| 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)                           |

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| 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 | 14 |
|                   | Item      1A. | Risk      Factors | 14 |
|                   | Item      2. | Unregistered      Sales of Equity Securities and Use of Proceeds | 14 |
|                   | 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              | 16 |

----

| Duckwall-ALCO      Stores, Inc. and Subsidiaries                                                             |   |
|--------------------------------------------------------------------------------------------------------------|--------|
| Consolidated      Balance Sheets                                                                             |   |
| (in      thousands, except share amounts)                                                                    |   |
| Assets                                                                                                       |   |
|                                                                                                         |   | May      4, |   |   | February      3, |   |
|                                                                                                         |   | 2008 |   |   | 2008 |   |
|                                                                                                         |   | (Unaudited) |   |   |   |   |
| Current      assets:                                                                                         |   |   |   |   |   |   |
|    Cash      and cash equivalents                                                             |   | $ | 4,977 |   |   | $ | 5,501 |   |
|    Receivables                                                                                |   |   | 3,898 |   |   |   | 4,905 |   |
|    Prepaid      income taxes                                                                  |   |   | 4,955 |   |   |   | 768 |   |
|    Inventories                                                                                |   |   | 145,123 |   |   |   | 128,545 |   |
|    Prepaid      expenses                                                                      |   |   | 3,263 |   |   |   | 3,101 |   |
|    Deferred      income taxes                                                                 |   |   | 6,835 |   |   |   | 7,094 |   |
|           Total      current assets                        |   |   | 169,051 |   |   |   | 149,914 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |
| Property      and equipment, at cost:                                                                        |   |   |   |   |   |   |   |   |
|    Land      and land improvements                                                            |   |   | 2,401 |   |   |   | 2,205 |   |
|    Buildings      and building improvements                                                   |   |   | 11,931 |   |   |   | 11,931 |   |
|    Furniture,      fixtures and equipment                                                     |   |   | 58,406 |   |   |   | 58,911 |   |
|    Transportation      equipment                                                              |   |   | 1,344 |   |   |   | 1,310 |   |
|    Leasehold      improvements                                                                |   |   | 13,788 |   |   |   | 15,419 |   |
|    Construction      work in progress                                                         |   |   | 1,445 |   |   |   | 1,282 |   |
|           Total      property and equipment                |   |   | 89,315 |   |   |   | 91,058 |   |
|    Less      accumulated depreciation                                                         |   |   | 61,360 |   |   |   | 64,019 |   |
|           Net      property and equipment                  |   |   | 27,955 |   |   |   | 27,039 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |
| Property      under capital leases                                                                           |   |   | 13,571 |   |   |   | 13,571 |   |
|    Less      accumulated amortization                                                         |   |   | 9,136 |   |   |   | 8,654 |   |
|           Net      property under capital leases           |   |   | 4,435 |   |   |   | 4,917 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |
| Other      non-current assets                                                                                |   |   | 270 |   |   |   | 262 |   |
| Deferred      income taxes                                                                                   |   |   | 3,028 |   |   |   | 3,254 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |
|           Total      assets                                |   | $ | 204,739 |   |   |  $ | 185,386 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |
| Liabilities      and Stockholders' Equity                                                                    |   |
| Current      liabilities:                                                                                    |   |   |   |   |   |   |   |   |
|    Current      maturities of long-term debt                                                  |   | $ | 1,298 |   |   |  $ | 1,278 |   |
|    Current      maturities of capital lease obligations                                       |   |   | 1,840 |   |   |   | 1,860 |   |
|    Accounts      payable                                                                      |   |   | 36,023 |   |   |   | 19,134 |   |
|    Accrued      salaries and commissions                                                      |   |   | 5,685 |   |   |   | 3,711 |   |
|    Accrued      taxes other than income                                                       |   |   | 3,554 |   |   |   | 4,301 |   |
|    Self-insurance      claim reserves                                                         |   |   | 4,693 |   |   |   | 4,571 |   |
|    Other      current liabilities                                                             |   |   | 6,344 |   |   |   | 7,360 |   |
|           Total      current liabilities                   |   |   | 59,437 |   |   |   | 42,215 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |
| Long      term debt, less current maturities                                                                 |   |   | 3,895 |   |   |   | 4,227 |   |
| Notes      payable under revolving loan                                                                      |   |   | 29,671 |   |   |   | 20,715 |   |
| Capital      lease obligations - less current maturities                                                     |   |   | 4,376 |   |   |   | 4,933 |   |
| Deferred      gain on leases                                                                                 |   |   | 4,888 |   |   |   | 4,985 |   |
| Other      noncurrent liabilities                                                                            |   |   | 1,594 |   |   |   | 1,139 |   |
|           Total      liabilities                           |   |   | 103,861 |   |   |   | 78,214 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |
| Stockholders'      equity:                                                                                   |   |   |   |   |   |   |   |   |
|    Common      stock, $.0001 par value, authorized 20,000,000 shares;                         |   |   |   |   |   |   |   |   |
|           issued and outstanding 3,810,591 shares and 3,810,591 shares      respectively |   |   | 1 |   |   |   | 1 |   |
|    Additional      paid-in capital                                                            |   |   | 38,324 |   |   |   | 38,766 |   |
|    Retained      earnings                                                                     |   |   | 62,553 |   |   |   | 68,405 |   |
|           Total      stockholders' equity                  |   |   | 100,878 |   |   |   | 107,172 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |
|           Total      liabilities and stockholders' equity  |   | $ | 204,739 |   |   | $ | 185,386 |   |
|                                                                                                         |   |   |   |   |   |   |   |   |
| See      accompanying notes to unaudited consolidated financial      statements.                             |   |

