|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, 2003
|------------------------------------------



|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                                                                   | 
|(State or other jurisdiction of 
         incorporation or organization) | 
|                                                                         | 
|401 Cottage StreetAbilene, Kansas                                        | 
|(Address of principal executive offices)                                 | 



|Registrants telephone number including area
code: (785) 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 |_|
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Indicate by check
mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Act).  Yes |_|  No  |X|
|------------------------------------------------------------------------------------------------------------------------------



|APPLICABLE ONLY TO CORPORATE
ISSUERS:
|-------------------------------------



|4,191,257 shares
of common stock, $.0001 par value (the issuers only class of common stock), were
outstanding as of May 4,  2003.
|----------------------------------------------------------------------------------------------------------------------------------



| |  | 
| |  | 



---





|Duckwall-ALCO Stores, Inc.  And
Subsidiaries  Consolidated Balance Sheets(Dollars in Thousands)
|-----------------------------------------------------------------------------------------------



|Assets
|------

|                                        | May 4, 
      2003 | February 2, 
      2003
|--------------------------------------- | ------------------ | -----------------------
|
|Current assets:                         |                    |                        
|Cash and cash equivalents               |                    | $    2,725             
|Receivables                             |                    | 1,849                  
|Inventories                             |                    | 136,229                
|Prepaid expenses                        |                    | 2,041                  
|                                        |                    |                        
|Total
      current assets              |                    | 142,844                
|                                        |                    |                        
|Property and equipment                  |                    | 85,681                 
|Less accumulated depreciation           |                    | 55,805                 
|                                        |                    |                        
|Net
      property and equipment        |                    | 29,876                 
|                                        |                    |                        
|Property under capital leases           |                    | 20,120                 
|Less accumulated amortization           |                    | 16,642                 
|                                        |                    |                        
|Net
      property under capital leases |                    | 3,478                  
|                                        |                    |                        
|Other non-current assets                |                    | 221                    
|Deferred income taxes                   |                    | 557                    
|                                        |                    |                        
|Total
      assets                      |                    | $176,976               
|                                        |                    |                        



|See accompanying notes to unaudited consolidated
financial statements.
|----------------------------------------------------------------------



| |  | 
| |  | 



---





|
|



|Duckwall-ALCO Stores, Inc.  And
Subsidiaries  Consolidated Balance Sheets (Dollars in Thousands)
|------------------------------------------------------------------------------------------------



|Liabilities and Stockholders
Equity
|------------------------------------

|                                                         | May 4,
      2003 | February 2,
      2003
|-------------------------------------------------------- | ----------------- | ----------------------
|
|Current liabilities:                                     |                   |                       
|Current maturities of:                                   |                  
|Long term debt                                           |                   | $       508           
|Capital lease
      obligations                          |                   | 712                   
|Accounts payable                                         |                   | 31,186                
|Income taxes payable                                     |                   | 759                   
|Accrued salaries and commissions                         |                   | 3,883                 
|Accrued taxes other than
      income                    |                   | 4,673                 
|Other current liabilities                                |                   | 2,635                 
|Deferred income taxes                                    |                   | 2,126                 
|                                                         |                   |                       
|Total
      current liabilities                          |                   | 46,482                
|Notes payable under revolving loan                       |                   | 20,704                
|Long term debt - less current maturities                 |                   | 403                   
|Capital lease obligations - less current maturities      |                   | 5,206                 
|Other noncurrent liabilities                             |                   | 1,423                 
|Deferred revenue                                         |                   | 748                   
|                                                         |                   |                       
|Total
      liabilities                                  |                   | 74,966                
|                                                         |                   |                       
|Stockholders equity:                                    |                  
|Common stock, $.0001 par value,
      authorized         |                  
|20,000,000 shares;
      issued and outstanding          |                  
|4,191,257 shares and
      4,260,557 shares respectively |                   | 1                     
|Additional paid-in capital                               |                   | 48,101                
|Retained earnings                                        |                   | 53,908                
|                                                         |                   |                       
|Total
      stockholders equity                         |                   | 102,010               
|                                                         |                   |                       
|Total
      liabilities and stockholders equity         |                   | $176,976              
|                                                         |                   |                       



|See accompanying notes to unaudited consolidated
financial statements.
|----------------------------------------------------------------------



| |  | 
| |  | 



---





|Duckwall-ALCO Stores, Inc.  And
Subsidiaries  Consolidated Statements of Operations  (Dollars in Thousands Except Per
Share Amounts)  (Unaudited)
|-------------------------------------------------------------------------------------------------------------------------------------------------

