UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 13D

[Rule 13d-101]

INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO

§ 240.13(d)-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO § 240.13(d)-2(a)

(Amendment No. 2)*

Hancock Fabrics, Inc.

Common Stock

409900107

C. Brophy Christensen, Esq.

O’Melveny & Myers LLP

2 Embarcadero Center, 28th Floor

San Francisco, CA 94111

415-984-8700

November 20, 2012

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box x.

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See § 240.13d-7 for other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (the “Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

This Amendment No. 2 to Schedule 13D is being filed jointly by Lenado Capital Advisors, LLC, formerly known as Sopris Capital Advisors, LLC (“Lenado Advisors”), Lenado Partners, Series A of Lenado Capital Partners, L.P., formerly known as Sopris Partners, Series A of Sopris Capital Partners, L.P. (“Lenado Partners”), Lenado Capital, LLC, formerly known as Sopris Capital, LLC (“Lenado Capital”), Lenado DP, Series A of Lenado DP, L.P., formerly known as Sopris DP, Series A of Sopris DP, L.P. (“Lenado DP”), SPV UNO, LLC (“SPV UNO”), SPV Quatro, LLC (“SPV Quatro”) and Nikos Hecht (each a “Reporting Person” and collectively, the “Reporting Persons”), to supplement and amend the Schedule 13D filed on May 30, 2008, as amended by Amendment No. 1 to Schedule 13D filed on January 12, 2011 (collectively, the “Schedule 13D”), on behalf of certain of the Reporting Persons and certain other filers as set forth therein. Each item below amends and supplements the information disclosed under the corresponding item of Schedule 13D. Except as set forth in this Amendment No. 2 to Schedule 13D, capitalized terms defined in the Schedule 13D are used herein with their defined meaning. All references to Sopris Advisors, Sopris Partners and Sopris Capital in the Schedule 13D shall be deemed to be references to Lenado Advisors, Lenado Partners and Lenado Capital, respectively.

ITEM 2. IDENTITY AND BACKGROUND

The first three paragraphs appearing under Item 2 of the Schedule 13D are amended and restated in their entirety to read as follows:

(a-c)

This Statement on Schedule 13D is being filed jointly by Lenado Advisors, Lenado Partners, Lenado Capital, Lenado DP, SPV UNO, SPV Quatro and Nikos Hecht. The principal business office of each of Lenado Advisors, Lenado Partners, Lenado Capital, Lenado DP, SPV UNO, SPV Quatro and Mr. Hecht is 516 East Hyman Avenue, Aspen, CO 81611.

Lenado Partners is a Delaware limited partnership and a private investment partnership, investing principally in securities of distressed companies. Lenado Capital is a Delaware limited liability company, the business of which is acting as the general partner of Lenado Partners and Lenado DP. Lenado DP is a Delaware limited partnership and a private investment partnership, investing principally in securities of distressed companies. Lenado Advisors is a Delaware limited liability company, the business of which is investment management for affiliated partnerships and funds, including Lenado Partners, Lenado DP and SPV Quatro. Each of SPV UNO and SPV Quatro is a Delaware limited liability company, investing principally in securities of distressed companies. Mr. Hecht is the managing member of Lenado Advisors, SPV UNO and SPV Quatro, is the sole member of the managing member of Lenado Capital, and is engaged, through Lenado Advisors, in the business of organizing private investment partnerships and providing investment management to such partnerships and other institutional and private investors.

As the managing member of Lenado Advisors, SPV UNO and SPV Quatro, the sole member of the managing member of Lenado Capital and the owner, directly or indirectly, of a majority of the membership interests in each of Lenado Advisors, Lenado Capital, SPV UNO and SPV Quatro, Mr. Hecht may be deemed to be the controlling person of Lenado Advisors, Lenado Capital, SPV UNO and SPV Quatro and, through Lenado Capital, Lenado Partners and Lenado DP.

ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION

Item 3 of the Schedule 13D is amended and supplemented by adding the following paragraph to the end of such Item 3 of the Schedule 13D:

On November 20, 2012, Lenado Partners, Lenado DP, SPV Uno and SPV Quatro completed a warrant exchange with Hancock Fabrics, Inc. (the “Company”) whereby Lenado Partners, Lenado DP, SPV Uno and SPV Quatro exchanged warrants to purchase an aggregate of up to 3,736,400 shares of common stock of the Company (the ”Common Stock”) for new warrants to purchase an aggregate of up to 4,977,600 shares of Common Stock.

ITEM 5. INTEREST IN SECURITIES OF THE ISSUER

Item 5 of the Schedule 13D is amended and restated in its entirety to read as follows:

(a)           The Reporting Persons may be deemed to beneficially own, in the aggregate, 7,909,200 shares of Common Stock, representing approximately 29.89% of the Common Stock, allocated as follows:

(b)           Each Reporting Person has the following powers to vote, direct the vote, dispose of or direct the disposition of shares of Common Stock:

1 The percentage ownership of each Reporting Person, determined in accordance with Rule 13d-3(d) under the Securities Exchange Act of 1934 has been calculated by dividing (i) the sum of the aggregate number of outstanding shares of Common Stock beneficially owned by such Reporting Person and the number of shares of Common Stock issuable upon exercise of warrants to purchase shares of Common Stock beneficially owned by such Reporting Person by (ii) the sum of the 21,481,488 shares of Common Stock reported by the Company to be outstanding pursuant to its Report on Form 10-Q for the quarterly period ended July 28, 2012, and the number of shares of Common Stock issuable upon exercise of the warrants to purchase shares of Common Stock beneficially owned by such Reporting Person.

Of the shares reported as beneficially owned in this Schedule 13D, 3,931,190 shares are owned directly by Lenado Partners, 566,400 shares are owned directly by Lenado DP, 232,000 shares are owned directly by SPV UNO and 3,179,610 shares are directly owned by SPV Quatro.

Lenado Capital is the general partner of Lenado Partners and Lenado DP and, as such, may be deemed to share beneficial ownership of the shares of Common Stock owned directly by such parties. Mr. Hecht is the managing member of Lenado Advisors and the sole member of the managing member of Lenado Capital. As the managing member of SVP UNO, SPV Quatro and Lenado Advisors, the sole member of the managing member of Lenado Capital, and the owner, directly or indirectly, of a majority of the membership interests in each of SPV UNO, SPV Quatro, Lenado Capital and Lenado Advisors, Mr. Hecht may be deemed to be the controlling person of SPV UNO, SPV Quatro, Lenado Capital and Lenado Advisors, and through Lenado Capital, Lenado Partners and Lenado DP. Lenado Advisors, as investment manager for Lenado Partners, Lenado DP and SPV Quatro, has discretionary investment authority over the Common Stock held by Lenado Partners, Lenado DP and SPV Quatro, as applicable. Accordingly, Mr. Hecht may be deemed to be the beneficial owner of the Common Stock held by Lenado Partners, Lenado DP, SPV UNO, and SPV Quatro.

(c)           Except as described in Item 3, no transactions with respect to the shares of Common Stock were effected during the past sixty (60) days by any of the Reporting Persons.

ITEM 7. MATERIAL TO BE FILED AS EXHIBITS

Item 7 is amended and supplemented by adding the following exhibit:

Exhibit 13          Amended and Restated Joint Filing Agreement among the Reporting Persons.

SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information in this statement is true, complete and correct.

Dated: November 27, 2012

EXHIBIT 13

JOINT FILING AGREEMENT

The undersigned acknowledge and agree that the foregoing statement on Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to the statement on Schedule 13D shall be filed on behalf of each of the undersigned without the necessity of filing additional joint acquisition statements. The undersigned acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning him or it contained therein, but shall not be responsible for the completeness and accuracy of the information concerning the other, except to the extent that he or it knows or has reason to believe that such information is accurate.