----

| Duckwall-ALCO      Stores, Inc. and Subsidiaries                                                |   |
|-------------------------------------------------------------------------------------------------|--------|
| Consolidated      Statements of Operations                                                      |   |
| (dollars      in thousands, except per share amounts)                                           |   |
| (Unaudited)                                                                                     |   |
|                                                                                            |   | For      the Thirteen Week |   |
|                                                                                            |   | Periods      Ended |   |
|                                                                                            |   | May      4, 2008 |   |   | April      29, 2007 |   |
|                                                                                            |   |   |   |   |   |   |
| Net      sales                                                                                  |   | $ | 105,982 |   |   |   | 106,265 |   |
| Cost      of sales                                                                              |   |   | 74,146 |   |   |   | 73,456 |   |
| Gross      margin                                                                               |   |   | 31,836 |   |   |   | 32,809 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Selling,      general and administrative                                                        |   |   | 36,912 |   |   |   | 33,351 |   |
| Depreciation      and amortization                                                              |   |   | 1,774 |   |   |   | 1,753 |   |
|            Total      operating expenses |   |   | 38,686 |   |   |   | 35,104 |   |
| Operating      loss from continuing operations                                                  |   |   | (6,850 | ) |   |   | (2,295 | ) |
|                                                                                            |   |   |   |   |   |   |   |   |
| Interest      expense, net                                                                      |   |   | 605 |   |   |   | 758 |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Loss      from continuing operations before income taxes                                        |   |   | (7,455 | ) |   |   | (3,053 | ) |
|                                                                                            |   |   |   |   |   |   |   |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Income      tax benefit                                                                         |   |   | (3,063 | ) |   |   | (1,206 | ) |
|                                                                                            |   |   |   |   |   |   |   |   |
| Loss      from continuing operations                                                            |   |   | (4,392 | ) |   |   | (1,847 | ) |
|                                                                                            |   |   |   |   |   |   |   |   |
|                                                                                            |   |   |   |   |   |   |   |   |
| Loss      from discontinued operations, net of income tax benefit                               |   |   | (1,460 | ) |   |   | (385 | ) |
|                                                                                            |   |   |   |   |   |   |   |   |
| Net      earnings (loss)                                                                        |   |   | (5,852 | ) |   |   | (2,232 | ) |
|                                                                                            |   |   |   |   |   |   |   |   |
| Loss      per share                                                                             |   |   |   |   |   |   |   |   |
|      Basic                                                             |   |   |   |   |   |   |   |   |
|          Continuing      operations                |   |   | (1.15 | ) |   |   | (0.49 | ) |
|          Discontinued      operations              |   |   | (0.38 | ) |   |   | (0.10 | ) |
|                                                                                            |   |   |   |   |   |   |   |   |
|          Net      loss per share                   |   |   | (1.53 | ) |   |   | (0.59 | ) |
|                                                                                            |   |   |   |   |   |   |   |   |
| Loss      per share                                                                             |   |   |   |   |   |   |   |   |
|      Diluted                                                           |   |   |   |   |   |   |   |   |
|          Continuing      operations                |   |   | (1.15 | ) |   |   | (0.49 | ) |
|          Discontinued      operations              |   |   | (0.38 | ) |   |   | (0.10 | ) |
|                                                                                            |   |   |   |   |   |   |   |   |
|          Net      loss per share                   |   |  $ | (1.53 | ) |   |   | (0.59 | ) |
|                                                                                            |   |   |   |   |   |   |   |   |
| See      accompanying notes to unaudited consolidated financial      statements.                |   |   |   |   |   |   |   |   |

