UNITED STATES  
  
                      SECURITIES AND EXCHANGE COMMISSION  
  
                            Washington, D.C. 20549  
  
                                   FORM 10-Q

  
     (X)     Quarterly Report Pursuant to Section 13 or 15(d) of the   
             Securities Exchange Act of 1934  

             For the quarterly period ended ............ May 4, 1997

     OR

     ( )     Transition Report Pursuant to Section 13 or 15(d) of the
             Securities Exchange Act of 1934  


     Commission file Number    0-20269
  
     DUCKWALL-ALCO STORES, INC.                  
     (Exact name of registrant as specified in its charter.)  
  
     Kansas                                       48-0201080      
     (State or other jurisdiction of              (I.R.S. Employer  
     incorporation or organization)               Identification No.)  

     401 Cottage Street  
     Abilene, Kansas                              67410-2832       
     (Address of principal executive offices      (Zip Code)  
  
     Registrant's telephone number, including area code:  
     (913) 263-3350  
  
          Indicate by check mark whether the registrant(1) has filed 
     all reports required to be 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 [ ]  
  
                   
     APPLICABLE ONLY TO CORPORATE ISSUERS:                                     
                                                                          
     5,096,979 shares of common stock, $.0001 par value (the issuer's  
     only class of common stock), were outstanding as of May 4, 1997. 
 
<PAGE>  
<TABLE>  
             
PART I.  Financial Information.

         ITEM 1.  Financial Statements.

  
                          Duckwall-ALCO Stores, Inc.
                                And Subsidiary
                         Consolidated Balance Sheets

                            (Dollars in Thousands)                                                   
<CAPTION>                                                                      
  

                                           May 4, 1997  February 2, 1997
                                           (Unaudited)                  
                                       _______________   _______________
<S>                                                <C>               <C>
ASSETS

Current assets:                                                          
     Cash on deposit and on hand                $3,497            $7,538 
     Receivables                                 3,446             3,160 
     Inventories                                96,247            80,359                                         
     Other current assets                        2,013             1,785
                                                                         
          Total current assets                 105,203            92,842 
                                                                         
Property and equipment:                                                  
     Land                                        2,658             2,658
     Buildings                                  21,071            20,991 
     Furniture, fixtures and equipment          28,608            26,215 
     Transportation equipment                    1,688             1,688 
     Leasehold improvements                      4,774             4,623 
     Construction in progress                    3,736             2,931 
                                                                         
          Total property and equipment          62,535            59,106
                                                                         
     Less accumulated depreciation              27,411            26,527 
                                                                         
          Net property and equipment            35,124            32,579 
                                                                         
     Property under capital leases              20,407            20,407 
     Less accumulated amortization              13,278            13,100 
                                                                         
          Net property under capital leases      7,129             7,307 
                                                                         
     Debt financing cost                            73                80 
                                                                         
                                                                         
               Total assets                   $147,529          $132,808 
                                                                         
<FN>                                                                         
See accompanying notes to unaudited consolidated financial statements.   
</TABLE>
<PAGE>
<TABLE>  
  
                          Duckwall-ALCO Stores, Inc.
                                And Subsidiary
                         Consolidated Balance Sheets

(Dollars in Thousands)                                                   
<CAPTION>

                                           May 4, 1997     February 2,1997
                                           (Unaudited)                  
                                       _______________   _______________
<S>                                                <C>               <C>
LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:
   Current maturities of:
     Long term debt                             $1,351            $1,242 
     Capital lease obligations                     607               607 
   Accounts payable                             25,503            17,127 
   Income taxes payable                            504             2,345 
   Accrued salaries and commissions              2,307             3,876 
   Accrued taxes other than income               2,991             2,929 
   Other current liabilities                     1,788             1,670 
   Deferred taxes                                2,612             2,612 

          Total current liabilities             37,663            32,408 

Notes payable under revolving loan              19,219            12,095 
Long term debt                                                            
     less current maturities                     4,736             3,193 

Capital lease obligations                                                 
     less current maturities                     8,996             9,148 