|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|                                                              |  | For the Thirteen Week Periods Ended
|                                                              |  | May 4, 2003                        
|Net sales                                                     |  | $100,231                           
|Cost of sales                                                 |  | 66,818                             
|                                                              |  |                                    
|Gross margin                                                  |  | 33,413                             
|                                                              |  |                                    
|Selling, general and administrative                           |  | 30,137                             
|Depreciation and amortization                                 |  | 1,799                              
|                                                              |  |                                    
|Total
      operating expenses                                |  | 31,936                             
|                                                              |  |                                    
|Operating income from continuing
      operations             |  | 1,477                              
|Interest expense                                              |  | 390                                
|                                                              |  |                                    
|Earnings from continuing operations
      before income taxes |  | 1,087                              
|Income tax expense                                            |  | 394                                
|                                                              |  |                                    
|Earnings from continuing operations                           |  | 693                                
|Loss from discontinued operations,
      net of income tax    |  | (135                               
|                                                              |  |                                    
|Net earnings                                                  |  | $558                               
|                                                              |  |                                    
|Earnings per share                                            | 
|Basic                                                         | 
|Continuing
      operations                                   |  | $0.16                              
|Discontinued
      operations                                 |  | ($0.03                             
|                                                              |  |                                    
|Net
      earnings                                            |  | $0.13                              
|                                                              |  |                                    
|Diluted                                                       | 
|Continuing
      operations                                   |  | $0.16                              
|Discontinued
      operations                                 |  | ($0.03                             
|                                                              |  |                                    
|Net
      earnings                                            |  | $0.13                              
|                                                              |  |                                    



|See accompanying notes to unaudited consolidated
financial statements.
|----------------------------------------------------------------------



| |  | 
| |  | 



---





|Duckwall-ALCO Stores, Inc.  And
Subsidiaries  Consolidated Statements of Cash Flows  Dollars in Thousands  (Unaudited)
|----------------------------------------------------------------------------------------------------------------------

|                                                                 |  |                                           
|---------------------------------------------------------------- |  | ------------------------------------------
|                                                                 |  | For the Thirteen Week 
      Periods Ended
|                                                                 |  | May 4, 2003                               
|Cash Flows From Operating Activities:                            |  |                                           
|Net earnings                                                     |  | $558                                      
|Adjustments to reconcile net earnings
      to net cash provided | 
|by operating activities                                          | 
|Amortization
      of debt financing costs                       |  | 18                                        
|Depreciation
      and amortization                              |  | 1,812                                     
|Increase
      in inventories                                    |  | (6,552                                    
|Increase
      in accounts payable                               |  | 5,945                                     
|Decrease
      in receivables                                    |  | 166                                       
|Decrease
      (increase) in prepaid expenses                    |  | 374                                       
|Increase
      in accrued taxes other than income                |  | 738                                       
|(Decrease)
      increase in accrued salaries and commissions    |  | (1,489                                    
|Decrease
      in income taxes payable                           |  | (567                                      
|(Decrease)
      increase in deferred income taxes               |  | (38                                       
|Increase
      in deferred revenue                               |  | (109                                      
|(Decrease)
      in other liabilities                            |  | (226                                      
|                                                                 |  |                                           
|Net cash provided by operating
      activities                  |  | 630                                       
|                                                                 |  |                                           
|Cash Flows From Investing Activities:                            | 
|Proceeds
      from sale of property                             |  | 0                                         
|Capital
      expenditures                                       |  | (1,525                                    
|                                                                 |  |                                           
|Net cash used in investing activities                            |  | (1,525                                    
|                                                                 |  |                                           
|Cash Flows From Financing Activities:                            | 
|Proceeds
      from exercise of stock options                    |  | 0                                         
|Repurchase
      of common stock                                 |  | (658                                      
|Increase
      in revolving loan                                 |  | 3,221                                     
|Principal
      payments on long term notes                      |  | (121                                      
|Principal
      payments on capital leases                       |  | (178                                      
|Debt issue
      costs                                           |  | 0                                         
|                                                                 |  |                                           
|Net cash provided by financing
      activities                  |  | 2,264                                     
|                                                                 |  |                                           
|Net increase in cash and cash
      equivalents                  |  | 1,369                                     
|Cash and cash equivalents at beginning
      of period           |  | 1,356                                     
|                                                                 |  |                                           
|Cash and cash equivalents at end
      of period                 |  | $2,725                                    
|                                                                 |  |                                           