----

| Duckwall-ALCO      Stores, Inc. and Subsidiaries                                      |   |
|---------------------------------------------------------------------------------------|--------|
| Consolidated      Statements of Cash Flows                                            |   |
| (dollars      in thousands)                                                           |   |
| (Unaudited)                                                                           |   |
|                                                                                  |   | For      the Thirteen Week |   |
|                                                                                  |   | Periods      Ended |   |
|                                                                                  |   | May      4, |   |   | April      29, |   |
|                                                                                  |   |  2008 |   |   |  2007 |   |
|                                                                             |   |   |   |   |   |   |
|                                                                                  |   |   |   |   |   |   |
| Cash      flows from operating activities:                                            |   |   |   |   |   |   |
| Net      loss                                                                         |   | $ | (5,852 | ) |   |   | (2,232 | ) |
| Adjustments      to reconcile net loss to net cash used in operating      activities: |   |   |   |   |   |
|                                                                                  |   |   |   |   |   |   |   |   |
| Depreciation      and amortization                                                    |   |   | 1,819 |   |   |   | 1,879 |   |
| Gain      (loss) on sale of assets                                                    |   |   | (33 | ) |   |   | - |   |
| Share-based      compensation                                                         |   |   | (329 | ) |   |   | 282 |   |
| Tax      benefit from share-based compensation                                        |   |   | - |   |   |   | 11 |   |
| Deferred      income tax expense, net                                                 |   |   | 372 |   |   |   | - |   |
| Changes      in:                                                                      |   |   |   |   |   |   |   |   |
|          Receivables                                                   |   |   | 1,007 |   |   |   | (1,512 | ) |
|          Prepaid expenses                                              |   |   | (162 | ) |   |   | (1,396 | ) |
|          Inventories                                                   |   |   | (16,578 | ) |   |   | (7,414 | ) |
|          Accounts payable                                              |   |   | 16,889 |   |   |   | 4,224 |   |
|          Prepaid income taxes                                          |   |   | (4,187 | ) |   |   | (3,572 | ) |
|         Accrued salaries and commissions                                    |   |   | 2,352 |   |   |   | (168 | ) |
|         Accrued taxes other than income                                     |   |   | (747 | ) |   |   | 931 |   |
|         Self-insurance claims reserves                                      |   |   | 122 |   |   |   | 397 |   |
|         Other assets and liabilities                                        |   |   | (1,044 | ) |   |   | (457 | ) |
| Net      cash used in operating activities                                            |   |   | (6,371 | ) |   |   | (9,027 | ) |
|                                                                                  |   |   |   |   |   |   |   |   |
| Cash      flows from investing activities:                                            |   |   |   |   |   |   |   |   |
| Proceeds      from the sale of assets                                                 |   |   | 134 |   |   |   | - |   |
| Acquisition      of:                                                                  |   |   |   |   |   |   |   |   |
| Fixtures,      equipment and leasehold improvements                                   |   |   | (2,354 | ) |   |   | (1,549 | ) |
| Net      cash used in investing activities                                            |   |   | (2,220 | ) |   |   | (1,549 | ) |
|                                                                                  |   |   |   |   |   |   |   |   |
| Cash      flows from financing activities:                                            |   |   |   |   |   |   |   |   |
| Net      borrowings (pay downs) under revolving loan credit    agreement              |   |   | 8,956 |   |   |   | 12,999 |   |
| Proceeds      from exercise of outstanding stock options                              |   |   | - |   |   |   | 116 |   |
| Excess      tax benefit from share-based compensation                                 |   |   | - |   |   |   | 11 |   |
| Net      borrowings (pay downs) under term loan                                       |   |   | (312 | ) |   |   | - |   |
| Principal      payments under capital lease obligations                               |   |   | (577 | ) |   |   | (547 | ) |
| Net      cash provided by financing activities                                        |   |   | 8,067 |   |   |   | 12,579 |   |
|                                                                                  |   |   |   |   |   |   |   |   |
| Net      (decrease) increase in cash and cash equivalents                             |   |   | (524 | ) |   |   | 2,003 |   |
| Cash      and cash equivalents at beginning of year                                   |   |   | 5,501 |   |   |   | 2,983 |   |
|                                                                                  |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents at end of year                                         |   | $ | 4,977 |   |   |   | 4,986 |   |
|                                                                                  |   |   |   |   |   |   |   |   |
| Supplemental      disclosures of cash flow information:                               |   |   |   |   |   |   |   |   |
| Cash      paid during the period for:                                                 |   |   |   |   |   |   |   |   |
| Interest                                                                              |   | $ | 539 |   |   | $ | 625 |   |
|              Income taxes                          |   |   | 9 |   |   |   | 2,284 |   |
|                                                                                  |   |   |   |   |   |   |   |   |
| See      accompanying notes to unaudited consolidated financial      statements.      |   |   |   |   |   |   |   |   |

