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 ....... August 2, 1998

     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 Avenue  
     Abilene, Kansas                              67410-2832       
     (Address of principal executive offices      (Zip Code)  
  
     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 [ ]  
  
                   
     APPLICABLE ONLY TO CORPORATE ISSUERS:                                     
                                                                          
     5,144,074 shares of common stock, $.0001 par value (the issuer's  
     only class of common stock), were outstanding as of August 2, 1998. 
 
<PAGE>  
<TABLE>  
             
PART I.  Financial Information.

         ITEM 1.  Financial Statements.

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

                            (Dollars in Thousands)                                                   
<CAPTION>                                                                      
  

                                             August 2,      February 1,
                                               1998             1998
                                           (Unaudited)
                                           ___________      __________
<S>                                                <C>               <C>
ASSETS

Current assets:                                                          
     Cash on deposit and on hand                $5,492            $2,555 
     Receivables                                 2,965             3,158 
     Inventories                               113,562           103,445                                
     Other current assets                        1,735             2,131
                                                                         
          Total current assets                 123,754           111,289
                                                                         
Property and equipment                          76,174            70,774                             
Less accumulated depreciation                   33,256            30,627
                                                                         
          Net property and equipment            42,918            40,147
                                                                         
Property under capital leases                   20,407            20,407 
Less accumulated amortization                   14,120            13,811
                                                                         
          Net property under capital leases      6,287             6,596
                                                                         
Debt financing cost                                347                82
                                                                         
                                                                         
               Total assets                   $173,306          $158,114
                                                                         
<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>

                                            August 2,        February 1, 
                                              1998               1998
                                           (Unaudited)                  
                                          ___________       ____________
<S>                                                <C>               <C>
LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:
   Current maturities of:
     Long term debt                             $1,124            $1,333 
     Capital lease obligations                     540               518
   Accounts payable                             26,628            19,009
   Income taxes payable                             39             2,272 
   Accrued salaries and commissions              3,838             4,884 
   Accrued taxes other than income               4,046             3,159 
   Other current liabilities                     1,212             1,804 
   Deferred taxes                                2,324             2,324 

          Total current liabilities             39,751            35,303 

Notes payable under revolving loan              34,290            25,591 
Long term debt                                                            
     less current maturities                     3,006             3,646 

Capital lease obligations                                                 
     less current maturities                     8,348             8,630 

Other noncurrent liabilities                       886               782
Deferred revenue                                 1,174             1,272
Deferred income taxes                            2,496             2,496

          Total liabilities                     89,951            77,720 

Stockholders' equity:
Common stock, $.0001 par value, authorized
  20,000,000 shares; issued and outstanding
  5,144,074 shares and 5,098,761 shares
  respectively                                       1                 1
Additional paid-in capital                      54,839            54,474 

Retained earnings since June 2, 1991            28,515            25,919 

          Total stockholders' equity            83,355            80,394 

          Total liabilities and
               stockholders' equity           $173,306          $158,114

<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                 For the Twenty-Six 
                                                     Week Periods                      Week Periods    
                               
                                              August 2,        August 3,        August 2,         August 3,  
                                                1998             1997             1998              1997
                                            ___________      ___________       ___________      ___________
                                                    <C>              <C>               <C>              <C>
Net sales ...............................      $90,360           $80,463          $171,412         $149,735
Cost of sales ...........................       59,750            53,795           112,652           99,332

          Gross margin ..................       30,610            26,668            58,760           50,403

Selling, general
     and administrative .................       25,424            22,170            49,554           42,781

Depreciation
     and amortization ...................        1,549             1,152             2,938            2,214


          Total operating expenses ......       26,973            23,322            52,492           44,995


Income from operations ..................        3,637             3,346             6,268            5,408

Interest expense.........................        1,068               821             2,094            1,503

Earnings
    before income taxes .................        2,569             2,525             4,174            3,905

Income tax expense ......................          980               990             1,579            1,521


     Net earnings .......................       $1,589            $1,535            $2,595           $2,384



