Tandy Leather Factory Reports 2nd Quarter 2008 EPS of $0.06 up 50% over 2007

Cash Approaching $10 Million; International Operation Strong
FORT WORTH, Texas--(Business Wire)--
Tandy Leather Factory, Inc. (AMEX: TLF) today reported financial
results for the second quarter of 2008. Consolidated net income for
the quarter ended June 30, 2008 was $655,000 compared to consolidated
net income of $397,000 for the second quarter of 2007. Fully diluted
earnings per share for the quarter was $0.06, compared to $0.04 in the
second quarter of last year. Total sales for the quarter ended June
30, 2008 were $13.8 million, up 4% from $13.4 million in the second
quarter last year.

Consolidated sales for the six months ended June 30, 2008 were
$27.1 million, down 3% from the 2007 first half sales of $27.9
million. Consolidated net income for the first half of 2008 was $1.2
million or $0.11 per fully-diluted share versus $1.7 million or $0.16
per fully-diluted share in the comparable period last year.

Sales in the Retail Leathercraft segment, which consists of the
Tandy Leather stores, increased $393,000 in the second quarter, a 7%
improvement over last year's second quarter. Seventy-two stores
comprised the Tandy Leather's retail operations on June 30, 2008,
compared to sixty-eight retail stores a year ago. For the first six
months of 2008, Tandy Leather sales increased $410,000, or 3%, over
the first six months of 2007. Second quarter sales for the Wholesale
Leathercraft segment, which consists of the Leather Factory wholesale
centers and national account group, basically matched that of the same
quarter last year, reporting a $42,000 or a 1/2% increase. For the
first six months of 2008, Wholesale Leathercraft's sales were down
$1.2 million, or 8%, over the same period in 2007. International
Leathercraft, consisting of one combination wholesale and retail store
located in the United Kingdom, added sales of $194,000 and $235,000
for the quarter and year, respectively. This store was opened in
February 2008.

Consolidated gross profit margin for the current quarter was
57.9%, improving slightly from 57.5% for the second quarter of 2007.
For the first two quarters, consolidated gross profit margin for the
current year was 58.1%, declining minimally from last year's gross
profit margin of 58.4%. Consolidated operating expenses decreased
$61,000 in the current quarter but increased $315,000 for the first
six months over the same periods a year ago. For the second quarter,
the significant reductions in expenses occurred in personnel costs,
rent, supplies and professional/consulting fees. For the year, the
operating expenses associated with the new stores accounting for the
increase in operating expenses. Consolidated operating margin improved
for the quarter to 7.9% compared to 5.3% last year. On a year-to-date
basis, consolidated operating margin declined from 9.5% last year to
6.7% in the current year.

Ron Morgan, Chief Executive Officer, commented, "While we are
still behind in terms of sales and profits from where we were at this
time last year, our second quarter results are positive. We achieved a
respectable sales gain in light of the economy, gross profit margin
rose slightly and our operating expenses were down, even with the
several new stores in this quarter that didn't exist last year. I
think that demonstrates that we are making good decisions to keep the
company headed in the right direction. We said in previous releases
that we could get our expenses under control, after making some
mistakes last year. I hope this quarter's results speak loudly to
that."

Mr. Morgan continued, "We are very pleased with the growth from
our UK store despite the fact that the inflation rate is higher than
expected and economists there are expecting consumer spending to
tighten. Our presence has been well received and it certainly shows in
the financial performance of our store as it generated a profit in the
month of June. It is performing ahead of our expectations as we
continue to add to our customer base throughout Europe."

Chief Financial Officer, Shannon Greene, added, "Our goal has been
less inventory, less expense and more cash and we achieved all three
in the second quarter. Inventory is down $2 million from year-end 2007
and our cash is up almost $3 million during that same time period. But
more importantly, we reduced our operating expenses in the second
quarter. The consolidated expense reduction was only $61,000, which
doesn't sound like much, but when you consider that the operating
expenses in the new stores totaled $250,000, the reduction becomes a
greater achievement. Our work is not over however. Inventory is almost
too low now so as we move through the third quarter, I expect it to
increase slightly. But we will continue to focus on controlling
expenses in order to maximize earnings for the year."

Tandy Leather Factory, Inc., (http://www.tandyleatherfactory.com),
headquartered in Fort Worth, Texas, is a specialty retailer and
wholesale distributor of a broad product line including leather,
leatherworking tools, buckles and adornments for belts, leather dyes
and finishes, saddle and tack hardware, and do-it-yourself kits. The
Company distributes its products through its 29 Leather Factory
stores, located in 19 states and 3 Canadian provinces, 72 Tandy
Leather retail stores, located in 34 states and 5 Canadian provinces,
one combination wholesale/retail store located in the United Kingdom,
and Mid-Continent Leather Sales, one store located in Oklahoma. Its
common stock trades on the American Stock Exchange with the symbol
"TLF".

