UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

FORM 10-Q

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

For the quarterly
  period ended July 31, 2005

OR


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

Commission File Number
0-20269

DUCKWALL-ALCO
  STORES, INC. (Exact name
  of registrant as specified in its charter)

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


Registrants telephone number
including area code: (785) 263-3350

Indicate
  by check mark whether the registrant (1) has filed all reports required to be
  filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
  preceding 12 months (or for such shorter period that the registrant was required
  to file such reports), and (2) has been subject to such filing requirements
  for the past 90 days. Yes X   No___

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

APPLICABLE ONLY TO
CORPORATE ISSUERS:

4,017,939
shares of common stock, $.0001 par value (the issuers only class of common stock), were
outstanding as of July 31, 2005.

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PART I - FINANCIAL
INFORMATION

ITEM 1. FINANCIAL
STATEMENTS

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

Assets

July 31, 
        2005
      
      January 30, 
        2005(Unaudited)Current assets:Cash and cash equivalents
      $2,696
      
      $1,200Receivables
      1,003
      
      1,734Refundable income tax
      1,865
      
      0Inventories
      118,718
      
      129,486Prepaid expenses
      2,310
      
      2,225Property held for sale
      577
      
      0Total
        current assets
      127,169
      
      134,645Property and equipment
      87,685
      
      88,008Less accumulated depreciation
      63,464
      
      63,520Net
        property and equipment
      24,221
      
      24,488Property under capital leases
      18,228
      
      18,228Less accumulated amortization
      15,941
      
      15,682Net
        property under capital leases
      2,287
      
      2,546Other non-current assets
      108
      
      89Deferred income taxes
      1,350
      
      1,350Total
        assets
      $155,135
      
      $163,118


See accompanying notes to unaudited
consolidated financial statements.

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

Liabilities
  and Stockholders Equity

July 31,
        2005
      
      January 30,
        2005(Unaudited)Current liabilities:Current maturities
        of capital lease obligations
      856
      
      856Accounts payable
      25,037
      
      22,234Income taxes payable
      0
      
      351Accrued salaries
        and commissions
      5,319
      
      4,728Accrued taxes
        other than income
      4,925
      
      4,367Other current
        liabilities
      5,895
      
      5,764Deferred income
        taxes
      916
      
      914Total
        current liabilities
      42,948
      
      39,214Notes payable under revolving loan
      4,495
      
      4,023Capital lease obligations - less
        current maturities
      3,298
      
      3,726Other noncurrent liabilities
      1,420
      
      1,479Total
        liabilities
      52,161
      
      48,442Stockholders equity:Common stock, $.0001
        par value, authorized20,000,000
        shares; issued and outstanding4,017,939
        shares and 4,475,079 shares respectively
      1
      
      1Additional paid-in
        capital
      42,211
      
      50,889Retained earnings
      60,762
      
      63,786Total
        stockholders equity
      102,974
      
      114,676Total
        liabilities and stockholders equity
      $155,135
      
      $163,118


See accompanying notes to unaudited
consolidated financial statements.

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

For the Thirteen Week
        Periods Ended
      
      For the Twenty-Six Week
        Periods EndedJuly 31,
        2005
      
      August 1,
        2004
      
      July 31,
        2005
      
      August 1,
        2004Net sales
      $108,679
      
      $102,286
      
      $206,705
      
      $197,637Cost of sales
      75,996
      
      68,736
      
      143,462
      
      132,582Gross margin
      32,683
      
      33,550
      
      63,243
      
      65,055Selling, general and administrative
      29,878
      
      29,700
      
      60,470
      
      58,230Depreciation and amortization
      1,478
      
      1,633
      
      3,025
      
      3,332Total operating
        expenses
      31,356
      
      31,333
      
      63,495
      
      61,562Operating income (loss) from continuing operations
      1,327
      
      2,217
      
      (252
      )
      3,493Interest expense
      245
      
      279
      
      455
      
      561Earnings (loss) from continuing operations before
        
           income taxes
      1,082
      
      1,938
      
      (707
      )
      2,932Income tax expense (benefit)
      383
      
      737
      
      (250
      )
      1,114Earnings (loss) from continuing operations
      699
      
      1,201
      
      (457
      )
      1,818Earnings (loss) from discontinued operations,
        
           net of income tax
      (993
      )
      (14
      )
      (2,567
      )
      56Net earnings (loss)
      ($294
      )
      $1,187
      