Earnings per share:
     Basic  .............................        $0.31             $0.30             $0.51            $0.47
     Diluted ............................        $0.31             $0.30             $0.50            $0.46
                                                       
<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 Twenty-Six Week
                                                    Periods Ended
                                         August 2, 1998      August 3, 1997
                                       -----------------    ----------------
<S>                                                <C>                 <C>

Cash flows from operating activities:

     Net Earnings                               $2,595             $2,384 
     Adjustments to reconcile                                           
       net earnings to net cash                                           
       used in operating activities                                       

          Amortization of                                               
            debt financing costs                    80                 20 
          Depreciation and amortization          2,938              2,214
          LIFO expense                               0                110
          Increase in inventories              (10,117)           (13,892)
          Increase in accounts payable           7,619              3,330
          Decrease (increase) in receivables       193                (24) 
          Decrease (increase)
            in other current assets                396               (188)
          Increase in accrued taxes
            other than income                      887                 46
          Increase (decrease)in accrued
             salaries and commissions           (1,046)              (848)
          (Decrease) in income taxes payable    (2,233)            (2,313)                
          Increase (decrease)in other
            liabilities                           (586)               193
          Net cash used in
            operating activities                   726             (8,968)

Cash flow from investing activities:

        Capital expenditures                    (5,400)            (5,601)
        Net cash used in
          investing activities                  (5,400)            (5,601)


Cash flow from financing activities:

        Proceeds from exercise of
          outstanding stock options                365                 74
        Increase in revolving loan               8,699              9,425    
        Principal payments on
          long term notes                         (849)              (848)
                                 
        Principal payments on
          capital leases                          (260)              (304)

        Increase in long term notes                  0              1,870 

        Debt issue costs                          (344)               (43)

        Net cash provided by
          financing activities                   7,611             10,174


        Net increase (decrease) in cash          2,937             (4,395) 
        Cash at beginning of period              2,555              7,538 
        Cash at end of period                   $5,492             $3,143 

<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 1998 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          Basic      Diluted

                    August 2, 1998              5,138,416    5,209,483
                    August 3, 1997              5,097,884    5,136,261

                    Twenty-Six Weeks Ending

                    August 2, 1998              5,131,851    5,195,246
                    August 3, 1997              5,094,128    5,135,714



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


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

(Dollars in thousands)

The thirteen weeks ended August 2, 1998 and August 3, 1997 are referred to
herein as the second quarter of fiscal 1999 and 1998, 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

	Net earnings increased 3.6% for the second quarter of fiscal 1999 to
        $1,589, an increase of $54 over the net earnings of $1,535 for the
        second quarter of fiscal 1998.  The Company has had 22 consecutive
        quarters of earnings growth (where current quarter earnings have
        exceeded prior year earnings for the same quarter).  Gross margins
        improved for the second quarter of fiscal 1998 to 33.9%, compared to
        33.1% in the prior year's second quarter.

	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 second quarter of
        fiscal 1999, the Company opened 5 stores, four of which were in new,
        non-competitive markets, resulting in a quarter end total of 248
        stores.  For the twenty-six week period ending August 2, 1998, the
        Company opened 26 stores and closed 3 stores.  As of August 2, 1998,
        80% of the stores are in non-competitive markets.

	Net sales for the second quarter of fiscal 1999 increased $9,897 or
        12.3% to $90,360  compared to $80,463 for the second quarter of fiscal
        1998.  Net sales for the prototype Class 18 ALCO stores open the full
        period in both the second quarter of fiscal 1999 and fiscal 1998
        (comparable stores) increased $439 or 1.7%.  The  Duckwall variety
        stores produced an increase of $65 or 1.6% compared to the second
        quarter of the prior fiscal year.  Net sales for all stores open the
        full period increased $395 or .6% compared to the second quarter of
        the prior fiscal year.  A severe drought in the south central United
        States, as well as depressed farm commodity prices, had a negative
        impact on the company's operations during the second quarter of
        fiscal 1999.  Although these weather and economic phenomena are
        largely cyclical in nature, the company will continue to be faced
        with these challenges at least in the short term.