Other noncurrent liabilities                       833               793 

Deferred income taxes                            2,346             2,346

          Total liabilities                     73,793            59,983 

Stockholders' equity:
Common stock, $.0001 par value, authorized
  20,000,000 shares; issued and outstanding
  5,096,979 shares and 5,089,823 shares
  respectively                                       1                 1
Additional paid-in capital                      54,458            54,396 

Retained earnings since June 2, 1991            19,277            18,428 

          Total Stockholders' equity            73,736            72,825 

          Total liabilities and
               Stockholders' equity           $147,529          $132,808

<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
                          Duckwall-ALCO Stores, Inc.
                                And Subsidiary
                      Consolidated Statement of Operations

                 (Dollars in Thousands Except Per Share Amounts)
                                  (Unaudited)                                        
<CAPTION>

                                                   For the Thirteen
                                                     Week Periods
                               
                                                 May 4          April 28
                                                  1997              1996
                                          ____________      ____________
<S>                                                <C>               <C>          
Net sales ...............................      $69,272           $59,348        
Cost of sales ...........................       45,537            39,706        

          Gross margin ..................       23,735            19,642         

Selling, general
     and administrative .................       20,611            16,912         

Depreciation
     and amortization ...................        1,062               864 


          Total operating expenses ......       21,673            17,776 


Income from operations ..................        2,062             1,866

Interest expense.........................          682               732 

Earnings
    before income taxes .................        1,380             1,134         

Income tax expense ......................          531               431


     Net earnings .......................         $849              $703



Earnings per common and
 common equivalent share ................        $0.17             $0.18

<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
                          Duckwall-ALCO Stores, Inc.
                                And Subsidiary
                     Consolidated Statements of Cash Flow

(Dollars in Thousands)
(Unaudited)
<CAPTION>
                                               For the Thirteen Week
                                                    Periods Ended
                                           May 4, 1997      April 28, 1996
                                      ----------------    ----------------
<S>                                                <C>                 <C>

Cash flows from operating activities:

     Net Earnings                                 $849                 703

     Adjustments to reconcile                                           
       net earnings to net cash                                           
       used in operating activities                                       

          Amortization of                                               
            debt financing costs                     7                  10 
          Depreciation and amortization          1,062                 864
          Increase in inventories              (15,888)             (9,684)
          Increase in accounts payable           8,376               6,062
          Decrease (Increase) in receivables      (286)               (289) 
          Decrease (Increase)
            in other current assets               (228)               (459)
          Decrease in accrued expenses          (1,507)             (2,531)
          (Decrease) in income taxes payable    (1,841)               (457)
          Increase in other liabilities            158                 114

        Net cash used in
          operating activities                  (9,298)             (5,667)

Cash flow from investing activities:

        Capital expenditures                    (3,429)             (3,571)
        Net cash used in
          investing activities                  (3,429)             (3,571)


Cash flow from financing activities:

        Proceeds from exercise of 
          outstanding stock options                 62                   0
        Increase in revolving loan               7,124               9,345
        Principal payments on
          long term notes                         (218)                (62)

        Principal payments on
          capital leases                          (152)               (159)

        Increase in long term notes              1,870               1,000 

        Debt issue costs                             0                 (10)

        Net cash provided by
          financing activities                   8,686              10,114


        Net increase in cash                    (4,041)                876 
        Cash at beginning of period              7,538                 177 
        Cash at end of period                   $3,497              $1,053 

<FN>
See accompanying notes to unaudited consolidated financial statements.
</TABLE>
<PAGE>

                          Duckwall-ALCO Stores, Inc.
                                And Subsidiary
             Notes to Unaudited Consolidated Financial Statements


(1)  Basis of Presentation

              The accompanying unaudited consolidated financial         
         statements are for interim periods and, consequently, do not   
         include all disclosures required by generally accepted         
         accounting principles for annual financial statements.  It is  
         suggested that the accompanying unaudited consolidated         
         financial statements be read in conjunction with the           
         consolidated financial statements included in the Company's    
         fiscal 1997 Annual Report.  In the opinion of management of
         Duckwall-ALCO Stores, Inc., the accompanying unaudited
         consolidated financial statements reflect all adjustments
         (consisting of normal recurring accruals) necessary to present
         fairly the financial position of the Company and the results of
         its operations and cash flows for the interim periods.

