----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C. 20549**

**FORM      10-Q**

**      QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE      ACT      OF 1934**

**OR**

**      TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE      ACT      OF 1934**

**DUCKWALL-ALCO      STORES, INC.**

| Kansas                                                                   | 48-0201080                                          |
|-------------------------------------------------------------------------------|-----------------------------------------------------|
| (State                or other jurisdiction of incorporation or organization) | (I.R.S.                Employer Identification No.) |
|                                                                          |                                                |
| 401                Cottage StreetAbilene,                Kansas          |   67410-2832                              |
| (Address                of principal executive offices)                       | (Zip                Code)                           |

| **TABLE                  OF CONTENTS** |                                       |
|----------------------------------------|--------------------------------------------|
|                                   |                                       |   |   |   |   |
| **PART                  I**            | **FINANCIAL                  INFORMATION** |   |   |   |
|                                   | Item                  1.                   | Financial                  Statements |   | ** ** | **3** |   |
|                                   | Item                  2.                   | Management's                  Discussion and Analysis of Financial Condition and Results of                  Operations |   | ** ** | **8** |   |
|                                   | Item                  3.                   | Quantitative                  and Qualitative Disclosure About Market Risk |   | ** ** | **13** |   |
|                                   | Item                  4.                   | Controls                  and Procedures |   | ** ** | **13** |   |
|                                   |                                       |   |   |   |   |   |
| **PART                  II**           | **OTHER                  INFORMATION**     |   |   |   |   |
|                                   | Item                  1.                   | Legal                  Proceedings |   | ** ** | **15** |   |
|                                   | Item                  1A.                  | Risk                  Factors |   | ** ** | **15** |   |
|                                   | Item                  2.                   | Unregistered                  Sales of Equity Securities and Use of Proceeds |   | ** ** | **15** |   |
|                                   | Item                  3.                   | Defaults                  Upon Senior Securities |   | ** ** | **15** |   |
|                                   | Item                  4.                   | Submissions                  of Matters to a Vote of Security Holders |   | ** ** | **15** |   |
|                                   | Item                  5.                   | Other                  Information |   | ** ** | **15** |   |
|                                   | Item                  6.                   | Exhibits |   | ** ** | **15** |   |
|                                   |                                       |   |   |   |   |   |
| Signature                              |                                       |   |   | ** ** | **15** |   |