|See accompanying notes to unaudited consolidated
financial statements
|---------------------------------------------------------------------



| |  | 
| |  | 



---





|Duckwall-ALCO Stores, Inc.  And
Subsidiaries  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 2003 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 subsidiaries.  All significant intercompany transactions and balances have been
eliminated in consolidation.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3)  Stock-based Compensation
|-----------------------------



|The Company
applies the  intrinsic-value-based  method of accounting prescribed by Accounting
Principles Board (APB)  Opinion No. 25,  Accounting for Stock Issued to Employees,  and
related  interpretations  to account for its fixed-plan  stock options.  Under this
method,  compensation  expense is recorded on the date of grant only if the current
market price of the  underlying  stock  exceeded  the  exercise  price.  If the  Company
had  elected to  recognize  compensation  cost based on the fair value of the options
granted at grant date,  net earnings and net earnings  per share would have been
decreased to the pro forma  amounts  indicated in the  table below:
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                   |  |                                           
|------------------------------------------------------------------ |  | ------------------------------------------
|                                                                   |  | For the Thirteen Week 
      Periods Ended
|                                                                   |  | May 4, 2003                               
|Net earnings as reported                                           |  | $558                                      
|Pro forma stock-based employee
      compensation cost, net of tax |  | (21                                       
|                                                                   |  |                                           
|Pro forma net earnings                                             |  | $537                                      
|                                                                   |  |                                           
|Earnings per share as reported:                                    | 
|Basic                                                              |  | $0.13                                     
|Diluted                                                            |  | $0.13                                     
|Earnings per share, pro forma:                                     | 
|Basic                                                              |  | $0.13                                     
|Diluted                                                            |  | $0.12                                     



|(4)  Impact of Change in Accounting Principle
|---------------------------------------------



|Effective February 4, 2002,
      the Company adopted SFAS No. 144, Accounting for the Impairment or Disposal
      of Long-Lived Assets. SFAS No. 144 provides a single accounting model for
      long-lived assets to be disposed of. The statement also changes the criteria
      for classifying an asset as held for sale, broadens the scope of assets
      to be disposed of that qualify for reporting as discontinued operations
      and changes the timing of recognizing losses on such operations. The adoption
      of SFAS No. 144 resulted in the reclassification of certain prior year revenue
      and expense activity related to five stores closed during fiscal year 2003
      as discontinued operations. In addition, seven stores were closed in the
      first quarter of fiscal year 2004, and certain revenue and expense activity
      related to these stores was reclassified as discontinued operations.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Effective
February 3, 2003, the Company  adopted SFAS No. 143,  Accounting  for Asset  Retirement
Obligations.  SFAS No. 143  requires the Company to record the fair value of an asset
retirement obligation as a
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 
| |  | 



---





|liability  in the period in which it incurs a
legal  obligation  associated  with the  retirement  of tangible  long-lived  assets that
result from the  acquisition,  construction,  development,  and/or normal use of the
assets.  The Company also records a  corresponding  asset that is depreciated over the
life of the asset.  Subsequent to the initial  measurement of the asset retirement
obligation,  the  obligation  will be adjusted at the end of each  period to reflect the
passage of time and changes in the  estimated  future cash flows  underlying the
obligation.  The adoption of SFAS No. 143 did not have a material effect on the Companys
financial statements.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5)  Earnings Per Share
|-----------------------



|Basic net earnings
per share is computed by dividing net earnings by the weighted average number of  shares
outstanding.  Diluted net earnings per share reflects the potential dilution that could
occur if  contracts to issue securities (such as stock options) were exercised.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The average number
of shares used in computing earnings per share was as follows:
|---------------------------------------------------------------------------------

|Thirteen Weeks Ended | Basic | Diluted  
|-------------------- | ----- | ---------
|May 4, 2003          |       | 4,259,034
|May 5, 2002          |       | 4,171,462



|ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|----------------------------------------------------------------------------------------------



|(Dollars in thousands)
|----------------------



|The  thirteen
weeks  ended May 4, 2003 and May 5, 2002 are  referred  to herein as the first  quarter
of fiscal 2004 and 2003  respectively.
|--------------------------------------------------------------------------------------------------------------------------------------------