----

|                                        |   |                  |   |   | For      the Thirteen Week |    |
|---------------------------------------------|--------|-----------------------|--------|--------|----------------------------|---------|
|                                        |   |                  |   |   | Periods      Ended         |    |
|                                        |   | February      3, 2008 |   |   | May      4, 2008           |    |   | April      29, 2007 |   |
| Stock      options granted                  |   |                  | 88,000 |   |                       |    | 62,500 |   |   |   | 20,000 |   |
| Weighted      average exercise price        |   | $                     | 39.02  |   |                       |  $ | 13.50 |   |   |  $ | 38.06 |   |
| Weighted      average grant date fair value |   | $                     | 10.93  |   |                       |  $ | 4.03 |   |   |  $ | 11.94 |   |

----

|                                          |   |                  |   |   | For      the Thirteen Week |   |
|-----------------------------------------------|--------|-----------------------|--------|--------|----------------------------|--------|
|                                          |   |                  |   |   | Periods      Ended         |   |
|                                          |   | February      3, 2008 |   |   | May      4, 2008           |   |   | April      29, 2007 |   |
| Expected      price volatility                |   |                  | 25.6   | %      |                       |   | 34.4 | % |   |   | 32.4 | % |
| Risk-free      interest rate                  |   |                  | 4.8    | %      |                       |   | 2.2 | % |   |   | 4.7 | % |
| Weighted      average expected lives in years |   |                  | 3.8    |   |                       |   | 4.0 |   |   |   | 3.8 |   |
| Dividend      yield                           |   |                  | 0.00   | %      |                       |   | 0.00 | % |   |   | 0.00 | % |

| The      average number of shares used in computing earnings per share was as      follows: |   |
|---------------------------------------------------------------------------------------------|--------|
|                                                                                        |   |   |   |   |   |   |
| Thirteen      Weeks Ended                                                                   |   | Basic |   |   | Diluted |   |
| May      4, 2008                                                                            |   |   | 3,810,591 |   |   |   | 3,810,591 |   |
| April      29, 2007                                                                         |   |   | 3,800,120 |   |   |   | 3,800,120 |   |

