLE>
<CAPTION>
                                                                     FOR THE THREE MONTHS ENDED
                                                                           SEPTEMBER 30,
<S>                                                                 <C>       <C>       <C>
                                                                        2003      2002  % CHANGE
Income before cumulative effect of change in accounting principle   $601,680  $534,092      12.6%
Cumulative effect of change in accounting principle*                       -         -         -
                                                                    --------  --------  ---------
Net income (loss)                                                   $601,680  $534,092      12.6%
                                                                    ========  ========  =========
</TABLE>

<TABLE>
<CAPTION>
                                                                        FOR THE NINE MONTHS ENDED
                                                                               SEPTEMBER 30,
<S>                                                                 <C>         <C>           <C>
                                                                          2003         2002   % CHANGE
Income before cumulative effect of change in accounting principle   $2,154,902  $ 2,085,444        3.3%
Cumulative effect of change in accounting principle*                         -   (4,008,831)         -
                                                                    ----------  ------------  ---------
Net income (loss)                                                   $2,154,902  $(1,923,387)        N/A
                                                                    ==========  ============  =========
<FN>
_____________
*The  amount  shown for the cumulative effect of change in accounting principle is net of income taxes.
</TABLE>

The  relatively  large  increase  in income before the effects of the accounting
change  for  the  third  quarter  (12.6%)  as  compared  to this measure for the
comparable nine-month periods of 2002 (3.3%) is attributable to continued growth
in  sales  from  the  Tandy  Leather  stores.
                                       12
<PAGE>

LEATHER  FACTORY  OPERATIONS

Net  sales  from  Leather  Factory's 30 warehouse distribution centers increased
1.76%, or $127,000, for the third quarter of 2003.  The following table presents
TLF's sales mix by customer categories for the quarters ended September 30, 2003
and  2002:

<TABLE>
<CAPTION>
<S>                                                                                    <C>             <C>
                                                                                             QUARTER ENDED
CUSTOMER GROUP                                                                             09/30/03    09/30/02
-------------------------------------------------------------------------------------  --------------  ---------
  RETAIL (end users, consumers, individuals)                                                      22%        18%
  INSTITUTION (prisons, prisoners, hospitals, schools, youth organizations, etc.)                  7          7
  WHOLESALE (resellers & distributors, saddle & tack shops, authorized dealers, etc.)             45         45
  NATIONAL ACCOUNTS                                                                               20         23
  MANUFACTURERS                                                                                    6          7
                                                                                       --------------  ---------
                                                                                                 100%       100%
                                                                                       ==============  =========
</TABLE>

We  have  re-categorized  our  customer  groups for the purpose of reporting our
sales  mix  as  we  believe  this revised presentation is more meaningful to the
reader.  The  following  table provides the sales mix in the modified categories
for  the  first  two  quarters  of  2003  and  2002  for  comparison  purposes:
<TABLE>
<CAPTION>

<S>                  <C>             <C>                  <C>        <C>
                             QUARTER ENDED                   QUARTER ENDED
CUSTOMER GROUP          03/31/03        03/31/02        06/30/03   06/30/02
-------------------  --------------  --------------       ---------  ---------
  RETAIL                        23%             21%             19%        18%
  INSTITUTION                    8               9              10         10
  WHOLESALE                     42              43              39         45
  NATIONAL ACCOUNTS             21              23              24         21
  MANUFACTURERS                  6               4               8          6
                     --------------  --------------       ---------  ---------
                               100%            100%            100%       100%
                     ==============  ==============       =========  =========
</TABLE>

The majority of Leather Factory's sales gain was with our retail customers.  The
other  customer  groups  achieved  very  modest gains, with the exception of our
national  accounts.  Several of the customers in this group are re-setting their
programs  with  us  during the last half of this year.  This is a normal part of
doing  business  with  these  customers  and  occurs  every  two  to four years,
depending  on the agreements negotiated with the customer.  Simply stated, these
customers  determine  what products they intend to purchase from us for the next
several  years  and  what  products they intend to discontinue carrying in their
product lines.  Although they often continue to order these "to-be-discontinued"
products  until the new program is in place (which is to occur in January 2004),
we  intentionally  begin  decreasing  our  inventory  of these items in order to
eliminate these products in their entirety by the end of the year.  As a result,
our  sales  to  these customers decrease during this time as we intentionally do
not  have  all  of the product they are attempting to purchase as they wind-down
the  year.  We believe that these intentional reductions in product availability
and  sales to these customers are temporary and will not have a long-term effect
on  Leather  Factory's  total  sales.