      ($3,024
      )
      $1,874Earnings (loss) per shareBasicContinuing operations
      $0.17
      
      $0.27
      
      ($0.11
      )
      $0.42Discontinued operations
      ($0.24
      )
      $0.00
      
      ($0.60
      )
      $0.01Net
        earnings (loss)
      ($0.07
      )
      $0.27
      
      ($0.71
      )
      $0.43DilutedContinuing operations
      $0.17
      
      $0.27
      
      ($0.11
      )
      $0.41Discontinued operations
      ($0.24
      )
      $0.00
      
      ($0.60
      )
      $0.01Net
        earnings (loss)
      ($0.07
      )
      $0.27
      
      ($0.71
      )
      $0.42


See accompanying notes to unaudited
consolidated financial statements.

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

For the Twenty-Six Week
        Periods EndedJuly 31, 2005
      
      August 1, 2004Cash Flows From Operating Activities:Net earnings (loss)
      ($3,024
      )
      $1,874Adjustments to reconcile net earnings
        (loss) to net cashprovided by operating
        activitiesDecrease
        (increase) in receivables
      731
      
      (344
      )Increase
        in prepaid expenses
      (85
      )
      (566
      )Decrease
        (increase) in inventories
      10,768
      
      (1,408
      )Depreciation
        and amortization
      3,034
      
      3,419Loss on
        disposal of equipment
      617
      
      0Amortization
        of debt financing costs
      42
      
      37Increase
        (decrease) in accounts payable
      2,803
      
      (447
      )Decrease
        in income taxes payable
      (2,188
      )
      (2,028
      )Increase
        (decrease) in accrued salary & commissions
      591
      
      (1,290
      )Increase
        in accrued taxes other than income
      558
      
      603Decrease
        (increase) in deferred income taxes
      2
      
      (1
      )Increase
        in other liabilities
      72
      
      563Decrease
        in deferred revenue
      0
      
      (209
      )Net cash provided by operating activities
      13,921
      
      203Cash Flows From Investing Activities:Capital
        expenditures
      (3,703
      )
      (3,280
      )Net cash used in investing activities
      (3,703
      )
      (3,280
      )Cash Flows From Financing Activities:Increase
        in revolving loan
      472
      
      4,046Refinancing
        costs on revolving loan
      (61
      )
      0Principal
        payments on long term notes
      0
      
      (262
      )Principal
        payments on capital leases
      (428
      )
      (401
      )Proceeds
        from exercise of stock options
      280
      
      659Common stock
        repurchase
      (8,985
      )
      0Net cash (used in) provided by financing
        activities
      (8,722
      )
      4,042Net increase in cash
      1,496
      
      965Cash and cash equivalents at beginning
        of period
      1,200
      
      1,084Cash at end of period
      $2,696
      
      $2,049Supplemental disclosure of non-cash
        activity:Tax benefit related
        to stock options exercised
      $27
      
      $211


See accompanying notes to unaudited
consolidated financial statements.

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Duckwall-ALCO
Stores, Inc. And Subsidiaries
Notes to Unaudited Consolidated Financial Statements(Dollars in Thousands Except Per Share Amounts)

|(1) |  | Basis
of Presentation
|--- |  | ---------------------

The
accompanying unaudited consolidated financial statements are for interim periods and,
consequently, do not include all disclosures required by generally accepted accounting
principles for annual financial statements. It is suggested that the accompanying
unaudited consolidated financial statements be read in conjunction with the consolidated
financial statements included in the Companys fiscal 2005 Annual Report. In the opinion
of management of Duckwall-ALCO Stores, Inc., the accompanying unaudited consolidated
financial statements reflect all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position of the Company and the results of its
operations and cash flows for the interim periods.

|(2) |  | Principles
of Consolidation
|--- |  | ---------------------------

The
consolidated financial statements include the accounts of Duckwall-ALCO Stores, Inc. and
its wholly owned subsidiaries. All significant intercompany transactions and balances
have been eliminated in consolidation.