----

**PART      I – FINANCIAL INFORMATION**

**ITEM      1.  FINANCIAL STATEMENTS**

| **Duckwall-ALCO                  Stores, Inc. and Subsidiaries**                               |   |
|-------------------------------------------------------------------------------------------------------------------------|--------|
| **Consolidated                  Balance Sheets**                                               |   |
| (in                  thousands, except share amounts)                                          |   |
|                                                                                                                    |   |   |   |   |   |   |
| **Assets**                                                                                     |   |
|                                                                                                                    |   | July                  29, |   |   | January                  28, |   |
|                                                                                                                    |   | 2007 |   |   | 2007 |   |
|                                                                                                                    |   | (Unaudited) |   |   |   |   |
| Current                  assets:                                                                                        |   |   |   |   |   |   |
|    Cash                  and cash equivalents                                                            |   | $ | 4,217 |   |   | $ | 2,983 |   |
|    Receivables                                                                                           |   |   | 4,151 |   |   |   | 3,059 |   |
|    Prepaid                  expenses                                                                     |   |   | 3,528 |   |   |   | 1,561 |   |
|    Prepaid                  income taxes                                                                 |   |   | 46 |   |   |   | - |   |
|    Inventories                                                                                           |   |   | 156,019 |   |   |   | 151,406 |   |
|    Deferred                  income taxes                                                                |   |   | 3,037 |   |   |   | 3,037 |   |
|           Total                  current assets                       |   |   | 170,998 |   |   |   | 162,046 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| Property                  and equipment, at cost:                                                                       |   |   |   |   |   |   |   |   |
|    Land                  and land improvements                                                           |   |   | 1,719 |   |   |   | 1,719 |   |
|    Buildings                  and building improvements                                                  |   |   | 12,046 |   |   |   | 12,023 |   |
|    Furniture,                  fixtures and equipment                                                    |   |   | 58,771 |   |   |   | 56,703 |   |
|    Transportation                  equipment                                                             |   |   | 1,484 |   |   |   | 1,491 |   |
|    Leasehold                  improvements                                                               |   |   | 16,135 |   |   |   | 15,410 |   |
|    Construction                  work in progress                                                        |   |   | 651 |   |   |   | 138 |   |
|           Total                  property and equipment               |   |   | 90,806 |   |   |   | 87,484 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
|    Less                  accumulated depreciation                                                        |   |   | 66,662 |   |   |   | 64,451 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
|           Net                  property and equipment                 |   |   | 24,144 |   |   |   | 23,033 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| Property                  under capital leases                                                                          |   |   | 24,571 |   |   |   | 24,571 |   |
|    Less                  accumulated amortization                                                        |   |   | 18,630 |   |   |   | 17,618 |   |
|           Net                  property under capital leases          |   |   | 5,941 |   |   |   | 6,953 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| Other                  non-current assets                                                                               |   |   | 97 |   |   |   | 44 |   |
| Deferred                  income taxes                                                                                  |   |   | 5,653 |   |   |   | 3,344 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
|           Total                  assets                               |   | $ | 206,833 |   |   | $ | 195,420 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| Current                  liabilities:                                                                                   |   |   |   |   |   |   |   |   |
|    Current                  maturities of capital lease obligations                                      |   | $ | 1,982 |   |   | $ | 2,128 |   |
|    Accounts                  payable                                                                     |   |   | 36,290 |   |   |   | 35,263 |   |
|    Income                  taxes payable                                                                 |   |   | - |   |   |   | 1,915 |   |
|    Accrued                  salaries and commissions                                                     |   |   | 4,311 |   |   |   | 4,180 |   |
|    Accrued                  taxes other than income                                                      |   |   | 5,130 |   |   |   | 4,242 |   |
|    Self-insurance                  claim reserves                                                        |   |   | 4,936 |   |   |   | 4,322 |   |
|    Other                  current liabilities                                                            |   |   | 3,659 |   |   |   | 3,634 |   |
|           Total                  current liabilities                  |   |   | 56,308 |   |   |   | 55,684 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| Notes                  payable under revolving loan                                                                     |   |   | 29,876 |   |   |   | 21,077 |   |
| Capital                  lease obligations - less current maturities                                                    |   |   | 5,839 |   |   |   | 6,783 |   |
| Deferred                  gain on leases                                                                                |   |   | 5,179 |   |   |   | 5,378 |   |
| Other                  non-current liabilities                                                                          |   |   | 2,465 |   |   |   | 438 |   |
|           Total                  liabilities                          |   |   | 99,667 |   |   |   | 89,360 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| Stockholders'                  equity:                                                                                  |   |   |   |   |   |   |   |   |
|   Common                  stock, $.0001 par value, authorized 20,000,000 shares; issued                  and  |   |   |   |   |   |   |   |   |
|   outstanding                  3,809,341 shares and 3,794,303 shares respectively                             |   |   | 1  |   |   |   | 1  |   |
|   Additional                  paid-in capital                                                                 |   |   | 38,174 |   |   |   | 37,315 |   |
|   Retained                  earnings                                                                          |   |   | 68,991 |   |   |   | 68,744 |   |
|           Total                  stockholders' equity                 |   |   | 107,166 |   |   |   | 106,060 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
|           Total                  liabilities and stockholders' equity |   | $ | 206,833 |   |   | $ | 195,420 |   |
|                                                                                                                    |   |   |   |   |   |   |   |   |
| 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 |   |   | For                the Twenty-Six Week |   |
|                                                                                                                       |   | Periods                Ended |   |   | Periods                End |   |
|                                                                                                                       |   | July                29, 2007 |   |   | July                30, 2006 |   |   | July                29, 2007 |   |   | July                30, 2006 |   |
| Net                sales                                                                                                   |   | $ | 124,366 |   |   | $ | 119,637 |   |   | $ | 235,688 |   |   | $ | 227,817 |   |
| Cost                of sales                                                                                               |   |   | 83,744 |   |   |   | 83,715 |   |   |   | 160,718 |   |   |   | 159,603 |   |
| Gross                margin                                                                                                |   |   | 40,622 |   |   |   | 35,922 |   |   |   | 74,970 |   |   |   | 68,214 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling,                general and administrative                                                                         |   |   | 33,291 |   |   |   | 31,155 |   |   |   | 68,595 |   |   |   | 60,744 |   |