Operating  income for Leather Factory increased $153,000 for the current quarter
compared  to  2002.  Operating  expenses  as  a percentage of sales in the third
quarter  of  2003  were  43.58%,  down  from  44.4% a year ago.  Advertising and
marketing  costs continue to be a significant expense; however, we believe these
efforts are pivotal to the success of the operation.  We have been successful in
reducing  discretionary  expenses  in  some  areas  such as temporary personnel,
property  maintenance, and miscellaneous supplies, and will continue to look for
ways  to  cut  administrative  costs  without  jeopardizing  operations.
                                       13
<PAGE>

TANDY  LEATHER  OPERATIONS

Net sales for Tandy, which consisted of twenty-six retail stores as of September
30, 2003, were up 35.1% for the third quarter of 2003 over the same quarter last
year,  which  consisted  of  ten  retail  stores,  as  follows:
<TABLE>
<CAPTION>



<S>                                                <C>         <C>         <C>          <C>
                                                   QTR ENDED   QTR ENDED   $     INCR   % INCR
                                                    09/30/03    09/30/02        (DECR)   (DECR)
                                                   ----------  ----------  -----------  -------
Same store sales (10 stores)                       $1,133,337  $1,121,736  $   11,601     1.03%
New store sales (16 stores)                         1,198,246           -   1,198,246        -
Centralized mail order facility (closed 09/01/02)       2,544     606,189    (603,645)  (99.58)
                                                   ----------  ----------  -----------  -------
Total sales                                        $2,334,127  $1,727,925  $  606,202    35.08%
                                                   ==========  ==========  ==========   =======
</TABLE>

The  ten  "same"  stores  are  those  that  were  opened August 2002 or earlier.

Sales  in  the  current  quarter  were  generally  in  line  with  our  internal
expectations.  The  third  quarter  of the year is generally the weakest quarter
for  sales.  Average  sales  per  month in the stores that have been open for at
least three months through September 30, 2003 was approximately $35,000 which is
still  ahead  of  our  internal goal of $30,000 per month per store.  The stores
that  were  opened  in  2002 are averaging monthly sales over $38,000 per store.

The  following  table  presents Tandy's sales mix by customer categories for the
quarters  ended  September 30, 2003 and 2002.  Tandy's customer groups have been
re-grouped  consistent  with the categories for Leather Factory discussed above.
<TABLE>
<CAPTION>

<S>              <C>             <C>
                       QUARTER ENDED
CUSTOMER GROUP      09/30/03      09/30/02
---------------  --------------  ---------
  RETAIL                    72%        62%
  INSTITUTION                7         12
  WHOLESALE                 20         25
  MANUFACTURERS              1          1
                 --------------  ---------
                           100%       100%
                 ==============  =========
</TABLE>

The  following  table  provides the sales mix in the modified categories for the
first  two  quarters  of  2003  and  2002  for  comparison  purposes:
<TABLE>
<CAPTION>
<S>              <C>             <C>             <C>        <C>
                          QUARTER ENDED            QUARTER ENDED
CUSTOMER GROUP        03/31/03        03/31/02   06/30/03   06/30/02
---------------  --------------  --------------  ---------  ---------
  RETAIL                    72%             61%        67%        57%
  INSTITUTION                4              12         10         17
  WHOLESALE                 23              27         23         26
  MANUFACTURERS              1               0          0          0
                 --------------  --------------  ---------  ---------
                           100%            100%       100%       100%
                 ==============  ==============  =========  =========
</TABLE>

Third quarter operating income for Tandy increased $41,000 or 54% over operating
income  in  last year's third quarter.  Gross profit margins improved from 59.4%
to  63.2%  for  the quarter due to the continued increase in retail sales versus
other  sales  categories.  Operating expenses were 58.2% of sales in the current
quarter  compared  to  55.0%  in  the same quarter last year.  The 3.2% increase
arose from $70,000 of additional expenses.  The four new stores opened in August
2003 accounted for $50,000 of the increase, as management's policy is to expense
the  stores'  set-up  and  openings  costs  in  the first month a store is open.