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

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

For The Thirteen Week
        Periods Ended
      
      
      For The Twenty-Six Week
        Periods EndedJuly 31,
        2005
      
      
      August 1,
        2004
      
      
      July 31,
        2005
      
      
      August 1,
        2004Net earnings (loss) as reported
      ($294
      )
      
      $1,187
      
      
      ($3,024
      )
      
      $1,874Pro forma stock-based employee compensationcost, net of tax
      (58
      )
      
      (9
      )
      
      (79
      )
      
      (19
      )Pro forma net earnings (loss)
      ($352
      )
      
      $1,178
      
      
      ($3,103
      )
      
      $1,855Earnings (loss) per share as reported:Basic
      ($0.07
      )
      
      $0.27
      
      
      ($0.71
      )
      
      $0.43Diluted
      ($0.07
      )
      
      $0.27
      
      
      ($0.71
      )
      
      $0.42Earnings (loss) per share, pro forma:Basic
      ($0.09
      )
      
      $0.27
      
      
      ($0.73
      )
      
      $0.43Diluted
      ($0.09
      )
      
      $0.26
      
      
      ($0.73
      )
      
      $0.42


|(4) |  | Earnings
Per Share
|--- |  | ------------------

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

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

Thirteen Weeks Ended
      
      Basic
      
      DilutedJuly 31, 2005
      
      4,066,479
      
      4,101,105August 1, 2004
      
      4,367,122
      
      4,464,746Twenty-Six Weeks EndedJuly 31, 2005
      
      4,252,224
      
      4,252,224August 1, 2004
      
      4,343,668
      
      4,444,460


|(5) |  | Reclassifications
|--- |  | -----------------

Certain
prior year amounts have been reclassified to conform with current presentation.

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

(Dollars in Thousands
Except Per Share Amounts)

OVERVIEW

Operations.The Company is a regional discount retailer operating in 21 states in the central
United States, with two business segments, consisting of:

| |  |  | the
ALCO Stores segment. As of July 31, 2005, the Company operated 178          ALCO Stores
which offer a wide variety of general merchandise and a          limited variety of food
products and accounted for 93% of the Companys          sales for the second quarter of
fiscal 2006.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the
Duckwall Stores segment. As of July 31, 2005, the Company operated          69 Duckwall
Stores which offer a more limited general merchandise          selection, but serve the
needs of a community that is not large enough          to support a full-line retail
discount store, and accounted for 7% of          the Companys sales for the second
quarter of fiscal 2006.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
thirteen weeks ended July 31, 2005 and August 1, 2004 are referred to herein as the
second quarter of fiscal 2006 and 2005, respectively. For purposes of this managements
discussion and analysis of financial condition and results of operations, the financial
numbers are presented in thousands.

As
used below the term competitive market refers to any town in which both an ALCO or
Duckwall store and one or more national or regional full-line discount stores are
located. The term non-competitive market refers to any town served by the Company where
no national or regional full-line discount store is also located. The Company
nevertheless faces competition in such markets from a variety of sources, including
dollar stores, and national and regional full-line discount stores located within a
reasonable driving distance.

The
non-competitive markets where the Company operates ALCO or Duckwall stores generally
consist of small towns where population growth is generally steady, but not dramatic. As
no direct competitor or national or regional full-line discount store is located in these
towns, they are generally considered under-served by full-line discount retailers except
for the presence of an ALCO or Duckwall store.

Strategy.
  The Companys overall business strategy involves identifying and opening
  stores in towns that will provide the Company with the highest return on investment.
  Although the Company prefers markets that dont have direct competition,
  its strategy does not preclude it from entering competitive markets. Even in
  non-competitive markets, competition still exists, as the Companys customers
  still shop at retail discount stores and other retailers located in regional
  trade centers. The Company also competes for retail sales with other entities,
  such as mail order companies, specialty retailers, mass merchandisers, dollar
  stores, manufacturers outlets, and the internet.