| Depreciation                and amortization                                                                               |   |   | 1,876 |   |   |   | 1,664 |   |   |   | 3,738 |   |   |   | 3,268 |   |
|      Total                operating expenses                                                      |   |   | 35,167 |   |   |   | 32,819 |   |   |   | 72,333 |   |   |   | 64,012 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating                income from continuing operations                                                            |   |   | 5,455 |   |   |   | 3,103 |   |   |   | 2,637 |   |   |   | 4,202 |   |
| Interest                expense                                                                                            |   |   | 840 |   |   |   | 631 |   |   |   | 1,597 |   |   |   | 1,202 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings from                continuing operations before income taxes                                                |   |   | 4,615 |   |   |   | 2,472 |   |   |   | 1,040 |   |   |   | 3,000 |   |
| Income                tax expense                                                                                          |   |   | 1,829 |   |   |   | 1,016 |   |   |   | 412 |   |   |   | 1,233 |   |
| Earnings from                continuing operations                                                                    |   |   | 2,786 |   |   |   | 1,456 |   |   |   | 628 |   |   |   | 1,767 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings                (loss) from discontinued operations, net of income taxes                                           |   |   | (192 | ) |   |   | (39 | ) |   |   | (266 | ) |   |   | 191 |   |
| Net                earnings                                                                                                |   |  $ | 2,594 |   |   |  $ | 1,417 |   |   |  $ | 362 |   |   |  $ | 1,958 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings                (loss) per share                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Continuing                operations                                                         |   |  $ | 0.73 |   |   |  $ | 0.38 |   |   |  $ | 0.17 |   |   |  $ | 0.47 |   |
|      Discontinued                operations                                                       |   |   | (0.05 | ) |   |   | (0.01 | ) |   |   | (0.07 | ) |   |   | 0.05 |   |
|      Net                earnings per share                                                        |   |   | 0.68 |   |   |   | 0.37 |   |   |   | 0.10 |   |   |   | 0.52 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                                                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|      Continuing                operations                                                         |   |   | 0.72 |   |   |   | 0.38 |   |   |   | 0.16 |   |   |   | 0.46 |   |
|      Discontinued                operations                                                       |   |   | (0.05 | ) |   |   | (0.01 | ) |   |   | (0.07 | ) |   |   | 0.05 |   |
|      Net                earnings per share                                                        |   | $ | 0.67 |   |   | $ | 0.37 |   |   | $ | 0.09 |   |   | $ | 0.51 |   |
|                                                                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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 Twenty-Six Week |   |
|                                                                                                 |   | Periods                Ended |   |
|                                                                                                 |   | July                29, 2007 |   |   | July                30, 2006 |   |
|                                                                                                 |   |   |   |   |   |   |
| Cash                flows from operating activities:                                                 |   |   |   |   |   |   |
| Net                earnings                                                                          |   | $ | 362 |   |   | $ | 1,958 |   |
| Adjustments                to reconcile net earnings to net cash                                     |   |   |   |   |   |   |   |   |
|   used                in operating activities:                                             |   |   |   |   |   |   |   |   |
| Depreciation                and amortization                                                         |   |   | 3,746 |   |   |   | 3,273 |   |
| Amortization                of debt financing costs and lease costs                                  |   |   | 19 |   |   |   | 52 |   |
| Amortization                of deferred gain on sale-leaseback                                       |   |   | (199 | ) |   |   | (82 | ) |
| Loss                (gain) on sale of assets                                                         |   |   | 147 |   |   |   | (354 | ) |
| Shared                based compensation expense                                                     |   |   | 576 |   |   |   | 273 |   |
| Tax                benefit of stock options exercised                                                |   |   | 11 |   |   |   | 14 |   |
| Changes                in:                                                                           |   |   |   |   |   |   |   |   |
|    Receivables                                                                        |   |   | (1,041 | ) |   |   | (1,328 | ) |
|    Prepaid                expenses                                                    |   |   | (1,967 | ) |   |   | (91 | ) |
|    Inventories                                                                        |   |   | (4,613 | ) |   |   | (4,744 | ) |
|    Accounts                payable                                                    |   |   | (1,288 | ) |   |   | (1,403 | ) |
|    Income                taxes payable                                                |   |   | (1,838 | ) |   |   | (731 | ) |
|    Accrued                salaries and commissions                                    |   |   | 131 |   |   |   | (1,045 | ) |
|    Accrued                taxes other than income                                     |   |   | 888 |   |   |   | (79 | ) |
|    Self-insurance                claim reserves                                       |   |   | 614 |   |   |   | 365 |   |
|    Deferred                income taxes                                               |   |   | (148 | ) |   |   | (84 | ) |
|    Other                assets and liabilities                                        |   |   | (420 | ) |   |   | (2,736 | ) |
| Net                cash used in operating activities                                                 |   |   | (5,020 | ) |   |   | (6,742 | ) |
|                                                                                                 |   |   |   |   |   |   |   |   |
| Cash                flows from investing activities:                                                 |   |   |   |   |   |   |   |   |
| Proceeds                from the sale of assets                                                      |   |   | 30 |   |   |   | 11,815 |   |
| Acquisition                of property and equipment                                                 |   |   | (4,072 | ) |   |   | (3,900 | ) |
| Net                cash (used in) provided by  investing activities                             |   |   | (4,042 | ) |   |   | 7,915 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |
| Cash                flows from financing activities:                                                 |   |   |   |   |   |   |   |   |
| Net                borrowings under revolving loan                                                   |   |   | 8,799 |   |   |   | 1,074 |   |
| Bank                overdraft                                                                        |   |   | 2,315 |   |   |   | (196 | ) |
| Proceeds                from exercise of outstanding stock options                                   |   |   | 261 |   |   |   | 111 |   |
| Excess                tax benefit on stock options exercised                                         |   |   | 11 |   |   |   | 28 |   |
| Principal                payments under capital lease obligations                                    |   |   | (1,090 | ) |   |   | (976 | ) |
| Net                cash provided by financing activities                                             |   |   | 10,296 |   |   |   | 41 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |
| Net                increase in cash and cash equivalents                                             |   |   | 1,234 |   |   |   | 1,214 |   |
| Cash                and cash equivalents at beginning of period                                      |   |   | 2,983 |   |   |   | 472 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |
| Cash                and cash equivalents at end of period                                            |   | $ | 4,217 |   |   | $ | 1,686 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |
| Cash                paid during the period for:                                                      |   |   |   |   |   |   |   |   |
| Interest                                                                                             |   | $ | 1,458 |   |   | $ | 1,097 |   |
| Income                taxes                                                                          |   | $ | 2,324 |   |   | $ | 2,147 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |
| See                accompanying notes to unaudited consolidated financial                statements. |   |   |   |   |   |   |   |   |