                                       14
<PAGE>

ROBERTS,  CUSHMAN  OPERATIONS

Net  sales  for Cushman decreased $99,000 for the third quarter of 2003 over the
third  quarter  of 2002.  Operating income for Cushman decreased $119,000.   The
decrease in sales and operating income is the result of the continued demand for
less  expensive  hats  (straw  vs.  felt)  and therefore less expensive hatbands
(ribbon  or  felt  vs. leather).  Overall hat sales appear to be down throughout
the  industry.  Several  of  Cushman's  hat manufacturing customers are on short
work  weeks  (3  or  4  days  as  compared  to  the  usual  5  or  6  days).

Because  Cushman's  operation is not material to our company and it does not fit
in  our  specialty  retail business model on a long-term basis, we are currently
analyzing  the  proper  direction  to  take  with  respect  to  this subsidiary.

OTHER  EXPENSES

Interest  expense of $40,735 in the third quarter of 2003 decreased from $54,108
in  the  third quarter of 2002.  The decrease was attributable to an decrease in
the  average  debt  balance  and  the  reduction in the interest rate during the
current  period  as  compared  to a year ago.  The interest rate during 2002 was
4.75%.  The interest rate throughout during 2003 has ranged from 4.25% to 4.00%.
The  average  debt  balance  for  the first nine months of 2003 was $3.4 million
compared  to  $4.2  million  for  the  first  nine  months  of  2002.

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

There  was  a  slight  decrease  (3.4%)  in  our  consolidated total assets from
December  31,  2002  to  September  30, 2003.  Total assets decreased from $19.7
million  at  year-end  to  $19.0  million  at  September  30.  The  reduction in
inventory  of  $1.0  million,  partially  offset  by  an  increase  in  accounts
receivable  of  $400,000,  accounted  for  the  majority of the decrease.  Total
stockholders'  equity increased from $11.2 million at December 31, 2002 to $13.7
million  at  September  30, 2003.  The increase in equity is attributable to the
earnings  in  the  first  nine  months of the year.  Also, during the first nine
months  of  2003,  we reduced the outstanding principal balance of our revolving
credit  line  by  $1.5  million.

Inventory  decreased  $1.0  million  at  September  30, 2003 from year-end 2002.
Inventory  turnover  decreased  to  an  annualized rate of 3.41 times during the
first  nine months of 2003, a slowdown from 4.08 times for the first nine months
of  2002  and  3.65  times  for all of 2002.  The slowdown in turns is still due
primarily  to the high inventory balance at the end of 2002 discussed in earlier
reports.  We  compute our inventory turns as sales divided by average inventory.

Leather Factory stores are holding an average inventory of approximately $90,000
per  store  which is on target with expected levels.  Tandy stores are averaging
approximately  $50,000  of  inventory  per  store  -  which is also in line with
management's  target  of  $50,000  or  less.

Trade  accounts  receivable  was $2.3 million at September 30, 2003, up $390,000
from  $1.9 million at year-end 2002, reflecting an overall increase in sales and
the  effect  of  the  timing  of  orders  shipped to some of our larger accounts
towards  the  end of the third quarter of 2003 compared to the end of the fourth
quarter  of  2002.  Consolidated  average  days  to  collect  accounts  improved
slightly  over  the  first  three-fourths  of  2002 from 42.4 days to 41.0 days.
Leather Factory posted the most improvement in average days to collect accounts,
from  41.4  days  to 37.4 days.  Tandy and Cushman days outstanding increased in
the  first  nine  months  of 2003 compared to 2002, from 23.55 and 64.82 days in
2002  to  39.23  and 72.25 days in 2003, respectively.  Tandy's days outstanding
has  improved  from  the second quarter of 2003 by approximately five days while
Cushman's  days  outstanding  has increased by approximately four days from June
30,  2003.