|As used below the
term competitive  market refers to any market wherein there is one or more
national or regional  full-line  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  full-line  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, 2003 Compared to
Thirteen Weeks Ended May 5, 2002.
|------------------------------------------------------------------------------



|The Company
continues to execute its basic strategy of opening stores in under-served  markets that
have no competition  from  national or regional  full-line  discount  retailers.  During
the first quarter of fiscal 2004 the Company  opened 6 ALCO stores.  Five  of these
stores were in new,  non-competitive  markets.  The Company also closed 2 ALCO stores and
5 Duckwall  stores  during the first  quarter of fiscal 2004. The  operations of these
stores have been reflected as  discontinued  operations in all periods  presented.  As
of May 4, 2003 over 85% of the 263 stores are in non-competitive markets.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Net sales for the
first  quarter of fiscal  2004  increased  $5,280 or 5.6% to  $100,231  compared  to
$94,951  for the first  quarter of fiscal 2003.  Same store sales rose $312 or 0.3%.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 
| |  | 



---





|Gross  margin for
the first  quarter of fiscal  2004  increased  $1,752 or 5.5% to  $33,413  compared  to
$31,661 in the first  quarter of fiscal 2003.  Gross margin as a percentage  of sales was
33.3% for the first quarter of both fiscal  years.  Improvement  in  gross margin due to
a reduction  in markdowns  and lower cost of goods sold was largely  offset by  increased
fuel and  transportation  costs and slightly higher shrinkage expense in the first
quarter of fiscal 2004.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Selling,  general
and administrative  expense increased $1,531 or 5.4% to $30,137 in the first quarter of
fiscal 2004 compared  to $28,606 in the first  quarter of fiscal 2003.  As a percentage
of net sales,  selling,  general and  administrative  expenses  were  30.1%,  in the
first quarter of both fiscal years.  Store opening  expenses,  utilities,  general
insurance,  distribution  center and  credit card expenses were all higher in the first
quarter of fiscal 2004,  but were largely offset by lower store  remodeling,  medical
insurance, incentive compensation and store payroll costs.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Depreciation  and
amortization  expense  increased  $200 or 12.5% to $1,799 in the first  quarter of fiscal
2004  compared to  $1,599 in the first quarter of fiscal 2003.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Operating  income
from continuing  operations  increased $21 or 1.4% to $1,477 in the first quarter of
fiscal 2004 compared to  $1,456 in the first quarter of fiscal 2003.  Operating  income
from continuing  operations as a percentage of net sales was 1.5% in the  first quarter
of both fiscal years.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Interest  expense
decreased  $60 or 13.3% in the first  quarter of fiscal 2004  compared to the first
quarter of fiscal 2003.  The reduction in interest expense was due primarily to lower
interest rates.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Earnings  from
continuing  operations  for the first  quarter  of fiscal  2004 were  $693,  an  increase
of $56 from the net  earnings of $637 for the first quarter of fiscal 2003.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Loss from
discontinued  operations,  net of income tax, was $135 in the first quarter of fiscal
2004,  compared to $106 in the  first  quarter of fiscal  2003.  The  operations  of
closed  stores  have been  reflected  as  discontinued  operations  in all periods
presented.  The increase in the loss from  discontinued  operations  is due to the
composition  of the  operations  and store  closure  expenses of the stores.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Net earnings for
the first  quarter of fiscal 2004 were $558,  an increase of $27 or 5.1% from the net
earnings of $531 in the  first  quarter of fiscal  2003.  Diluted net earnings for the
first  quarter of fiscal 2004 were $0.13,  an increase of $0.01,  or 8.3%  from the
diluted net earnings of $0.12 in the first quarter of fiscal 2003.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|LIQUIDITY AND CAPITAL RESOURCES
|-------------------------------



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



|At May 4, 2003
working capital  (defined as current assets less current  liabilities)  was $96,362
compared to $93,377 at the  end of fiscal 2003.
|--------------------------------------------------------------------------------------------------------------------------------------------------



|Cash  provided by
operating  activities  in the first  quarter of fiscal 2004 and 2003 was $630 and $4,943
respectively.  The  decrease in the amount of cash  provided by operating  activities  in
the first quarter of fiscal 2004 compared to the first quarter of  fiscal 2003 was
primarily  due to a larger  buildup of  inventory  levels in fiscal 2004  compared to
fiscal  2003,  due to the higher  number of  store openings.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The  Company
generated  cash in  financing  activities  in the  first  quarter  of fiscal  2004 and
2003 of  $2,264  and $509  respectively.  Cash was  generated by borrowing on the
revolving  loan.  Cash was used to purchase and retire  69,300 shares of Common  Stock
during the first quarter of fiscal 2004.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Cash used in
investing  activities  in the first  quarter of fiscal 2004 and 2003  totaled  $1,525 and
$1,844,  respectively.  Total  anticipated  cash payments for  acquisition of property
and equipment in fiscal 2004  principally  for store buildings and store  and warehouse
fixtures and equipment, are approximately $8,000.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 
| |  | 