----

----

|   | • | SKU rationalization      initiative:  The Company is in the process of performing a SKU      (stock keeping unit) rationalization process.  Each and every      SKU offered is being      reviewed to ensure that it meets the Company expected GMROI (gross margin      return on investment). |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Marketing      initiative:  The Company is aggressively reviewing its fiscal      2009 marketing strategies to find the most effective and cost efficient      method to reach its customers.  |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | The      Company closed 17 stores in the first quarter of fiscal      2009.  Of these 17 stores, ten were ALCO stores, four were      Duckwall stores and three were Duckwall stores replaced by an ALCO      store.  The Company took a charge of $936 in lease      termination costs and relatedexpenses. |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Then      President and Chief Executive Officer, Bruce C. Dale resigned on February      22, 2008.  On April 11, 2008, four members of the Senior      Management team were terminated.  On May 2, 2008, the Company      eliminated 27 corporate office positions, including one      officer.  These resignations and reduction in force have caused      the Company to record severance expenses of $1.9 million in the first      quarter of fiscal 2009 compared to $128 during the first quarter of fiscal      2008. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | • | Inventory      review initiative:  The Company has reviewed its ownership in      items that it has either discontinued, clearanced or is      inactive.  This review started in the first quarter of fiscal      2009.  The Company has determined a sell through plan to      liquidate this merchandise and develop a process to minimize the      accumulation of this inventory going forward.   Due to this      analysis the Company has taken a $1.3 million cost of goods sold charge in      the first quarter of fiscal 2009.  The Company did not take an      inventory reserve charge during the first quarter of fiscal      2008. |
|--------|---------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Net      sales decreased 0.3% to $106 million.  Same store sales      decreased 8.4% compared to the prior year firstquarter.                                                            |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Gross      margin percentage decreased to 30.0% of sales, when compared to 30.9% in      the prior year first quarter.                                                                             |
| · | Net      loss per share was $1.53 in the first quarter of fiscal 2009 compared to      $0.59 net loss per share in the prior year first  quarter.                                                  |
| · | The      Company’s earnings before interest, taxes, depreciation and amortization      (“EBITDA”) from continuing operations for the first quarter 2009 was      ($1,396).  |
| · | The      Company’s return on average equity (“ROE”) for the first quarter 2009 was      (0.8)%.                                                                                  |