	Net sales for the twenty-six week period ending August 2, 1998
        increased $21,677 or 14.4% to $171,412 compared to $149,735 in
        the comparable twenty-six week period of the prior fiscal year.
        Net sales of comparable class 18 ALCO stores increased by $1,137
        or 2.3% for the twenty-six week period ending August 2, 1998
        compared to the twenty-six week period of the prior fiscal year.

	Gross margin for the second quarter of fiscal 1999 increased $3,942
        or 14.8% to $30,610 compared to $26,668 in the second quarter of
        fiscal 1998.  Gross margin as a percentage of sales was 33.9% for
        the second quarter of  fiscal 1999 compared to 33.1%  the second
        quarter of fiscal 1998. The improvement in the gross margin percentage
        was due to strong sales performance in the higher margin apparel and
        shoe lines as well as a continuing focus on managing product costs.

        Gross margin for the twenty-six week period ended August 2, 1998 was
        $58,760, which was $8,357 or 16.6% higher than last year's twenty-six
        week gross margin of $50,403.  As a percent of net sales, gross
        margin for the twenty-six week period ended August 2, 1998 was 34.3%
        compared to 33.7% in the twenty-six week period of the prior fiscal
        year.
  
	Selling, general and administrative expense increased $3,254 or 14.7%
        to $25,424 in the second quarter of fiscal 1999 compared to $22,170
        in the second quarter of fiscal 1998, primarily due to the increase
        in total stores.  As a percentage of net sales, selling, general and
        administrative expenses in the second  quarter of fiscal 1999 was
        28.1%, compared to 27.6% in the second quarter of fiscal 1998.   The
        increase was due to increased payroll costs, due in part to an
        increase in the minimum wage.

	Selling, general and administrative expenses increased $6,773 or 15.8%
        to $49,554 for the twenty-six week period ended August 2, 1998
        compared to $42,781 for the comparable twenty-six week period of the
        prior fiscal year.  Selling, general and administrative expense as a
        percent of net sales was 28.9% for the twenty-six week period ended
        August 2, 1998 compared to 28.6% in the comparable twenty-six week
        period last year.   The increase in selling, general and administrative
        expense in fiscal 1999 is primarily due to an increase in the number of
        stores.

	Depreciation and amortization expense increased $397 or 34.5% to
        $1,549 in the second quarter of fiscal 1999 compared to $1,152 in the
        second quarter of fiscal 1998.  The increase is due to additional
        buildings and equipment associated with the store expansion program.
 
	Income from operations increased $292 or 8.7% to $3,637  in the second
        quarter of fiscal 1999 compared to $3,346 in the second quarter of
        fiscal 1998.  Income from operations as a percentage of net sales was
        4.0% in the second quarter of fiscal 1999 compared to 4.2% in the
        second quarter of fiscal 1998.

	Income from operations increased $860 or 15.9% to $6,268 for the
        twenty-six week period ended August 2, 1998 compared to $5,408 in
        the comparable twenty-six week period of the prior fiscal year.

	Interest expense increased $247 or 30.1% in the second quarter of
        fiscal 1999 compared to the second quarter of fiscal 1998.

	Net earnings for the second quarter of fiscal 1999 were $1,589, an
        increase of  $54 or 3.6% over the net earnings of $1,535 for the
        second quarter of fiscal 1998.

	
LIQUIDITY AND CAPITAL RESOURCES	

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

	At August 2, 1998 working capital (defined as current assets less
        current liabilities) was $84,003 compared to $75,986 at the end of
        fiscal 1998.

	Operating activities in the second quarter of fiscal 1999 generated
        cash in the amount of $726 and used cash in the amount of $8,968  in
        the second quarter of fiscal 1998.  The increase in the amount of
        cash generated by operating activities in the second quarter of
        fiscal 1999 compared to the second quarter of fiscal 1998 was
        primarily due to a larger 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 second
        quarter of fiscal 1999 and 1998 of $7,611 and $10,174, respectively.
        This was generated by borrowing under the revolving loan credit
        facility, as well as a $1,870 mortgage secured by certain company
        fixed assets in fiscal 1998.