----

**Duckwall-ALCO      Stores, Inc. and Subsidiaries**

**Notes      to Unaudited Consolidated Financial Statements**

*Share-Based Payment*

*Stock      Incentive Plan*

*Black-Scholes*

----

|                                                  |   |                            |    |   | For                the Thirteen Week |    |   | For                the Twenty-Six Week |   |
|-------------------------------------------------------|--------|---------------------------------|---------|--------|--------------------------------------|---------|--------|----------------------------------------|--------|
|                                                  |   |                            |    |   | Periods                Ended         |    |   | Periods                Ended           |   |
|                                                  |   | January                28, 2007 |    |   | July                29, 2007         |    |   | July                30, 2006           |   |   | July                29, 2007 |   |   | July                30, 2006 |   |
| Stock                options granted                  |   |                            | 392,000 |   |                                 |    | 43,000 |                                   |   |   | 357,000 |   |   |   | 63,000 |   |   |   | 377,000 |   |
| Weighted                average exercise price        |   | $                               | 30.35   |   |                                 |  $ | 39.10  |                                   |   |  $ | 30.25 |   |   |  $ | 38.77 |   |   |  $ | 30.01 |   |
| Weighted                average grant date fair value |   | $                               | 10.59   |   |                                 |  $ | 10.58  |                                   |   |  $ | 10.51 |   |   |  $ | 11.01 |   |   |  $ | 10.52 |   |

|                                                    |   |                            |   |   | For                the Thirteen Week |   |   | For                the Twenty-Six Week |   |
|---------------------------------------------------------|--------|---------------------------------|--------|--------|--------------------------------------|--------|--------|----------------------------------------|--------|
|                                                    |   |                            |   |   | Periods                Ended         |   |   | Periods                Ended           |   |
|                                                    |   | January                28, 2007 |   |   | July                29, 2007         |   |   | July                30, 2006           |   |   | July                29, 2007 |   |   | July                30, 2006 |   |
| Expected                price volatility                |   |                            | 37.40  | %      |                                 |   | 25.4   | %                                      |   |   | 37.3 | % |   |   | 27.9 | % |   |   | 37.4 | % |
| Risk-free                interest rate                  |   |                            | 5.00   | %      |                                 |   | 4.8    | %                                      |   |   | 5.0 | % |   |   | 4.8 | % |   |   | 5.0 | % |
| Weighted                average expected lives in years |   |                            | 3.8    |   |                                 |   | 3.8    |                                   |   |   | 3.7 |   |   |   | 3.7 |   |   |   | 3.8 |   |
| Dividend                yield                           |   |                            | 0.00   | %      |                                 |   | 0.00   | %                                      |   |   | 0.00 | % |   |   | 0.00 | % |   |   | 0.00 | % |

*Accounting for Uncertainty in      Income Taxes – an interpretation of FASB Statement No. 109, *

| The                average number of shares used in computing earnings per share was                as                follows: |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                           |   |   |   |   |   |   |
| Thirteen                Weeks Ended                                                                                            |   | Basic |   |   | Diluted |   |
|                                                                                                                           |   |   |   |   |   |   |
| July                29, 2007                                                                                                   |   |   | 3,807,515 |   |   |   | 3,845,795 |   |
| July                30, 2006                                                                                                   |   |   | 3,793,392 |   |   |   | 3,828,546 |   |
|  Twenty-Six                Weeks Ended                                                                                    |   |   |   |   |   |   |   |   |
|                                                                                                                           |   |   |   |   |   |   |   |   |
| July                29, 2007                                                                                                   |   |   | 3,804,014 |   |   |   | 3,847,975 |   |
| July                30, 2006                                                                                                   |   |   | 3,790,788 |   |   |   | 3,820,778 |   |

----

*Fair Value Measurement*

*The Fair Value Option for Financial      Assets and Financial Liabilities - Including an Amendment of SFAS 115*

**ITEM      2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL      CONDITION AND RESULTS OF OPERATIONS (Dollars in Thousands Except Per Share      Amounts)**

***CAUTIONARY      STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT      FUTURE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR      BUSINESS***

***OVERVIEW***

*Operations*

*Strategy.*

*Recent      Events*

| ·   | Net                sales increased 4.0% to $124,366.  Same store sales increased                2.1% compared to the prior year second                quarter. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Gross                  margin percentage increased to 32.7% of sales, when compared to                  30.0% in                  the prior year second quarter. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Net                  earnings per share was $0.67 in the second quarter of fiscal 2008                  compared                  to $0.37 per share in the prior year second                  quarter. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                  Company’s earnings before interest, taxes, depreciation and amortization                  and share based compensation expense (“EBITDA”) from continuing operations                  for the second quarter 2008 was                  $7,625. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The                Company’s return on average equity (“ROE”) for the second quarter 2008 was                2.5%. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------|

----

*SG&A Detail; Certain        Financial Measures, *

***RESULTS      OF OPERATIONS***

**Thirteen      Weeks Ended July 29, 2007 Compared to Thirteen Weeks Ended July 30,      2006.**

***Net      Sales***

***Gross      Margin***

***SG&A***

| ·   | Increased                  $885 for non-comparable store expenses.                                                                                                                                                                                               |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·   | Increased                  IT expenses of $292 which will continue to trend higher than fiscal                  year                  2007.  Fiscal 2008 will be the first complete fiscal year of the                  Company’s IT initiative. |
| ·   | Additional                  planned maintenance expenses of $249 which will continue to trend                  higher                  than fiscal year 2007.                                                                                                    |
| ·   | Increased                  inventory service fees of $295 due to accelerated store physical                  inventories.  Inventory service fees for fiscal 2008 are                  expected to be consistent with fiscal 2007.                     |
| ·   | Decreased vacation                  expense of $337.  The vacation expense for fiscal 2008 is                  expected to be consistent with fiscal 2007.                                                                                        |
| ·   | Decreased accounting                  professional services of $354.                                                                                                                                                                                        |