----

----

|                                                          |   |                                     |    |   |                |   |
|---------------------------------------------------------------|--------|------------------------------------------|---------|--------|---------------------|--------|
|                                                          |   | For      the Thirteen Week Periods Ended |    |
| SG&A      Expenses Breakout                               |   | May      4, 2008                         |    |   | April      29, 2007 |   |
| General      office                                           |   | $                                        | 8,110   |   |                | $      | 5,904 |   |
| Distribution      center                                      |   |                                     | 2,337   |   |                |   | 2,291 |   |
| 401K      expense                                             |   |                                     | 125     |   |                |   | 121 |   |
| Same-store      SG&A                                      |   |                                     | 22,740  |   |                |   | 24,328 |   |
| Non      same-store SG&A (1)                              |   |                                     | 3,929   |   |                |   | 425 |   |
| Share-based      compensation expense                         |   |                                     | (329    | )      |                |   | 282 |   |
| Final      SG&A as reported                               |   | $                                        | 36,912  |   |                | $      | 33,351 |   |
|                                                          |   |                                     |    |   |                |   |   |   |
| ROE      (2)                                                  |   |                                     | -0.8    | %      |                |   | -2.1 | % |
|                                                          |   |                                     |    |   |                |   |   |   |
| Net      sales                                                |   | $                                        | 105,982 |   |                | $      | 106,265 |   |
| SG&A      as % of sales                                   |   |                                     | 34.8    | %      |                |   | 31.4 | % |
|                                                          |   |                                     |    |   |                |   |   |   |
| SG&A      per average selling square foot                 |   | $                                        | 8.61    |   |                | $      | 8.61 |   |
|                                                          |   |                                     |    |   |                |   |   |   |
| EBITDA      (3)                                               |   | $                                        | (1,396  | )      |                | $      | (132 | ) |
| EBITDA      per average selling square foot (4)               |   | $                                        | (0.33   | )      |                | $      | (0.03 | ) |
|                                                          |   |                                     |    |   |                |   |   |   |
| Sales      per average selling square feet (5)                |   |                                     |    |   |                |   |   |   |
| ALCO                                                          |   | $                                        | 24.45   |   |                | $      | 27.24 |   |
| Duckwall                                                      |   | $                                        | 18.29   |   |                | $      | 19.81 |   |
| Total                                                         |   | $                                        | 24.71   |   |                | $      | 27.42 |   |
|                                                          |   |                                     |    |   |                |   |   |   |
| Average      inventory per average selling square feet (5)(6) |   |                                     |    |   |                |   |   |   |
| ALCO      (7)                                                 |   | $                                        | 28.09   |   |                | $      | 31.83 |   |
| Duckwall                                                      |   | $                                        | 21.38   |   |                | $      | 21.46 |   |
| Total      (7)                                                |   | $                                        | 27.64   |   |                | $      | 31.00 |   |
|                                                          |   |                                     |    |   |                |   |   |   |
| Average      selling square feet (in thousands) (5)           |   |                                     | 4,289   |   |                |   | 3,875 |   |
| Average      square feet % change                             |   |                                     | 10.7    | %      |                |   | 2.4 | % |
|                                                          |   |                                     |    |   |                |   |   |   |
| Total      stores operating beginning of period               |   |                                     | 262     |   |                |   | 256 |   |
| Total      stores operating end of period                     |   |                                     | 251     |   |                |   | 255 |   |
|                                                          |   |                                     |    |   |                |   |   |   |
| Supplemental      Data:                                       |   |                                     |    |   |                |   |   |   |
| Same-store      sales change                                  |   |                                     | -8.4    | %      |                |   | 1.2 | % |
| Same-store      gross margin percentage change                |   |                                     | 0.4     | %      |                |   | 2.4 | % |
| Same-store      SG&A percentage change                    |   |                                     | -6.5    | %      |                |   | 6.6 | % |
| Total      customer count change                              |   |                                     | -9.5    | %      |                |   | -2.7 | % |
| Average      sale per ticket change                           |   |                                     | 1.3     | %      |                |   | 3.7 | % |

|                                                                                                                                                                                                               |   |   |   |   |   |   |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|
| (1)      Non Comparable Stores are those stores opened in Fiscal 2008 & Fiscal      2007                                                                                                                       |   |   |   |   |   |   |   |   |
| (2)      Return on average equity (ROE) is calculated as net earnings (loss)      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)      Adjusted EBITDA is a non-GAAP financial measure and is calculated as      earnings (loss) from continuing operations before interest, taxes,      depreciation and amortization, and stock optionexpense. |
| (4)      Adjusted EBITDA per selling square foot is a non-GAAP financial measure      and is calculated as EBITDA divided by selling squarefeet.                                                                   |   |
| (5)      Average selling square feet is (beginning square feet plus ending square      feet) divided by 2.                                                                                                         |   |   |   |   |   |   |   |   |
| (6)      Average inventory is (beginning inventory plus ending inventory) divided      by 2. This includes only the merchandise inventory at store      level.                                                     |   |
| (7)      Excludes inventory for unopened stores.                                                                                                                                                                   |   |   |   |   |   |   |   |   |