---





|BUSINESS OPERATIONS AND SEGMENT INFORMATION
|-------------------------------------------



|The Companys
business  activities  include  operation of ALCO discount stores in towns with
populations  which are typically  less than 5,000 not served by other  regional or
national  full-line  discount  chains and  Duckwall  variety  stores that offer a more
limited selection of merchandise which are primarily located in communities of less than
2,500 residents.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|For financial
reporting  purposes,  the Company has  established two operating  segments:  ALCO
Discount  Stores,  and All  Other,  which includes the Duckwall variety
stores and other business activities,  such as general office,  warehouse and
distribution  activities.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                  |  |                                    
|--------------------------------- |  | -----------------------------------
|                                  |  | For the Thirteen Week Periods Ended
|                                  |  | May 4, 2003                        
|Segment Information               |  |                                    
|                                  | 
|Net Sales:                        | 
|ALCO Discount Stores              |  | $92,519                            
|All Other                         | 
|External                          |  | 7,712                              
|Intercompany                      |  | 61,034                             
|                                  |  |                                    
|                                  |  | $161,265                           
|                                  |  |                                    
|Depreciation and Amortization     | 
|ALCO Discount Stores              |  | $1,086                             
|All Other                         |  | 713                                
|                                  |  |                                    
|                                  |  | $1,799                             
|                                  |  |                                    
|Income (expense) from Operations: | 
|ALCO Discount Stores              |  | $7,663                             
|All Other                         |  | (6,141                             
|                                  |  |                                    
|                                  |  | $1,522                             
|                                  |  |                                    
|Capital Expenditures:             | 
|ALCO Discount Stores              |  | $1,285                             
|All Other                         |  | 240                                
|                                  |  |                                    
|                                  |  | $1,525                             
|                                  |  |                                    
|Identifiable Assets:              | 
|ALCO Discount Stores              |  | $138,899                           
|All Other                         |  | 38,077                             
|                                  |  |                                    
|                                  |  | $176,976                           
|                                  |  |                                    



| |  | 
| |  | 



---





|Income from operations as reflected in the above
segment  information has been  determined  differently  than income from operations in
the accompanying consolidated statements of operations as follows:
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Intercompany
Sales
| | ------------------

| | Intercompany
sales represent transfers of merchandise from the warehouse to ALCO discount stores and
Duckwall variety stores.
| | -----------------------------------------------------------------------------------------------------------------------------



| | Intercompany
Expense Allocations
| | --------------------------------

| | General and
administrative  expenses  incurred at the general office have not been allocated to the
ALCO Discount  Stores for  purposes of determining income from operations for the segment
information.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Warehousing
and distribution  costs including  freight  applicable to merchandise  purchases,  have
been allocated to the ALCO  Discount  Stores  segment based on the Companys  customary
method of  allocation  for such costs  (primarily as a stipulated  percentage of
merchandise purchases).
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Inventories
| | -----------

| | Inventories
are based on the FIFO  method for  segment  information  purposes  and on the LIFO
method  for the  consolidated  statements of operations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------



| | Leases
| | ------

| | All leases are
accounted  for as  operating  leases for  purposes of  determining  income  from
operations  for  purposes of  determining  the segment  information  for the ALCO
Discount  Stores  whereas  capital leases are accounted for as such in the  consolidated
statements of operations.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Identifiable
assets as reflected in the above segment information include cash and cash equivalents,
receivables, inventory,  property and equipment, and property under capital leases.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|A reconciliation of the segment information to
the amounts reported in the consolidated financial statements is presented below:
|--------------------------------------------------------------------------------------------------------------------------------