Total  accounts  payable  decreased  $163,000  to $1.4 million at the end of the
third  quarter.  Accrued  expenses and other liabilities decreased $1.5 million,
from  $2.5  million at December 31, 2002 to $964,000 at September 30, 2003.  The
reduction is due to the decrease of accrued inventory in transit of $1.0 million
between  December  31  and  September 30 as well as the change in the balance of
accrued managers' bonuses.  Bonuses are accrued throughout the year based on the
operating  profits  of  each  stores  and  then paid annually in March.  Accrued
bonuses  at  December 31, 2002 totaled $930,000, which represents bonuses earned
based  on  the  stores'  twelve months of operating profits, compared to that at
September  30,  2003  totaling  $435,000, which represents bonuses earned on the
stores'  nine  months  of  operating profits.  The Company applied its cash flow
from  operating activities to reduce the notes payable and current maturities of
long-term debt decreased from $4.2 million at the end of 2002 to $2.7 million at
September  30,  2003.
                                       15
<PAGE>

The  Company's  current  ratio  rose  from  1.94 at December 31, 2002 to 3.07 at
September  30,  2003.  Generally accepted accounting principles ("GAAP") require
the  Company's  debt with Wells Fargo Bank Minnesota, N.A. ("Wells Fargo") to be
classified  as  short-term (even though the stated maturity is in November 2004)
because  our  credit  agreement  with  Wells  Fargo  includes  both a subjective
acceleration  clause  and  a requirement to maintain an arrangement whereby cash
collections  from  our  customers directly reduce the debt outstanding (Emerging
Issues  Task  Force  Issue  95-22).

If  GAAP  permitted  this  loan  to  be  report  as  long-term indebtedness, the
Company's  current  ratio  at  September  30,  2003  would  have been 6.48.  The
following table reconciles this non-GAAP disclosure to the presentation required
by  GAAP:
<TABLE>
<CAPTION>

                                                                                     AS OF SEPTEMBER 30, 2003
                                                                                     ------------------------
<S>                                                                          <C>                 <C>
                                                                             GAAP PRESENTATION   NON-GAAP PRESENTATION
                                                                             ------------------  -----------------------
Current Assets                                                               $       15,559,074  $           15,559,074
Current Liabilities                                                                   5,069,209               5,069,209
                   Less Wells Fargo debt maturing after September 30, 2004                  N/A              (2,669,116)
Adjusted Current Liabilities                                                          5,069,209               2,400,093
Current Ratio (Current Assets/Current Liabilities (or as adjusted)                         3.07                    6.48
</TABLE>

After  the  close  of the third quarter of 2003, the Company refinanced its bank
debt  with  another  Wells  Fargo bank.  Under the terms of the refinancing, the
Company's  bank  debt  with  maturities  beyond  12  months  will  no  longer be
classified  as  a  current  liability  under  GAAP.  In  light  of  this change,
management  believes  that  the  non-GAAP  presentation  above  will  facilitate
comparisons of the current ratios at the end of the third quarter of 2003 and at
year-end.  Management has used this non-GAAP measure in comparing the Company to
other  companies  whose  funded  debt is recorded as long-term liabilities under
GAAP.

During  the  first  nine  months  of  2003,  cash  flow  provided from operating
activities  was  $1.6 million, up from $1.3 million for the first nine months of
2002.  The  increase  in  2003 was attributable to several factors that occurred
during  the first nine months of this year:  (1) the reduction of inventory, and
(2) the net income generated, partially offset by the payment of manager bonuses
in  the  first quarter of 2003.  Cash flows used in investing activities totaled
$342,000, $326,000 of which was for capital expenditures.  Most of the purchases
were  for  the  new  Tandy stores opened as well as replacements and upgrades of
existing computer equipment as needed.  Cash flows used for financing activities
was $1.2 million, representing our net payments on our revolving credit facility
for  the  year of $1.5 million, partially offset by cash received from employees
on  exercises  of  stock  options.

The  principal requirements for our liquidity needs are operational expenses and
our  expansion  of  Tandy's  retail store chain.  We anticipate that the Company
will  fund  these  requirements  from  a  combination  of current cash balances,
revenues  from  operations  and  our revolving credit facility with Wells Fargo.
The  amount  available  on  this  credit facility is based upon the level of our
accounts  receivable  and inventory.    At September 30, 2003, the available and
unused  portion  of  the  credit  facility  was  approximately  $4.0  million.