***Depreciation        and Amortization***

***Interest        Expense***

***Income      Taxes***

***Loss      from Discontinued Operations***

**Twenty-Six      Weeks Ended July 29, 2007 Compared to Twenty-Six Weeks Ended July 30,      2006.**

***Net      Sales***

----

***Gross      Margin***

***SG&A***

| ·   | Increased                  $1,707 for non-comparable store                  expenses. |
|--------------------|---------------------------------------------------------------------------------------|

| ·   | The                  timing of the recognition of CO-OP offset resulted in $1,037 less                  offset.  Fiscal 2008 CO-OP offset is expected to be consistent                  with fiscal 2007. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increased                  IT expenses of $1,097 which will continue to trend higher than                  fiscal year                  2007.  Fiscal 2008 will be the first complete fiscal year of the                  Company’s IT initiative. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Additional                  planned maintenance expenses of $834 which will continue to trend                  higher                  than fiscal year 2007. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increased                  inventory service fees of $558 due to accelerated store physical                  inventories.  Inventory service fees for fiscal 2008 are                  expected to be consistent with fiscal                  2007 |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Additional                  planned overhead associated with preparation of more aggressive                  store                  rollout plan and strengthening our internal controls of                  $457.  These expenses are expected to trend higher than fiscal                  year 2007. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increased                  professional accounting fees of $450 due to increased audit fees for                  fiscal 2007. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Increased                  share based compensation expense of $303 which will continue to                  trend                  higher than fiscal year 2007. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