|                                                     |  |                                    
|---------------------------------------------------- |  | -----------------------------------
|                                                     |  | For the Thirteen Week Periods Ended
|                                                     |  | May 4, 2003                        
|Net sales per above segment information              |  | $161,265                           
|Intercompany elimination                             |  | (61,034                            
|                                                     |  |                                    
|Net sales per consolidated
      statements          | 
|of operations                                        |  | $100,231                           
|                                                     |  |                                    
|Income from operations per above segment information |  | $1,522                             
|Leases                                               |  | 45                                 
|                                                     |  |                                    
|Income from operations per
      consolidated        | 
|statements of
      operations                       |  | $1,477                             
|                                                     |  |                                    



| |  | 
| |  | 



---





|MARKET RISK DISCLOSURE
|----------------------



|The  revolving
credit  facility  has a floating  interest  rate that is affected  by changes in market
interest  rates.  The  Company  entered into an interest rate swap in December  2000 with
a notional  principal  amount of $10,000  whereby the Company paid a  fixed rate of
interest  and received  interest  based on LIBOR for the period April 15, 2001 to April
15, 2002 to mitigate a portion of  its interest rate risk under the revolving credit
facility.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|On April 15, 2002,
the Company  replaced the existing line of credit with a new line of credit with Fleet
Retail Finance Inc.  that expires in April 2006.  The credit line available is
$70,000,000, which carries a variable rate of interest.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|CRITICAL ACCOUNTING POLICIES
|----------------------------



|As discussed in
Note 1 (d) to the Consolidated  Financial  Statements in the Companys fiscal 2003 Annual
Report,  inventories  are stated at the lower of cost or net realizable  value with cost
determined using the last-in,  first-out  (LIFO) method.  The retail  inventory  method
(RIM) used by the Company is an  averaging  method that has been widely used
in the retail  industry.  This method  calculates  a cost to retail ratio that is applied
to the retail value of inventory  to  calculate  cost  inventory  and the  resulting
gross margin.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Use of the RIM
method does not eliminate the use of management  judgments and  estimates,  including
markdowns and shrinkage,  which significantly  impact the ending inventory valuation at
cost and the resulting gross margins.  The Company continually  evaluates  product
categories  to determine if markdown  action is  appropriate,  or if a markdown  reserve
should be  established.  The Company  recognizes that the use of the retail inventory
method will result in valuing  inventories at lower of cost or market if markdowns are
currently  taken as a reduction  of the retail  value of  inventories.  As of May 4, 2003
and May 5, 2002,  the  Company  had  recorded  markdowns  that had not been taken and
which served to reduce  inventories to lower of cost or market by  approximately
$1,100,000 and  $1,100,000, respectively.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Management
believes that the Companys RIM provides an inventory  valuation which reasonably
approximates cost and results in  carrying inventory at the lower of cost or market.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The Company
considers  determination of impairment of long-lived assets as a critical accounting
policy because  determination  as to whether the  long-lived  assets of a store are
impaired  and, if  impaired,  the fair value of such assets  requires  the use of
judgment,  particularly as it relates to projecting  whether the sum of expected
undiscounted  future cash flows for the store over an  extended  period of time will
equal or exceed the carrying  value of such assets.  Management  uses the best
information  available to  make the  determination;  however,  actual  future cash flows
for the store may vary  significantly  from the cash flows  projected  in  conjunction
with the  impairment  assessment.  The potential  impact on the  financial  statements
of incorrect  judgments  regarding  impairment of long-lived  assets is that a provision
for impairment  could be needlessly  recorded if projected future cash flows for a  store
are  significantly  under estimated or a provision for impairment could be deferred until
later determined  necessary in a future  period  if  initial  projected  cash  flows  are
over  estimated.  See  Note 1 of Notes to  Consolidated  Financial  Statements  for a
description of the Companys accounting policy for impairment of long-lived assets.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 4.  CONTROLS AND PROCEDURES
|--------------------------------



|Based on an
evaluation of disclosure  controls and  procedures for the period ended May 4, 2003
conducted by our President and  Chief  Financial  Officer,  we conclude that our
disclosure  controls and procedures are effective.  The President and Chief  Financial
Officer conducted this evaluation in May, 2003.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|The company has in
place a system of internal  controls  which it believes are adequate.  There have been no
significant  deficiencies  or material  weaknesses  identified  and we have not made any
significant  changes in our internal  controls or in other  factors that  could
significantly affect internal controls.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 
| |  | 



