The Leather Factory Inc. (AMEX: TLF)
Interview with: Shannon L. Greene, Chief Financial Officer and Treasurer
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and Information on their broad line of leather and related products for customers worldwide

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Name recognition for the Tandy Leather division of The Leather Factory has their retail business on the rise



Consumer Cyclical
Apparel/Accessories
(AMEX: TLF)

The Leather Factory Inc.




Shannon L. Greene
Chief Financial Officer
and Treasurer

Interview conducted by:
Lynn Fosse
Editor

CEOCFOinterviews.com
January 2003

The Leather Factory, Inc. ("TLF"), founded in 1980, is a premier manufacturer and an international marketer and distributor of a broad line of leather and related products to customers worldwide. Its product lines consist of leather, leatherworking tools, buckles and adornments for belts, leather dyes and finishes, saddle and tack hardware, and do-it-yourself craft kits, suede lace, western-hat trim, and fringe. Its distribution network consists of 27 U.S.-based Leather Factory stores, targeting the wholesale customer, 14 U.S.-based Tandy Leather stores, focusing on the retail market, and 3 Canadian combination (Leather Factory/Tandy Leather) stores. It also sells products via mail/telephone/Website orders. In addition, TLF produces cigar cases, wallets, and other accessories through its Royal Crown Custom Leathers unit. Its hat trims, which are sold to hat manufacturers directly, are produced through Roberts, Cushman & Company, Inc. (Cushman), a subsidiary of The Leather Factory. Ms. Shannon L. Greene, CFO and Treasurer of The Leather Factory says, “Historically, as The Leather Factory, we were about 90% wholesale and 10% retail. Several years before we acquired Tandy, we were seeing a nice shift in our retail/wholesale mix to where Leather Factory was doing about 80% wholesale and 20% retail. Tandy does about 90% retail business. As Tandy becomes a larger contributor to our overall sales, then our retail business will continue to increase and become a larger percentage of our total sales. For example, in 2001, we did about $37 million in total sales and Tandy contributed about $7 million of that. The Leather Factory's retail sales were approximately five million dollars.  Combine that with Tandy's $7 million and roughly one third of our business was to the retail customer in 2001.  We believe Tandy has the potential to contribute half of our total revenue as the retail stores mature and as a result, our overall retail to wholesale ratio should continue to grow as well.” The Leather Factory has been in an expansion mode and when asked how has the expansion of the Tandy stores affected their financial condition, Ms Greene responded, “The expansion has gone very well.   We originally planned to open five or six Tandy retail stores in 2002, based on a couple of criteria. First, we want the stores to become profitable as quickly as possible, because stores that are not profitable tend to drain the profits of the stores that are doing well. Of the fourteen stores that we have opened, each store has started generating a profit within the sixty days of its opening, which is much better than we expected.  We figured it would take six months to a year for a new store to become profitable. We actually had one store that was opened this fall that was profitable the first month it was opened. The investment required to get these stores opened, although fairly minimal, has come back to us quickly. Usually the second month they are opened, they are already generating super sales and strong profits. However, we don’t want to open too quickly and generate a lot of debt while we are opening our stores.”

The Leather Factory frequently introduces new products either through its own manufacturing capability or by purchasing from vendors. The Company holds a substantial number of copyrights for its designs, which have been incorporated throughout its product line. TLF sells 3,600 items to retailers, wholesalers, and manufacturers. On what gives them their competitive edge, Ms. Greene states, “When it comes to competition, we are the largest supplier of the particular product lines we offer in the industry. That is particularly the case now that we own Tandy Leather.  I suppose we have competition but no one that we are aware of competing with the exact same product line. There are smaller companies that are doing about one to five million dollars in sales per year, so they are quite a bit smaller than we are. Usually, these are individually owned retail leathercraft stores and many of them are customers of ours. We have the advantage of being large enough that we can buy more efficiently than many other companies. In addition, I'm not aware of any public companies doing the same thing we are.”

The Company extends an invitation for retailers to become a Leather Factory Authorized Sales Center. They feel that most types of retail stores can become successful Leather Factory Authorized Sales centers, including craft stores, western stores, shoe repair stores, hardware stores and general merchandise stores.

To find out more about: The Leather Factory Inc., You may order the complete text of our interview. To receive a copy of this highly informative interview, left click here: Contact & Ordering

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Interview Highlights:

- Who are the CEO and President of Leather Factory?
- What company were they originally with before leaving and eventually starting the Leather Factory?
- Whom did they buy out to take total control of the company?
- When was the Leather Factory formed?
- When did they acquire the Tandy Leather Company?
- What differentiates Leather Factory from their Tandy Leather unit?
- How many retail stores do they currently have?
- Do they have stores in Canada as well as the United States?
- What products do they sell at their retail stores?
- Where do they buy the leather that they use for their products?
- Are they affected by fluctuating leather prices?
- Which unit currently generates the greatest revenues and will that trend continue?
- How do they decide on where and how to open and expand their stores?
- What do people buy in their retail stores?
- Who are Tandy’s main customers?
- How did 911 and a sluggish economy affect the craft industry?
- Have they built relationships with Scouts and Campgrounds?
- What are the customer markets for their do-it-yourself items?
- Do they have any institutional customers?
- How do they maintain their inventory, and are there many new products and a constant change in what they offer?
- Do they any product through mail order and online at their website?
- Are there copyrights or patents involved in either the design or manufacturing of their products?
- What sets Leather Factory apart from the competition?
- Are two leather products designed the same identical?
- How has the expansion of the Tandy stores affected the financial condition of the Leather Factory?
- What are Leather Factory’s criteria for expansion?
- What are the monthly sales averages for the stores that they just opened?
- Why is the Tandy name so important?