----

|                                                            |   | For      the Thirteen Week |   |
|-----------------------------------------------------------------|--------|----------------------------|--------|
|                                                            |   | Periods      Ended         |   |
|                                                            |   |                       |   |   |   |   |
|                                                            |   | May      4, 2008           |   |   | April      29, 2007 |   |
|                                                            |   |                       |   |   |   |   |
| Loss      from continuing operations                            |   | $                          | (4,392 | ) |   | $ | (1,847 | ) |
| Plus      interest                                              |   |                       | 605    |   |   |   | 758 |   |
| Plus      taxes                                                 |   |                       | (3,063 | ) |   |   | (1,206 | ) |
| Plus      depreciation and amortization                         |   |                       | 1,774  |   |   |   | 1,753 |   |
| Plus      shared-based compensation expense                     |   |                       | (329   | ) |   |   | 282 |   |
| Plus      preopening store costs                                |   |                       | 722    |   |   |   | 100 |   |
| Plus      inventory review initiative                      |   |                       | 1,345  |   |   |   | - |   |
| Plus      executive and staff severance                         |   |                       | 1,942  |   |   |   | 128 |   |
| =EBITDA                                                         |   | $                          | (1,396 | ) |   | $ | (32 | ) |
|                                                            |   |                       |   |   |   |   |   |   |
|                                                            |   |                       |   |   |   |   |   |   |
| Loss      from continuing operations per square foot            |   | $                          | (1.02  | ) |   | $ | (0.48 | ) |
| Plus      interest per square foot                              |   |                       | 0.14   |   |   |   | 0.20 |   |
| Plus      taxes per square foot                                 |   |                       | (0.71  | ) |   |   | (0.31 | ) |
| Plus      depreciation and amortization per square foot         |   |                       | 0.41   |   |   |   | 0.45 |   |
| Plus      share-based compensation expense per square foot      |   |                       | (0.08  | ) |   |   | 0.07 |   |
| Plus      preopening store costs per square feet                |   |                       | 0.17   |   |   |   | 0.03 |   |
| Plus      inventory review initiative per square feet |   |                       | 0.31   |   |   |   | - |   |
| Plus      executive and staff severance per square feet         |   |                       | 0.45   |   |   |   | 0.03 |   |
| =EBITDA      per selling square foot                            |   | $                          | (0.33  | ) |   | $ | (0.01 | ) |

----

|                                                                     |   |                     |   |   |   |   |
|--------------------------------------------------------------------------|--------|--------------------------|--------|--------|--------|--------|
|                                                                     |   | Percentage      of Sales |   |
|                                                                     |   |                     |   |   |   |   |
|                                                                     |   | 2009                     |   |   | 2008   |   |
| Merchandise      Category:                                               |   |                     |   |   |   |   |
| Consumables      and commodities                                         |   |                     | 33     | %      |   |   | 32 | % |
| Electronics,      entertainment, sporting goods, toys and outdoor living |   |                     | 25     | %      |   |   | 24 | % |
| Apparel      and accessories                                             |   |                     | 19     | %      |   |   | 19 | % |
| Home      furnishings and decor                                          |   |                     | 13     | %      |   |   | 14 | % |
| Other                                                                    |   |                     | 10     | %      |   |   | 11 | % |
|                                                                     |   |                     |   |   |   |   |   |   |
| Total                                                                    |   |                     | 100    | %      |   |   | 100 | % |