---





|OTHER INFORMATION
|-----------------



|PART II
|-------

| |        
| | -------
| | Item 1.
| |        
| | Item 2.
| |        
| | Item 3.
| |        
| | Item 4.
| |        
| | Item 5.
| |        
| | Item 6.
| |        
| |        



|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, 2003 | /s/ Richard A. Mansfield
      Richard A. Mansfield 
      Vice President - Finance 
      Chief Financial Officer
|------------------- | ------------------------------------------------------------------------------------------------------------------
|                    |                                                                                                                   
|                    | Signing on behalf of the registrant 
      and as principal financial officer                                     





| |  | 
| |  | 



---





|CERTIFICATIONS
|--------------



|I, Glen L. Shank, certify that:
|-------------------------------



|1. | I
have reviewed this quarterly report on Form 10-Q of Duckwall-ALCO Stores, Inc.;
|-- | ---------------------------------------------------------------------------------





|2. | Based
on my  knowledge,  this  quarterly  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 quarterly report;
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|3. | Based
on my knowledge,  the financial  statements,  and other financial  information included
in this quarterly 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 quarterly report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|4. | The
registrants  other certifying  officers and I are responsible for  establishing and
maintaining  disclosure  controls and  procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| | (a) | designed such disclosure controls and procedures
      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 quarterly report
      is being prepared;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | evaluated the effectiveness of the registrants
      disclosure controls and procedures as of a date within 90 days prior to
      the filing date of this quarterly report (the Evaluation Date);
      and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | presented in this quarterly report our conclusions
      about the effectiveness of the disclosure controls and procedures based
      on our evaluation as of the Evaluation Date;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------













|5. | The
registrants  other certifying  officers and I have disclosed,  based on our most recent
evaluation,  to the registrants  auditors and the audit committee of registrants board
of directors (or persons performing the equivalent function);
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | all significant deficiencies in the design or
      operation of internal controls which could adversely affect the registrants
      ability to record, process, summarize and report financial data and have
      identified for the registrants auditors any material weaknesses in
      internal controls; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | any fraud, whether or not material, that involves
      management or other employees who have a significant role in the registrants
      internal controls; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------













|6. | The
registrants  other  certifying  officers  and I have  indicated  in this  quarterly
report  whether  or not there  were  significant  changes  in  internal  controls  or in
other  factors  that could  significantly  affect  internal  controls  subsequent  to the
date of our most recent  evaluation,  including  any  corrective  actions  with regard to
significant  deficiencies and material weaknesses.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Date:  June 16, 2003 | /s/ Glen L. Shank
      Glen L. Shank 
      President, Chairman of the Board
|-------------------- | -----------------------------------------------------------------------------





|
|



| |  | 
| |  | 



---





|I, Richard A. Mansfield, certify that:
|--------------------------------------



|1. | I
have reviewed this quarterly report on Form 10-Q of Duckwall-ALCO Stores, Inc.;
|-- | ---------------------------------------------------------------------------------





|2. | Based
on my  knowledge,  this  quarterly  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 quarterly report;
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|3. | Based
on my knowledge,  the financial  statements,  and other financial  information included
in this quarterly 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 quarterly report;
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|4. | The
registrants  other certifying  officers and I are responsible for  establishing and
maintaining  disclosure  controls and  procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | designed such disclosure controls and procedures
      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 quarterly report
      is being prepared;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | evaluated the effectiveness of the registrants
      disclosure controls and procedures as of a date within 90 days prior to
      the filing date of this quarterly report (the Evaluation Date);
      and
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | presented in this quarterly report our conclusions
      about the effectiveness of the disclosure controls and procedures based
      on our evaluation as of the Evaluation Date;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

















|5. | The
registrants  other certifying  officers and I have disclosed,  based on our most recent
evaluation,  to the registrants  auditors and the audit committee of registrants board
of directors (or persons performing the equivalent function);
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | all significant deficiencies in the design or
      operation of internal controls which could adversely affect the registrants
      ability to record, process, summarize and report financial data and have
      identified for the registrants auditors any material weaknesses in
      internal controls; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | any fraud, whether or not material, that involves
      management or other employees who have a significant role in the registrants
      internal controls; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------













|6. | The
registrants  other  certifying  officers  and I have  indicated  in this  quarterly
report  whether  or not there  were  significant  changes  in  internal  controls  or in
other  factors  that could  significantly  affect  internal  controls  subsequent  to the
date of our most recent  evaluation,  including  any  corrective  actions  with regard to
significant  deficiencies and material weaknesses.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|Date:  June 16, 2003 | /s/ Richard A. Mansfield
      Richard A. Mansfield 
      Vice President, Chief Financial Officer
|-------------------- | --------------------------------------------------------------------------------------------------