(2)  Principles of Consolidation

              The consolidated financial statements include the accounts
         of Duckwall-ALCO Stores, Inc. and its wholly-owned subsidiary. 
         All significant intercompany transactions and balances have    
         been eliminated in consolidation.                              
                                                                         
(3)  Earnings Per Share                                                  
                                                                         
              Earnings per share has been computed based on the weighted
         average number of common shares outstanding during the period  
         plus common stock equivalents, when dilutive, consisting of    
         stock options.                                                 
                                                                         
         The average number of shares used in computing earnings   
         per share was as follows:                                      
                                                                         
                                                                         
                    Thirteen Weeks Ending

                    May 4, 1997                                 5,135,168
                    April 28, 1996                              4,016,552

                  


<PAGE>
                          Duckwall-ALCO Stores, Inc.
                                And Subsidiary

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

(Dollars in thousands)                                          
[CAPTION]

     The thirteen weeks ended May 4, 1997 and April 28, 1996 are referred
     to herein as the first quarter of fiscal 1998 and 1997, respectively.

     As used below the term "competitive market" refers to any market wherein 
     there is one or more national or regional discount stores located in the
     market served by the Company.  The term "non-competitive market" refers
     to any market where there is no national or regional discount store
     located in the market served by the Company.  Even in a non-competitive
     market, the Company faces competition from a variety of sources.

RESULTS OF OPERATIONS

     Thirteen Weeks Ended May 4, 1997 Compared to
     Thirteen Weeks Ended April 28,1996.

     Net earnings increased 20.8% for the first quarter of fiscal 1998
     to $849, an increase of $146 over the net earnings of $703 for the first
     quarter of fiscal 1997.  The Company has had 17 consecutive quarters of
     earnings growth (where current quarter earnings have exceeded prior year
     earnings for the same quarter).

     The Company continues to execute its basic strategy of opening stores in
     under-served markets that have no competition from national or regional
     discount retailers.  During the first quarter of fiscal 1998, the
     Company opened 17 stores, 15 of which were in new, non-competitive markets,
     resulting in a quarter end total of 202 stores.  At quarter end, 152
     stores, or 75% of the total stores, were located in non-competitive
     markets.  Fourteen of the new store openings were ALCO stores in
     locations acquired from the Val Corporation.

     Net sales for the first quarter of fiscal 1998 increased $9,924 or 16.7%
     to $69,272 compared to $59,348 for the first quarter of fiscal 1997.
     Net sales for all stores open the full period in both the first quarter
     of fiscal 1998 and fiscal 1997 (comparable stores) increased $1,435 or
     2.5%.  Net sales for these comparable stores in non-competitive markets
     increased by $1,226 or 3.4%.  Net sales for non-comparable stores
     increased $8,489 for the first quarter of fiscal 1998 compared to the
     first quarter of fiscal 1997.  The same store sales increase was
     attributable to increases in a broad spectrum of departments, including
     housewares, toys, consumables and outdoor living.

     Gross margin for the first quarter of fiscal 1998 increased $4,093 or
     20.8% to $23,735 compared to $19,642 in the first quarter of fiscal 1997.
     Gross margin as a percentage of sales was 34.3% for the first quarter of
     fiscal 1998 compared to 33.1% in the first quarter of fiscal 1997.  The
     increase in the margin percentage was due to an increase in vendor
     partnerships and new store opening discounts, as well as a reduction in
     shrinkage.

     Selling, general and administrative expense increased $3,699 or 21.9% to
     $20,611 in the first quarter of fiscal 1998 compared to $16,912 in the
     first quarter of fiscal 1997, primarily due to the increase in total
     stores.  As a percentage of net sales, selling, general and
     administrative expenses in the first quarter of fiscal 1998 increased by
     1.3% from the first quarter of fiscal 1997.  This increase was due to
     store opening costs (opening 15 ALCO stores and 2 Duckwall stores in the
     current quarter compared to 5 ALCO stores and 5 Duckwall store openings in
     the first quarter of fiscal 1997), and an increase in payroll costs, due
     in part to an increase in the minimum wage.