----

| · | The      Company did not have adequate transition plans to address turnover in      finance and accounting personnel.  As a result, due to      significant changes in these personnel that occurred around the Company’s      February 3, 2008 year-end closing process, the Company did not have      sufficient trained resources to effectively operate the year-end closing      process controls.  This resulted in misstatements that were      corrected prior to the issuance of the consolidated financial      statements.  As a result of this material weakness, there is more      than a reasonable possibility that a material misstatement of the      Company’s annual or interim financial statements will not be prevented or      detected on a timely basis. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                        |   |                  |   |   |                |   |   |                       |   |   | Maximum      Number         |   |
|---------------------------------------------|--------|-----------------------|--------|--------|---------------------|--------|--------|----------------------------|--------|--------|-----------------------------|--------|
|                                        |   |                  |   |   |                |   |   | Total      Number of       |   |   | (or      Approximate Dollar |   |
|                                        |   |                  |   |   |                |   |   | shares      (or Units)     |   |   | Value)      of Shares (or   |   |
|                                        |   | Total      Number     |   |   | Average      Price  |   |   | Purchased      as Part     |   |   | Units)      that May Yet    |   |
|                                        |   | Of      Shares (or    |   |   | Paid      per Share |   |   | of      Publicly Announced |   |   | Be      Purchased Under     |   |
| Period                                      |   | Units)      Purchased |   |   | (or      Unit)      |   |   | Plans      or Programs     |   |   | the      Plans or Programs  |   |
| February      4, 2008 – March 2, 2008 |   |                  | -      |   |                |   | -      |                       |   |   | -                           |   |   |   | 196,663 |   |
| March      3, 2008 – April 6, 2008    |   |                  | -      |   |                |   | -      |                       |   |   | -                           |   |   |   | 196,663 |   |
| April      7, 2008 – May 4, 2008      |   |                  | -      |   |                |   | -      |                       |   |   | -                           |   |   |   | 196,663 |   |

----

| 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 byreference). |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

| 31.1 | Certification of Interim Chief      Executive Officer of Duckwall-ALCO Stores, Inc. dated June 11, 2008,      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 Interim Chief      Financial Officer of Duckwall-ALCO Stores, Inc. dated June 11, 2008,      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 Interim Chief      Executive Officer of Duckwall-ALCO Stores, Inc, dated June 11, 2008,      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 May 4, 2008 and is not treated      as filed in reliance upon § 601(b)(32) of Regulations      S-K. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.2 | Certification of Interim Chief      Financial Officer of Duckwall-ALCO Stores, Inc., dated June 11, 2008,      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 May 4, 2008 and is not treated      as filed in reliance upon § 601(b)(32) of Regulations      S-K. |
|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Signature      and Title                           |   |   | Date               |
|----------------------------------------------------|--------|--------|--------------------|
|                                               |   |   |               |
| /s/      Donny R. Johnson                          |   |   | June      11, 2008 |
| Donny      R. Johnson                              |   |   |               |
| Interim      President and Chief Executive Officer |   |   |               |
| (Principal      Executive Officer)                 |   |   |               |
|                                               |   |   |               |
| /s/      Jon A. Ramsey                             |   |   | June      11, 2008 |
| Jon      A. Ramsey                                 |   |   |               |
| Interim      Chief Financial Officer and Treasurer |   |   |               |
| (Principal      Financial and Accounting Officer)  |   |   |               |
|                                               |   |   |               |
| /s/      Raymond A.D. French                       |   |   | June      11, 2008 |
| Raymond      A.D. French                           |   |   |               |
| Director                                           |   |   |               |
|                                               |   |   |               |
| /s/      James G. Hyde                             |   |   | June      11, 2008 |
| James      G. Hyde                                 |   |   |               |
| Director                                           |   |   |               |
|                                               |   |   |               |
| /s/      Dennis E. Logue                           |   |   | June      11, 2008 |
| Dennis      E. Logue                               |   |   |               |
| Director                                           |   |   |               |
|                                               |   |   |               |
| /s/      Lolan C. Mackey                           |   |   | June      11, 2008 |
| Lolan      C. Mackey                               |   |   |               |
| Director                                           |   |   |               |
|                                               |   |   |               |
| /s/      Royce L. Winsten                          |   |   | June      11, 2008 |
| Royce      L. Winsten                              |   |   |               |
| Director                                           |   |   |               |

----