***Depreciation      and Amortization***

***Interest      Expense***

***Income      Taxes***

***Earnings      (Loss) from Discontinued      Operations***

***SG&A      Detail; Certain Financial Measures***

----

|                                                                                                                                                                                                                                        |   |  For                  the Thirteen Week |    |   |  For                  the Twenty-Six Week |    |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------|---------|--------|------------------------------------------------|---------|
|                                                                                                                                                                                                                                        |   |  Periods                  Ended         |    |   | Periods                  Ended                 |    |
| **SG&A                  Expenses Breakout**                                                                                                                                                                                             |   | July                  29, 2007               |    |   | July                  30, 2006                 |    |   | July                  29, 2007 |   |   | July                  30, 2006 |   |
| General                  office                                                                                                                                                                                                             |   | $                                            | 5,208   |   |                                           |  $ | 4,752 |   |   |  $ | 11,113 |   |   |  $ | 9,047 |   |
| Distribution                  center                                                                                                                                                                                                        |   |                                         | 1,634   |   |                                           |    | 1,696 |   |   |   | 3,924 |   |   |   | 3,958 |   |
| 401(K)                  expense                                                                                                                                                                                                             |   |                                         | 116     |   |                                           |    | 117 |   |   |   | 238 |   |   |   | 234 |   |
| Comparable                  stores SG&A                                                                                                                                                                                                 |   |                                         | 24,640  |   |                                           |    | 23,740 |   |   |   | 50,054 |   |   |   | 46,126 |   |
| Non                  comparable stores SG&A (1)                                                                                                                                                                                    |   |                                         | 1,399   |   |                                           |    | 624 |   |   |   | 2,690 |   |   |   | 1,106 |   |
| Share                  based compensation expense                                                                                                                                                                                           |   |                                         | 294     |   |                                           |    | 226 |   |   |   | 576 |   |   |   | 273 |   |
| Final SG&A                  as reported                                                                                                                                                                                            |   | $                                            | 33,291  |   |                                           |  $ | 31,155 |   |   |  $ | 68,595 |   |   |  $ | 60,744 |   |
|                                                                                                                                                                                                                                        |   |                                         |    |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| ROE                  (2)                                                                                                                                                                                                                    |   |                                         | 2.46    | %      |                                           |    | 1.41 | % |   |   | 0.34 | % |   |   | 1.92 | % |
|                                                                                                                                                                                                                                        |   |                                         |    |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| Net                  sales                                                                                                                                                                                                                  |   | $                                            | 124,366 |   |                                           |  $ | 119,637 |   |   |  $ | 235,688 |   |   |  $ | 227,817 |   |
| SG&A                  as % of sales                                                                                                                                                                                                     |   |                                         | 26.77   | %      |                                           |    | 26.04 | % |   |   | 29.10 | % |   |   | 26.66 | % |
|                                                                                                                                                                                                                                        |   |                                         |    |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| SG&A                  per average selling square foot                                                                                                                                                                                   |   | $                                            | 7.95    |   |                                           |  $ | 7.58 |   |   |  $ | 16.38 |   |   |  $ | 14.82 |   |
|                                                                                                                                                                                                                                        |   |                                         |    |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| EBITDA                  (3)                                                                                                                                                                                                                 |   | $                                            | 7,625   |   |                                           |  $ | 4,993 |   |   |  $ | 6,951 |   |   |  $ | 7,742 |   |
| EBITDA                  per average selling square foot (4)                                                                                                                                                                                 |   | $                                            | 1.82    |   |                                           |  $ | 1.21 |   |   |  $ | 1.66 |   |   |  $ | 1.89 |   |
|                                                                                                                                                                                                                                        |   |                                         |    |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| Sales                  per average selling square feet (5)                                                                                                                                                                                  |   |                                         |    |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| ALCO                                                                                                                                                                                                                                        |   | $                                            | 30.45   |   |                                           |  $ | 29.91 |   |   |  $ | 57.74 |   |   |  $ | 57.07 |   |
| Duckwall                                                                                                                                                                                                                                    |   | $                                            | 21.74   |   |                                           |  $ | 20.78 |   |   |  $ | 40.74 |   |   |  $ | 40.34 |   |
| Total                                                                                                                                                                                                                                       |   | $                                            | 29.71   |   |                                           |  $ | 29.11 |   |   |  $ | 56.28 |   |   |  $ | 55.59 |   |
|                                                                                                                                                                                                                                        |   |                                         |    |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| Average                  selling square feet (5)                                                                                                                                                                                            |   |                                         | 4,186   |   |                                           |    | 4,110 |   |   |   | 4,188 |   |   |   | 4,098 |   |
| Average                  square feet % change                                                                                                                                                                                               |   |                                         | 1.9     | %      |                                           |    | 4.7 | % |   |   | 2.2 | % |   |   | 4.4 | % |
|                                                                                                                                                                                                                                        |   |                                         |    |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| Total                  stores operating beginning of period                                                                                                                                                                                 |   |                                         | 255     |   |                                           |    | 254 |   |   |   | 256 |   |   |   | 251 |   |
| Total                  stores operating end of period                                                                                                                                                                                       |   |                                         | 255     |   |                                           |    | 254 |   |   |   | 255 |   |   |   | 254 |   |
|                                                                                                                                                                                                                                        |   |                                         |    |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| Supplemental                  Data:                                                                                                                                                                                                         |   |                                         |    |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| Same                  store sales change                                                                                                                                                                                                    |   |                                         | 2.1     | %      |                                           |    | 6.2 | % |   |   | 1.7 | % |   |   | 6.6 | % |
| Total                  customer count change                                                                                                                                                                                                |   |                                         | -1.7    | %      |                                           |    | 5.1 | % |   |   | -1.9 | % |   |   | 4.9 | % |
| Average                  sale per ticket change                                                                                                                                                                                             |   |                                         | 4.0     | %      |                                           |    | 6.3 | % |   |   | 3.6 | % |   |   | 6.2 | % |
|                                                                                                                                                                                                                                        |   |                                         |    |   |                                           |    |   |   |   |   |   |   |   |   |   |   |
| (1)                  Non Comparable Stores are those stores opened in Fiscal 2008 & Fiscal                  2007.                                                                                                                       |   |                                         |    |   |                                           |    |   |   |   |   |   |   |   |
| (2) ROE                  is calculated as Net Earnings divided by average stockholders'                  equity.                                                                                                                       |   |                                         |    |   |                                           |    |   |   |   |
|                       Average Stockholders' Equity is calculated as (beginning of period                  stockholders' equity plus end of period stockholders' equity) divided                  by                  2. |   |                                         |    |   |                                           |
| (3)                  EBITDA is earnings from continuing operations before interest, taxes,                  depreciation and amortization, and share based compensation                  expense.                                      |   |                                         |    |   |                                           |
| (4)                  EBITDA per selling square foot is a non-GAAP financial measure                  and is                  calculated as EBITDA divided by selling square feet.                                                           |   |                                         |    |   |                                           |
| (5)                  Average selling square feet is (beginning square feet plus ending                  square                  feet) divided by 2.                                                                                         |   |                                         |    |   |                                           |    |   |   |   |   |   |   |   |

----

***Fiscal      2008 Compared to Fiscal 2007***

***Reconciliation      and Explanation of Non-GAAP Financial Measures***

|                                                                    |   |                                 |   |   |                                   |    |   |                         |   |    |                         |   |
|-------------------------------------------------------------------------|--------|--------------------------------------|--------|--------|----------------------------------------|---------|--------|------------------------------|--------|---------|------------------------------|--------|
|                                                                    |   | For                the Thirteen Week |   |   | For                the Twenty-Six Week |    |
|                                                                    |   | Periods                Ended         |   |   | Periods                Ended           |    |
|                                                                    |   | July                29, 2007         |   |   | July                30, 2006           |    |   | July                29, 2007 |   |    | July                30, 2006 |   |
|                                                                    |   |                                 |   |   |                                   |    |   |                         |   |    |                         |   |
| Earnings                from continuing operations                      |   |  $                              | 2,786  |   |                                   |  $ | 1,456  |                         |   |  $ | 628                          |   |   | $ | 1,767 |   |
| Plus                interest                                            |   |                                 | 840    |   |                                   |    | 631    |                         |   |    | 1,597                        |   |   |   | 1,202 |   |
| Plus                taxes                                               |   |                                 | 1,829  |   |                                   |    | 1,016  |                         |   |    | 412                          |   |   |   | 1,233 |   |
| Plus                depreciation and amortization                       |   |                                 | 1,876  |   |                                   |    | 1,664  |                         |   |    | 3,738                        |   |   |   | 3,268 |   |
| Plus                share based compensation expense                    |   |                                 | 294    |   |                                   |    | 226    |                         |   |    | 576                          |   |   |   | 272 |   |
|  =EBITDA                                                           |   |  $                              | 7,625  |   |                                   |  $ | 4,993  |                         |   |  $ | 6,951                        |   |   |  $ | 7,742 |   |
|                                                                    |   |                                 |   |   |                                   |    |   |                         |   |    |                         |   |   |   |   |   |
|                                                                    |   |                                 |   |   |                                   |    |   |                         |   |    |                         |   |   |   |   |   |
| Earnings from                continuing operations per square foot |   |  $                              | 0.67   |   |                                   |  $ | 0.35   |                         |   |  $ | 0.15                         |   |   |  $ | 0.43 |   |
| Plus                interest per square foot                            |   |                                 | 0.20   |   |                                   |    | 0.15   |                         |   |    | 0.38                         |   |   |   | 0.29 |   |
| Plus                taxes per square foot                               |   |                                 | 0.44   |   |                                   |    | 0.25   |                         |   |    | 0.10                         |   |   |   | 0.30 |   |
| Plus                depreciation and amortization per square foot       |   |                                 | 0.45   |   |                                   |    | 0.40   |                         |   |    | 0.89                         |   |   |   | 0.80 |   |
| Plus                share based compensation expense per square foot    |   |                                 | 0.07   |   |                                   |    | 0.05   |                         |   |    | 0.14                         |   |   |   | 0.07 |   |
|  =EBITDA                per selling square foot                    |   | $                                    | 1.83   |   |                                   |  $ | 1.20   |                         |   |  $ | 1.66                         |   |   |  $ | 1.89 |   |