This news release may contain forward-looking statements. All
forward-looking statements made here or in other news releases issued
by Tandy Leather Factory, Inc. are based on current expectations as of
the date of the release. These forward-looking statements involve
risks and uncertainties that could cause the results of Tandy Leather
Factory, Inc. to differ materially from management's current
expectations. Many of these risks and uncertainties are detailed from
time to time in TLF's reports filed with the Securities and Exchange
Commission, including its most recent annual report on Form 10-K and
the most recent quarterly report on Form 10-Q. Investors are reminded
that past performance may not be predictive of future results.

Selected financial data:

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*T
Quarter Ended June 30, Quarter Ended June 30,
2008 2007
----------------------- -----------------------
Operating Operating
Sales Income Sales Income
----------- ----------- ----------- -----------
Wholesale Leathercraft $ 7,218,197 $ 524,619 $ 7,176,153 $ 411,368
Retail Leathercraft 6,235,427 571,869 5,842,198 265,964
International
Leathercraft 193,822 (7,456) - -
Other 200,518 2,486 358,636 27,019
----------- ----------- ----------- -----------
Total Operations $13,847,964 $1,091,518 $13,376,987 $ 704,351
=========== =========== =========== ===========
*T

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Six Months Ended Six Months Ended
06/30/08 06/30/07
----------------------- ----------------------
Operating Operating
Sales Income Sales Income
----------- ----------- ----------- ----------
Wholesale Leathercraft $13,956,408 $ 648,574 $15,116,639 $1,757,571
Retail Leathercraft 12,506,201 1,186,321 12,096,416 819,712
International
Leathercraft 235,560 (48,917) - -
Other 409,955 26,923 671,737 81,848
----------- ----------- ----------- ----------
Total Operations $27,108,124 $1,812,901 $27,884,792 $2,659,131
=========== =========== =========== ==========
*T

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Wholesale Leathercraft Quarter Ended Quarter Ended
06/30/08 06/30/07
------------------ ------------------
# of # of
stores Sales stores Sales
------- ---------- ------- ----------
Same store sales 30 $6,069,076 30 $6,316,463
National account group n/a 1,149,121 n/a 859,690
---------- ----------
Total Sales - Wholesale
Leathercraft $7,218,197 $7,176,153
========== ==========
*T

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Wholesale Leathercraft Six Months Ended Six Months Ended
06/30/08 06/30/07
------------------- -------------------
# of # of
stores Sales stores Sales
------- ----------- ------- -----------
Same store sales 29 $11,744,151 29 $12,737,194
New store sales 1 316,877 1 389,137
National account group n/a 1,895,380 n/a 1,990,308
----------- -----------
Total Sales - Wholesale
Leathercraft $13,956,408 $15,116,639
=========== ===========
*T

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Retail Leathercraft Quarter Ended Quarter Ended
06/30/08 06/30/07
-------------------- ------------------
# of # of
stores Sales stores Sales
--------- ---------- ------- ----------
Same store sales 68 $6,027,222 68 $5,842,198
New store sales 4 208,205 - -
---------- ----------
Total Sales - Retail
Leathercraft 72 $6,235,427 68 $5,842,198
========== ==========
*T

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Retail Leathercraft Six Months Ended Six Months Ended
06/30/08 06/30/07
------------------- -------------------
# of # of
stores Sales stores Sales
------- ----------- ------- -----------
Same store sales 64 $11,739,052 64 $11,948,058
New store sales 8 767,149 4 148,358
----------- -----------
Total Sales - Retail
Leathercraft 72 $12,506,201 68 $12,096,416
=========== ===========
*T

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Tandy Leather Factory, Inc.
Consolidated Balance Sheets

June 30, December 31,
2008 2007
(unaudited) (audited)
------------ ------------
ASSETS
CURRENT ASSETS:
Cash $ 9,485,677 $ 6,810,396
Marketable securities 400,000 -
Accounts receivable-trade, net of
allowance for doubtful accounts of
$165,000 and $104,000 in 2008 and 2007,
respectively 2,355,647 2,538,816
Inventory 15,310,946 17,473,352
Prepaid income taxes 116,990
Deferred income taxes 253,325 256,938
Other current assets 893,202 1,102,836
------------ ------------
Total current assets 28,815,788 28,182,338
------------ ------------

PROPERTY AND EQUIPMENT, at cost 15,083,775 11,793,317
Less accumulated depreciation and
amortization (4,719,233) (4,794,505)
------------ ------------
10,364,542 6,998,812

GOODWILL 987,526 990,536
OTHER INTANGIBLES, net of accumulated
amortization of $339,000 and $313,000 in
2008 and 2007, respectively 358,489 384,134
OTHER assets 373,779 1,095,686
------------ ------------
$40,900,125 $37,651,506
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable-trade $ 1,789,676 $ 1,497,564
Accrued expenses and other liabilities 2,793,616 2,072,640
Income taxes payable - 67,150
Current maturities of long-term debt and
capital lease obligations 513,871 135,000
------------ ------------
Total current liabilities 5,097,163 3,772,354
------------ ------------