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The
Company is constantly evaluating the appropriate mix of merchandise to improve sales and
gross margin performance. The Company uses centralized purchasing, merchandising, pricing
and warehousing to obtain volume discounts, improve efficiencies and achieve consistency
among stores and the best overall results. The Company utilizes information obtained from
its point-of-sale system and regular input from its store associates to determine its
merchandise offerings.

The
Company has evaluated the costs and benefits of upgrading its current point-of-sale,
merchandising, human resources/payroll and financial systems. The Companys project team
has selected the hardware and software and entered into agreements with the respective
vendors. Implementation is currently underway. The goal is to go live on the human
resources/payroll and financial systems during the fourth quarter of fiscal 2006. The
pilot of the new point-of-sale system in five stores and go live on the merchandising
system is expected in the first quarter of fiscal 2007, with roll out of the
point-of-sale system to all stores later that year. This represents an investment of
approximately $8.9 million for hardware and software in fiscal 2006, and an investment of
an additional $10.2 million in fiscal 2007, as the point-of-sale systems are rolled out
to all existing stores. A required feature of this new point-of-sale system is perpetual
inventory, which the Company does not currently have in its stores. Perpetual inventory
allows tracking of on-hand quantities at the item level, and enables automated
replenishment. Once the Company has on-hand information and the ability to automatically
replenish items in the stores, the benefits of these new systems can be significant. For
example, the Company estimates it can reduce its inventory levels by 5% to 10%, and
potentially more, because the system will have parameters set at the item level relating
to how much inventory to order based on criteria set centrally. A reduction in inventory
will improve the Companys return on assets ratio. In addition to lowering inventory, the
new system has the potential to improve in-stock levels in the stores, thereby increasing
same-store sales and profits. The new system will also enable other improvements in the
stores which are not available today due to technology limitations. Once those
limitations are removed, the Company expects to re-engineer the stores to take full
advantage of the new technology.

The
Company, when appropriate, implements new merchandising and marketing initiatives in an
effort to increase customer traffic and same-store sales. The Company is changing its
focus from consumable products that carry a lower margin to higher margin soft goods.
This includes more fashion apparel that will appeal to a broad base of customers. The
Company is also adding new items to its assortments and has made changes to its
advertising program that reduces the number of items advertised, but increases the
frequency of the advertising.

The
Company is also proactive in looking for and implementing ways to improve the bottom line
through expense reductions in selling, general and administrative expenses (SG&A).
The Company finalized its restructuring plan on April 28, 2005 and on May 3, 2005, the
Company publicly announced the restructuring. The restructuring is designed to help the
Company more effectively compete in todays competitive retail environment. As a part of
the restructuring, 46 corporate positions were eliminated, which will result in an
annualized savings of approximately $2,200. One-time costs associated with the
restructuring were approximately $734.

The
Companys top priority is improving stockholder value and it has taken aggressive actions
over the years to achieve that objective, including the engagement of top advisers to
help identify opportunities to improve its performance. Company management is currently
developing short and long-term initiatives to improve its performance. The Companys
management, the Board and other advisors will also examine other means of enhancing
stockholder value.

Recent
Events.As of July 31, 2005, the Companys market capital held by non-affiliates exceeded
$75,000. Thus, the Company is an accelerated filer. On March 17, 2005, the Company
announced that, as part of its initiatives designed to improve performance of the Company
for its shareholders, it would be closing 8 ALCO and 12 Duckwall stores that do not meet
the Companys minimum return on investment threshold. The process to close these stores
was completed on schedule in early June 2005. Of the stores being closed, the Company
owns two ALCO stores and leases the properties for the remaining 18 stores. The cost to
close these stores, before income taxes, was approximately $2,000 in the first quarter
and approximately $1,600 in the second quarter. The total cost to close the stores was at
the low end of the previously announced estimated cost. The twenty stores that closed
produced gross sales of $19,900 in Fiscal Year 2005, and employed approximately 260
associates.