| |  | 
| |  | 



---





|EXHIBIT INDEX
|-------------



|3.1 | Amended
and  Restated  Articles  of  Incorporation  (filed  as  Exhibit  3(a) to  Companys
Registration  Statement  on Form S-1  and hereby incorporated herein by reference).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|3.2 | Certificate
of Amendment to the Articles of  Incorporation  (filed as Exhibit 3(b) to Companys
Annual Report on Form 10-K for  the fiscal year ended  January 29, 1995,  and
incorporated  herein by reference)  (filed as Exhibit 3(b) to Companys  Annual  Report
on Form 10-K for the fiscal year ended January 29, 1995, and  incorporated herein by
reference.)
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|3.3 | Bylaws
(filed as Exhibit 3(b) to Companys Registration Statement on Form S-1 and hereby
incorporated  herein by reference).
|--- | ----------------------------------------------------------------------------------------------------------------------------





|4.1 | Specimen
Common Stock  Certificates  (filed as Exhibit 4.1 to Companys  Registration  Statement
on Form S-1 and  incorporated  herein by reference).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------





|4.2 | Reference
is made to the Amended and  Restated  Articles of  Incorporation  and Bylaws  described
above under 3(1) and 3(3),  respectively  (filed as  Exhibit  4(a) to  Companys
Registration  Statement  on Form S-1 and hereby  incorporated  herein by  reference).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|4.3 | Reference
is made to the  Certificate  of  Amendment  to the  Articles  of  Incorporation
described  above  under 3(2) (filed as  Exhibit 3(2) to Companys  Annual Report on Form
10-K for the fiscal year ended January 29, 1995, and  incorporated  herein by  reference).
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|10.11 | Employment
Agreement  dated  December  28, 2000  between the Company and Glen L. Shank  (filed as
Exhibit  10.11 to Companys  annual Report on Form 10-K for the fiscal year ended
February 2, 2003, and incorporated herein by reference).
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|10.12 | Employment
Agreement  dated  December  28,  2000  between  the Company  and James E.  Schoenbeck
(filed as Exhibit  10.12 to  Companys annual Report on Form 10-K for the fiscal year
ended February 2, 2003, and incorporated herein by reference).
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|10.13 | Employment
Agreement  dated  December 28, 2000 between the Company and James R. Fennema  (filed as
Exhibit 10.13 to Companys  annual Report on Form 10-K for the fiscal year ended February
2, 2003, and incorporated herein by reference).
|----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|10.14 | Employment
Agreement  dated  December  28, 2000  between the Company  and Richard A.  Mansfield.
(filed as Exhibit  10.14 to  Companys annual Report on Form 10-K for the fiscal year
ended February 2, 2003, and incorporated herein by reference.).
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|10.15 | Employment
Agreement  dated  December  28,  2000  between the Company and Tom L.  Canfield,  Jr.
(filed as Exhibit  10.15 to  Companys annual Report on Form 10-K for the fiscal year
ended February 2, 2003, and incorporated herein by reference).
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|10.16 | Loan
and Security  Agreement,  dated as of April 15, 2002, between the Company and Fleet
Retail Finance Inc. (filed as Exhibit  10.16 to  Companys  annual  Report on Form 10-K
for the  fiscal  year ended  February  2, 2003,  and  incorporated  herein by  reference).
|----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|10.17 | Joinder
Agreement and First Amendment to Loan and Security  Agreement dated September 9, 2002
among the Company,  Fleet Retail  Finance  Inc.,  and DA Good Buys,  Inc.  (filed as
Exhibit  10.17 to Companys  annual Report on Form 10-K for the fiscal year  ended
February 2, 2003, and incorporated herein by reference).
|----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|99.1 | Certification
of Chief  Executive  Officer of  Duckwall-ALCO  Stores,  Inc. dated June 16, 2003,  which
is accompanying  this  Quarterly  Report on Form 10-Q for the quarter  ended May 4, 2003
and is not treated as filed in reliance on the SECs Interim  Guidance Regarding Filing
Procedures.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





|99.2 | Certification
of Chief  Financial  Officer of  Duckwall-ALCO  Stores,  Inc. dated June 16, 2003,  which
is accompanying  this  Quarterly  Report on Form 10-Q for the quarter  ended May 4, 2003
and is not treated as filed in reliance on the SECs Interim  Guidance Regarding Filing
Procedures.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





| |  | 
| |  | 



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| |  | 
| |  | 



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