	Cash used for acquisition of property and equipment in the second
        quarters of fiscal 1999 and 1998 totaled $5,400 and $5,601,
        respectively.  Total anticipated cash payments for acquisition of
        property and equipment in fiscal 1999, principally for store buildings
        and store and warehouse fixtures and equipment, are $13,308.

IMPACT OF NEW ACCOUNTING PRONOUNCEMENT

In April 1998, the American Institute of Certified Public Accountants adopted
a Statement of Position (SOP) REPORTING ON THE COSTS OF START-UP ACTIVITIES.
The SOP requires that entities expense costs of start-up activities as they
are incurred.  The SOP is effective for financial statements for fiscal years
beginning after December 15, 1998, with earlier application encouraged.  The
initial application of the SOP is to be reported as a cumulative effect of a
change in accounting principle.  The Company currently capitalizes store
pre-opening costs and amortizes such costs over the initial twelve months of
a store's operations.  Pre-opening costs capitalized, net of accumulated
amortization, at August 2, 1998 and February 1, 1998 are $1,219 and $1,567,
respectively.  While the one-time recording of the cumulative effect of the
change in accounting principle could be material, the ongoing effect of the
proposed new accounting principle would be dependent upon the number and
timing of new stores opened.  Generally, pre-opening costs would be recognized
during the two months prior to a store commencing operation under the proposed
new accounting principle versus over the twelve months subsequent to
commencing operation under the existing principle.

THE YEAR 2000 ISSUE

The Company is aware of the issues associated with the programming code in
existing computer systems as the year 2000 approaches.  The Company has
commenced, for all of its systems, a year 2000 date conversion project to
address all necessary code changes, testing and implementation.

I.  The Company's state of readiness: The Company has defined this project
as consisting of five phases:  1) Enterprise level assessment,  2) Strategy
Development and Confirmation,  3) Implementation,  4) Vendor Compliance
planning, and  5) Vendor Compliance Management.  The Company has completed
phases one and two and is currently active in phases three and four.  Major
project components have been prioritized and are on target for completion on
schedule as established by the Company.

II.  The costs to address the Company's Year 2000  issues:  The Company has
specifically identified necessary hardware and software upgrades that will
cost approximately $400,000.   Approximately one-third of that amount has
been expended to date.  As on-going testing continues, it is expected that up
to $300,000 in additional hardware and software costs will  be identified.
The costs associated with internal and external programming staff to review
and modify software programs are estimated to be not more than $300,000.
This brings the total estimated maximum expenditures to $1,000,000.  All
costs will be funded out of current operating cash flow, and will be
capitalized or expensed depending on the classification of the expenditure
according to current company policies.

III.  The Risks of the Company's Year 2000 Issues:  The Company has not made
an assessment of the estimated material lost revenue due to Year 2000 issues.
The Company presently believes that, with modifications to existing software
and converting to new software, the year 2000 problem will not pose
significant operations problems for the Company's computer systems as so
modified and converted.  The largest risk to lost revenue appears to be if
the company's merchandise vendors were unable to ship goods for the company
to sell.  For this reason, phases four and five of the Company's plan are
devoted to Vendor Compliance Planning and Vendor Compliance Management.  As
the Company completes these phases of the project, it believes that it will
have assurances from its vendors that there will be no material disruptions
to the flow of goods to the Company.  However, even the best efforts on the 
part of the Company and its suppliers will not eliminate 100% of the risk of
lost revenues.

IV.  The Company's Contingency Plans:  The Company's efforts have been focused
on identifying and implementing solutions for the Year 2000 issue.  The
Company feels this has been a better use of its time rather than developing
contingency plans that could take its focus off solving year 2000 issues.  As
time goes on, the Company will evaluate the need for contingency plans based
on its assessment of the risks involved.

        <PAGE>


OTHER INFORMATION

PART II
   


     Item 1.   Legal Proceedings
          No legal proceedings except those covered by insurance occurred
          during the thirteen week period ended August 2, 1998.


     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, September 11, 1998          /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>