     Depreciation and amortization expense increased $198 or 22.9% to $1,062
     in the first quarter of fiscal 1998 compared to $864 in the first quarter
     of fiscal 1997.  The increase is due to additional buildings and equipment
     associated with the store expansion program.

     Income from operations increased $196 or 10.5% to $2,062 in the first
     quarter of fiscal 1998 compared to $1,866 in the first quarter of fiscal
     1997.  Income from operations as a percentage of net sales decreased
     slightly to 3.0% in the first quarter of fiscal 1998 compared to 3.1% in
     the first quarter of fiscal 1997.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES    

     The Company's primary sources of funds are cash flow from operations,
     borrowings under its revolving loan credit facility and vendor trade
     credit financing (increases in accounts payable).

     At May 4, 1997 working capital (defined as current assets less current
     liabilities) was $67,540 compared to $60,434 at the end of fiscal 1997.
     
     Cash used by operating activities in the first quarter of fiscal 1998
     and 1997 was $9,298 and $5,667 respectively.   The increase in the
     amount of cash used by operating activities in the first quarter of
     fiscal 1998 compared to the first quarter of fiscal 1997 was primarily
     due to a smaller increase in the trade accounts payable build up
     relative to the overall increase in inventory levels.

     The Company generated cash from financing activities in the first
     quarter of fiscal 1998 and 1997 of $8,686  and $10,114, respectively.
     This was generated by borrowing under the revolving loan credit facility,
     as well as a $1,870 and $1,000 mortgage secured by certain company fixed
     assets in fiscal 1998 and 1997, respectively.

     Cash used for acquisition of property and equipment in the first quarters
     of fiscal 1998 and 1997 totaled $3,429 and $3,571, respectively.  Total
     anticipated cash payments for acquisition of property and equipment in
     fiscal 1998, principally for store buildings and store and warehouse
     fixtures and equipment, are $13,869.

IMPACT OF NEW ACCOUNTING PRONOUNCEMENT

     The Financial Accounting Standards Board has issued SFAS No. 128,
     Earnings Per Share ("Statement 128") which replaces the current
     accounting standard regarding computation of earnings per share.
     Statement 128 requires a dual presentation of basic earnings per share
     (based on the weighted average number of common shares outstanding) and
     diluted earnings per share which reflects the potential dilution that
     could occur if contracts to issue securities (such as stock options)
     were exercised.  Statement 128 is effective for financial statements
     issued for periods ending after December 15, 1997.  If Statement 128 had
     been adopted, on a pro-forma basis, for the 13 weeks ended May 4, 1997
     and April 28, 1996, there would have been no effect on the amount of
     earnings per share as presented in the accompanying financial statements.
     
<PAGE>

OTHER INFORMATION

PART II
   


     Item 1.   Legal Proceedings
          No legal proceedings except those covered by insurance occurred
          during the thirteen week period ended May 4, 1997.


     Item 2.   Changes in Securities
          Not applicable


     Item 3.   Defaults Upon Senior Securities
          Not Applicable


     Item 4.   Submission of Matters to a Vote of Security Holders
          Not Applicable

 
     Item 5.   Other Information
          None


     Item 6.   Exhibits and Reports on Form 8-K
          (a)  None
          (b)  Reports on Form 8-K
               No reports filed



 

 

<PAGE>

                        

                          Duckwall-ALCO Stores, Inc.
                                And Subsidiary

                                  SIGNATURES

                                                                      
     Pursuant to the requirements of the Securities Exchange Act of 1934 
the registrant has duly caused this report to be  signed on its behalf by
the undersigned thereunto duly authorized.                               
                                                                         
                                                                         
                                                                         
                                       DUCKWALL-ALCO STORES, INC.
                                       (Registrant)
                                                                         
                                                                         
                                                                         
                                                                         
Date, June 16, 1997               /s/Richard A. Mansfield
                                  Richard A. Mansfield
                                  Vice President - Finance
                                  Chief Financial Officer


                                  Signing on behalf of the
                                  registrant and as principal
                                  financial officer
                                 


<PAGE>