During
the second quarter of fiscal 2006, the Company purchased and retired 83,571 shares of the
Companys Common Stock for an average price of $21.50. Also, as previously announced, on
April 19, 2005, the

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Company reached an agreement with a
significant stockholder to repurchase 399,362 shares of the Companys Common Stock for
approximately $7,200. These shares were also retired. The Board of Directors at its
August 23, 2005 meeting adopted a Rule 10b-5 and 10b-18 Agreement and expects to continue
to repurchase shares pursuant to this agreement and as other permissible opportunities
arise.

Key
Items in Fiscal 2006.The Company measures itself against a number of financial metrics
to assess its performance. Some of the important financial items during the second
quarter of fiscal 2006 were:

| |  |  | Net
sales increased 6.3% to $108,679. Same store sales increased 3.5% compared to the prior
year.
| | - |  | -------------------------------------------------------------------------------------------------

| |  |  | Gross
margin decreased to 30.1% of sales, compared to 32.8% in the prior year first quarter.
| | - |  | --------------------------------------------------------------------------------------------

| |  |  | Earnings
(loss) per share was ($0.07) in the second quarter of fiscal 2006 compared to earnings of
$.27 per share in the prior year second quarter.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

Same
store sales growth is a measure which may indicate whether existing stores are
maintaining their market share. Other factors, such as the overall economy, may also
affect same store sales. The Company defines same stores as those stores that were open
as of the first day of the prior fiscal year and remain open at the end of the reporting
period. Same store sales for all Company stores increased 3.5% compared to the second
quarter last year. The ALCO same store sales increased 3.4%, and the Duckwall same store
sales increased 4.7% during the second quarter of fiscal 2006.

Gross
margin percentage is a key measure of the Companys ability to   maximize profit on the
purchase and subsequent sale of merchandise, while   minimizing promotional and clearance
markdowns, shrinkage, damage, and   returns. Gross margin percentage is defined as sales
less cost of sales,   expressed as a percentage of sales. Gross margin percent decreased
to 30.1% of   sales in the second quarter of fiscal 2006, compared to 32.8% in the second
  quarter of fiscal 2005.

Earnings
per share (EPS) growth is an indicator of the returns   generated for the Companys
stockholders. EPS from continuing operations was   reduced to ($0.07) per diluted share
for the second quarter of fiscal 2006,   compared to $0.27per diluted share for the
second quarter of the prior fiscal   year.

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

Certain
statements contained in this Quarterly Report on Form 10-Q that are not statements of
historical fact may constitute forward-looking statements within the meaning of Section
21E of the Exchange Act. These statements are subject to risks and uncertainties, as
described below. Examples of forward-looking statements include, but are not limited to:
(i) projections of revenues, income or loss, earnings or loss per share, capital
expenditures, store openings, store closings, payment or non-payment of dividends,
capital structure and other financial items, (ii) statements of plans and objectives of
the Companys management or Board of Directors, including plans or objectives relating to
inventory, store development, marketing, competition, business strategy, store
environment, merchandising, purchasing, pricing, distribution, transportation, store
locations and information systems, (iii) statements of future economic performance, and
(iv) statements of assumptions underlying the statements described in (i), (ii) and
(iii). Forward-looking statements can often be identified by the use of forward-looking
terminology, such as believes, expects, may, will, should, could, intends,
plans, estimates, projects or anticipates, variations thereof or similar
expressions.

Forward-looking
statements are not guarantees of future performance or results. They involve risks,
uncertainties and assumptions. The Companys future results of operations, financial
condition and business operations may differ materially from the forward-looking
statements or the historical information stated in this Quarterly Report on Form 10-Q.
Stockholders and investors are cautioned not to put undue reliance on any forward-looking
statement.