                                       16
<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:

-     Continued  involvement  by  the  United  States  in  military  and  other
operations in the Middle East and other areas abroad could disrupt international
trade  and  affect  the  Company's  inventory  sources.

-     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.

-     Several of our wholesale customers are conducting a periodic review of the
products  they  purchase  from  us.  If  these  reviews  were to have an overall
reduction  in the volume of products purchased from us, our total sales could be
affected.

-     As  a  result  of  the  on-going threat of terrorist attacks on the United
States,  consumer  buying  habits  could  change  and  decrease  our  sales.

-     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.

-     We might fail to realize the anticipated benefits of opening of additional
Tandy Leather retail stores or other retail initiatives might not be successful.

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

-     Any  change  in  the  commercial banking environment may affect us and our
ability  to  borrow  capital  as  needed.

-     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.
                                       17
<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, 2002.  The Company
believes  that  its exposure to market risks has not changed significantly since
December  31,  2002.

PART  II.  OTHER  INFORMATION

ITEM  4.  CONTROLS  AND  PROCEDURES

At  the end of the third quarter of 2003, 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.

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)  Exhibits
     --------
<TABLE>
<CAPTION>
<S>      <C>
EXHIBIT
NUMBER   EXHIBIT
-------  -----------------------------------------------------------------------------------------------------------------------
31.1     Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
31.2     Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
32       Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
</TABLE>

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

On  July  23, 2003, the Company filed a report on Form 8-K in which we furnished
under Item 9 the press release entitled "The Leather Factory Reports 2nd Quarter
2003  Results" relating to the result of our second quarter ended June 30, 2003.
This  report  was  dated  July  22,  2003.

On August 21, 2003, the Company filed a report on Form 8-K in which we furnished
under  Item 4 details regarding a change in independent auditors for 2003.  This
report  was  dated  August  18,  2003.

                                       18
<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  7,  2003           By:   /s/  Wray  Thompson
                                          -------------------
                                          Wray  Thompson
                                          Chairman  of  the  Board  and
                                          Chief  Executive  Officer

Date:  November  7,  2003           By:   /s/  Shannon  L.  Greene
                                          ------------------------
                                          Shannon  L.  Greene
                                          Chief  Financial  Officer  and
                                          Treasurer (Chief Accounting Officer)

                                       19
<PAGE>


EXHIBIT  31.1

                                  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))  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. 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

          c.  Disclosed  in  this report any change in the registrant's internal
     control over financial reporting that occurred during the registrant's most
     recent fiscal quarter that has materially affected, or is reasonable likely
     to  materially  affect,  the  registrant's  internal control over financial
     reporting;  and

5.     The  registrant's other certifying officer(s) 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
     control  over  financial  reporting.

November  7,  2003

                              /s/  Wray  Thompson
                              -------------------
                              Wray  Thompson
                              Chairman  and  Chief  Executive  Officer
                                       20
<PAGE>

EXHIBIT  31.2
-------------
                                  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))  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. 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

          c.  Disclosed  in  this report any change in the registrant's internal
     control over financial reporting that occurred during the registrant's most
     recent fiscal quarter that has materially affected, or is reasonable likely
     to  materially  affect,  the  registrant's  internal control over financial
     reporting;  and

5.     The  registrant's other certifying officer(s) 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
     control  over  financial  reporting.

November  7,  2003

                              /s/  Shannon  L.  Greene
                              ------------------------
                              Shannon  L.  Greene
                              Chief  Financial  Officer  and  Treasurer
                                       21
<PAGE>

EXHIBIT  32
-----------


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

In  connection  with  the  Quarterly Report on Form 10-Q of The Leather Factory,
Inc.  for  the  quarter ended September 30, 2003 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 fairly presents, in all material
respects,  the  financial  condition  and  results of operations of the Company.


     November  7,  2003               /s/  Wray  Thompson
                                      -------------------
                                      WRAY  THOMPSON
                                      CHAIRMAN  AND  CHIEF  EXECUTIVE  OFFICER


     November  7,  2003               /s/  Shannon  L.  Greene
                                      -----------------------
                                      SHANNON  L.  GREENE
                                      CHIEF  FINANCIAL  OFFICER  AND  TREASURER