***LIQUIDITY      AND CAPITAL RESOURCES***

----

***BUSINESS      OPERATIONS***

|                                                                               |   |                                  |   |   |                                    |   |   |                         |   |   |                         |   |
|------------------------------------------------------------------------------------|--------|---------------------------------------|--------|--------|-----------------------------------------|--------|--------|------------------------------|--------|--------|------------------------------|--------|
|                                                                               |   | For                the Thirteen Weeks |   |   | For                the Twenty-Six Weeks |   |
|                                                                               |   | Ended                                 |   |   | Ended                                   |   |
|                                                                               |   | July                29, 2007          |   |   | July                30, 2006            |   |   | July                29, 2007 |   |   | July                30, 2006 |   |
| Merchandise                Category:                                               |   |                                  |   |   |                                    |   |   |                         |   |   |                         |   |
| Consumables                and commodities                                         |   |                                  | 29     | %      |                                    |   | 29     | %                            |   |   | 31                           | %      |   |   | 30 | % |
| Electronics,                entertainment, sporting goods, toys and outdoor living |   |                                  | 27     | %      |                                    |   | 27     | %                            |   |   | 26                           | %      |   |   | 26 | % |
| Apparel                and accessories                                             |   |                                  | 20     | %      |                                    |   | 20     | %                            |   |   | 19                           | %      |   |   | 19 | % |
| Home                furnishings and décor                                     |   |                                  | 13     | %      |                                    |   | 13     | %                            |   |   | 13                           | %      |   |   | 14 | % |
| Other                                                                              |   |                                  | 11     | %      |                                    |   | 11     | %                            |   |   | 11                           | %      |   |   | 11 | % |
|                                                                               |   |                                  |   |   |                                    |   |   |                         |   |   |                         |   |   |   |   |   |
| Total                                                                              |   |                                  | 100    | %      |                                    |   | 100    | %                            |   |   | 100                          | %      |   |   | 100 | % |

**NEW      ACCOUNTING PRONOUNCEMENTS**

*Fair Value Measurement*

*The Fair Value Option for Financial Assets and Financial      Liabilities - Including an Amendment of SFAS 115 *

**ITEM      3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET      RISK**

***INSTRUMENTS      ENTERED INTO OTHER THAN FOR TRADING – INTEREST RATE      RISK***

**ITEM      4.  CONTROLS AND PROCEDURES**

----

*Internal      Control- Integrated Framework *
* *

| ·   | is                  evaluating the overall control environment.  The Company recognizes                  its need in this area.  The Company began a process of evaluating its                  level of skill in finance, tax and accounting prior to this year.  To                  assist our staff, in fiscal 2006, the Company engaged an external                  resource                  to assist in analyzing and evaluating its internal control structure,                  including development of additional controls and improvement of                  existing                  controls.  The Company began hiring and staffing an internal audit                  department in the fourth quarter of fiscal 2007.  The Company                  continues to evaluate the need for training in internal financial                  control                  procedures throughout the organization.  This will include the review                  of the level of skill in finance, tax and accounting to adequately                  assure                  proper supervisory review and monitoring activities over certain                  financial                  reporting matters and controls.  Emphasis will be made to assure an                  adequate control consciousness exists throughout the                  organization. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | has                begun a review and plans to document all policies and procedures                relating                to the accounting for fixed assets in a Capitalized Asset Policy,                which                will define controls to ensure compliance to U.S. generally accepted                accounting principles and to assure the accuracy of all fixed asset                activity. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | is                  currently in the process of establishing the appropriate segregation                  between human resources and payroll. This process is planned to                  be                  completed by the third quarter of fiscal 2008. The reconciliation of                  employee payroll withholding amounts as reported on the payroll                  register                  to the amounts recorded in the general ledger is planned to be                  reviewed by                  management personnel on a monthly basis. Evaluation and training                  of                  personnel responsible for reconciliations to assure proper staffing                  in                  these areas was completed in the second quarter of fiscal                  2008. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ·   | has                  initiated the development and implementation of controls over the                  development and review of the financial statements and continues                  to refine                  and document those controls and procedures. The Company has added the                  appropriate personnel to perform the necessary reviews of the financial                  statements. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | has                developed and is testing procedures to analyze and monitor existing                accounting policies for significant accrued liabilities to ensure                that                those policies are in accordance with U.S. generally accepted accounting                principles. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | has                developed and is testing procedures to analyze and monitor the LIFO                and                lower of cost or net realizable value calculations to ensure that                those                calculations are in accordance with U.S. generally accepted accounting                principles. The Company has also developed and is testing procedures                to                analyze and monitor the estimates used by management to ensure that                those                estimates accurately reflect current                trends. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**PART      II - OTHER INFORMATION**