DEFERRED INCOME TAXES 503,448 148,648

LONG-TERM DEBT, net of current maturities 3,813,750 3,915,000
CAPITAL LEASE OBLIGATION, net of current
maturities 441,124 -

COMMITMENTS AND CONTINGENCIES - -

STOCKHOLDERS' EQUITY:
Preferred stock, $0.10 par value;
20,000,000 shares authorized; none
issued or outstanding; attributes to be
determined on issuance - -
Common stock, $0.0024 par value;
25,000,000 shares authorized; 10,992,951
shares issued at 2008 and 2007;
10,987,092 shares outstanding at 2008
and 2007 26,383 26,359
Paid-in capital 5,448,203 5,419,477
Retained earnings 25,277,419 24,037,672
Treasury stock (5,859 shares at cost) (25,487) (25,487)
Accumulated other comprehensive income 318,122 357,483
------------ ------------
Total stockholders' equity 31,044,640 29,815,504
------------ ------------
$40,900,125 $37,651,506
============ ============
*T

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Tandy Leather Factory, Inc.
Consolidated Statements of Income
(Unaudited)
For the Three and Six Months Ended June 30, 2008 and 2007

THREE MONTHS SIX MONTHS
2008 2007 2008 2007
------------ ----------- ------------ -----------
NET SALES $13,847,964 $13,376,987 $27,108,124 $27,884,792

COST OF SALES 5,836,312 5,691,318 11,355,450 11,601,170
------------ ----------- ------------ -----------

Gross profit 8,011,652 7,685,669 15,752,674 16,283,622

OPERATING EXPENSES 6,920,134 6,981,318 13,939,773 13,624,491
------------ ----------- ------------ -----------

INCOME FROM
OPERATIONS 1,091,518 704,351 1,812,901 2,659,131

OTHER INCOME
(EXPENSE):
Interest
expense (87,912) - (169,653) -
Other, net 26,293 27,522 306,683 76,514
------------ ----------- ------------ -----------
Total other
income
(expense) (61,619) 27,522 137,030 76,514
------------ ----------- ------------ -----------

INCOME BEFORE
INCOME TAXES 1,029,899 731,873 1,949,931 2,735,645

PROVISION FOR
INCOME TAXES 374,649 335,181 710,183 992,603
------------ ----------- ------------ -----------

NET INCOME $ 655,250 $ 396,692 $ 1,239,748 $ 1,743,042
============ =========== ============ ===========

NET INCOME PER
COMMON SHARE-
BASIC $ 0.06 $ 0.04 $ 0.11 $ 0.16
============ =========== ============ ===========
NET INCOME PER
COMMON SHARE-
DILUTED $ 0.06 $ 0.04 $ 0.11 $ 0.16
============ =========== ============ ===========

Weighted Average
Number of Shares
Outstanding:
Basic 10,981,378 10,945,661 10,979,235 10,931,201
Diluted 11,076,340 11,145,066 11,072,102 11,159,188
*T

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*T

Tandy Leather Factory, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
For the Six Months Ended June 30, 2008 and 2007

2008 2007
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,239,748 $ 1,743,042
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities-
Depreciation & amortization 509,325 233,742
Loss on disposal of assets 14,760 -
Non-cash stock-based compensation 15,250 15,251
Deferred income taxes 358,413 (61)
Other (36,352) 144,723
Net changes in assets and liabilities:
Accounts receivable-trade, net 183,169 (323,170)
Inventory 2,162,405 (2,660,008)
Income taxes (184,139) (546,488)
Other current assets 209,633 (25,420)
Accounts payable 292,112 138,298
Accrued expenses and other
liabilities 777,199 (634,526)
------------ ------------
Total adjustments 4,301,775 (3,657,660)
------------ ------------

Net cash provided by (used in)
operating activities 5,541,523 (1,914,618)
------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (3,098,638) (352,880)
Payments in connection with businesses
acquired - (650,000)
Proceeds from sale of assets 38,181 25,338
Increase in marketable securities (400,000) -
Decrease (increase) in other assets 721,907 (115,559)
------------ ------------

Net cash used in investing activities (2,738,550) (1,093,101)
------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt and notes
payable (33,750) -
Payments on capital lease obligations (107,411) (67,034)
Proceeds from issuance of common stock 13,500 54,960
------------ ------------

Net cash used in financing activities (127,661) (12,074)
------------ ------------

NET CHANGE IN CASH 2,675,282 (3,019,793)

CASH, beginning of period 6,810,396 6,739,891
------------ ------------

CASH, end of period $ 9,485,678 $ 3,720,098
============ ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid during the period $ 169,653 -
Income taxes paid during the period, net
of (refunds) 534,957 $ 1,548,067

NON-CASH INVESTING ACTIVITIES:
Equipment acquired under capital lease
financing arrangements 803,713 -
*T

Tandy Leather Factory, Inc.
Shannon L. Greene, 817-872-3200
sgreene@tandyleather.com
or
Magellan Fin, LLC
Mark Gilbert, 317-867-2839
MGilbert@MagellanFin.com

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