**ITEM      1.  LEGAL PROCEEDINGS**

**ITEM      1A.  RISK FACTORS**

**ITEM      2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF      PROCEEDS**

|                                                |                                 |                                   |                                     | **Maximum                Number**         |
|-----------------------------------------------------|--------------------------------------|----------------------------------------|------------------------------------------|-------------------------------------------|
|                                                |                                 |                                   | **Total                Number of**       | **(or                Approximate Dollar** |
|                                                |                                 |                                   | **shares                (or Units)**     | **Value)                of Shares (or**   |
|                                                | **Total                Number Of**   |                                   | **Purchased                as Part**     | **Units)                that May Yet**    |
|                                                | **Shares                (or Units)** | **Average                Price Paid**  | **of                Publicly Announced** | **Be                Purchased Under**     |
| **Period**                                          | **Purchased**                        | **per                Share (or Unit)** | **Plans                or Programs**     | **the                Plans or Programs**  |
| February                1 – February 28, 2007 | 0                                    | 0                                      | 0                                        | 196,663                                   |
| March                1 – March 31, 2007       | 0                                    | 0                                      | 0                                        | 196,663                                   |
| April                1 – April 30, 2007       | 0                                    | 0                                      | 0                                        | 196,663                                   |
| May                1 - May 31, 2007                 | 0                                    | 0                                      | 0                                        | 196,663                                   |
| June                1 - June 30, 2007               | 0                                    | 0                                      | 0                                        | 196,663                                   |
| July                1 - July 31, 2007               | 0                                    | 0                                      | 0                                        | 196,663                                   |

**ITEM      3.  DEFAULTS UPON SENIOR SECURITIES**

**ITEM      4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY      HOLDERS**

**ITEM      5.  OTHER INFORMATION**

**ITEM      6.  EXHIBITS**

**SIGNATURE**

**DUCKWALL-ALCO      STORES, INC.**

***(Registrant)***

| Date:                September 6, 2007 |   | */s/                Donny R. Johnson* |
|----------------------------------------|--------|---------------------------------------|

----

**EXHIBIT      INDEX**

| 3.1 | Articles                of Incorporation of Duckwall-ALCO Stores, Inc., amended as of June                13,                1994 and restated solely for filing with the Securities and Exchange                Commission (filed as Exhibit 3.1 to Company's Quarterly Report on                Form                10-Q for the fiscal quarter ended August 1, 2004 and incorporated                herein                by reference). |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.2 | Bylaws                of Duckwall-ALCO Stores, Inc. (filed as Exhibit 3.2 to Company's                Quarterly                Report on Form 10-Q for the fiscal quarter ended August 1, 2004 and                incorporated herein by reference). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.1 | Specimen                of Duckwall-ALCO Stores, Inc. Common Stock Certificate. (filed as                Exhibit                4.1 to Company's Quarterly Report on Form 10-Q for the fiscal quarter                ended August 1, 2004 and incorporated herein by                reference). |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 4.2 | Reference                is made to the Amended and Restated Articles of Incorporation described                under 3.1 above and Bylaws described under 3.2                above. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31.1 | Certification                of Chief Executive Officer of Duckwall-ALCO Stores, Inc. dated                September 6, 2007, pursuant to Rule 13a-4(a) under the Securities                Exchange Act of 1934, as adopted pursuant to Section 302 of the                Sarbanes-Oxley Act of 2002. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31.2 | Certification                of Chief Financial Officer of Duckwall-ALCO Stores, Inc. dated September                6, 2007, pursuant to Rule 13a-4(a) under the Securities Exchange                Act of                1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act                of                2002. |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.1 | Certification                of Chief Executive Officer of Duckwall-ALCO Stores, Inc, dated September                6, 2007, pursuant to 18 U.S.C. Section 1350, as adopted pursuant                to                Section 906 of the Sarbanes-Oxley Act of 2002, which is furnished                with                this Quarterly Report on Form 10-Q for the quarter ended July 29,                2007 and                is not treated as filed in reliance upon § 601(b)(32) of Regulations                S-K. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.2 | Certification                of Chief Financial Officer of Duckwall-ALCO Stores, Inc., dated September                6, 2007, pursuant to 18 U.S.C. Section 1350, as adopted pursuant                to                Section 906 of the Sarbanes-Oxley Act of 2002, which is furnished                with                this Quarterly Report on Form 10-Q for the quarter ended July 29,                2007 and                is not treated as filed in reliance upon § 601(b)(32) of Regulations                S-K. |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----