There
are a number of factors and uncertainties that could cause actual results of operations,
financial condition or business contemplated by the forward-looking statements to differ
materially from those discussed in the forward-looking statements made herein or
elsewhere orally or in writing, by, or on behalf of, the Company, including those factors
described below. Other factors not identified herein could also have such an effect.
Factors that could cause actual results to differ materially from those discussed in the
forward-looking statements and from

| | 9 | 
| | - | 

---

historical information include, but
are not limited to, those factors described below.

CRITICAL ACCOUNTING
POLICIES

Inventory:As discussed in Note 1 (d) to the Consolidated Financial Statements, inventories are
stated at the lower of cost or net realizable value with cost determined using the
last-in, first-out (LIFO) method. The retail inventory method (RIM) used by the Company
is an averaging method that has been widely used in the retail industry. This method
calculates a cost to retail ratio that is applied to the retail value of inventory to
calculate cost inventory and the resulting gross margin. Use of the RIM method does not
eliminate the use of management judgments and estimates, including markdowns and
shrinkage, which significantly impact the ending inventory valuation at cost and the
resulting gross margins. The Company continually evaluates product categories to
determine if markdown action is appropriate, or if a markdown reserve should be
established. The Company recognizes that the use of the RIM will result in valuing
inventories at lower of cost or market if markdowns are currently taken as a reduction of
the retail value of inventories. As of July 31, 2005 and August 1, 2004, the Company had
recorded markdowns that had not been taken and which served to reduce inventories to
lower of cost or market by approximately $200 and $679, respectively. Management believes
that the RIM provides an inventory valuation which reasonably approximates cost and
results in carrying inventory at the lower of cost or market.

Property
and Equipment:The Companys policy is to capitalize property and equipment if it has a
useful life beyond one year. Major improvements are capitalized, while maintenance and
repairs, which do not extend the useful life of the asset, are expensed as incurred. The
nature and extent of the repair, as well as the relative dollar amount of the repair in
relation to the cost of the asset determine whether the expenditure is capitalized or
expensed.

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

Insurance:The Company considers determination of general insurance cost a critical accounting
policy. As described below, the Company is essentially self insured for its workers
compensation, medical insurance and general liability insurance. Due to the fact that it
takes more than one year to determine the actual costs under these plans, these costs are
estimated based on the Companys historical loss experience and estimates from the
insurance carriers and consultants.

| | Workers
Compensation and General Liability. Starting June 1, 2003, the Company is
essentially self insured for workers compensation and general liability claims
due to large deductibles on its policies. At the beginning of the initial plan
year the Companys underwriter and actuaries retained by the Companys insurance
brokers, provided the Company with a reasonable estimate for expense accruals.
After the plan year ended on May 31, 2004, which was during the Companys second
fiscal quarter in fiscal 2005, these advisors informed the Company that
previous reserves were inadequate due to escalating costs per claim. As
a result of this change in estimate, in the second quarter in fiscal
2005, the Company had to increase its workers compensation and general
liability reserves significantly and recorded additional expense of
$463. After the plan year ended on May 31, 2005, which was during the
Companys second quarter in fiscal 2006, these advisors informed the
Company that previous reserves were more than required due to fewer
claims developing than anticipated. As a result of this change in
estimate, in the second quarter in fiscal 2006, the Company had to
decrease its workers compensation and general liability reserves
significantly and recorded a reduction of expense of $901.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Medical.
The Company is also essentially self insured for medical insurance and covers
all claims in a plan year related to an individual until they exceed $200.
Medical insurance expenses began to spike upwards in the first half of the
fiscal year 2005. The expenses for the second quarter of fiscal 2006 were
slightly higher than the Company anticipated. The Company has responded to this
situation by taking steps
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10 | 
| | -- | 

---

| | that
are effective August 1, 2005 to increase the premiums          paid by its associates and
by implementing other changes that are          designed to control future medical
insurance costs.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Income
Taxes:The Companys tax provision and establishment of reserves for potential tax
liabilities involves the use of estimates and professional judgment. The Company has
identified exposures for which they have established a reserve, such as differences in
interpretation of tax laws at the federal, state, and local units of government.

RESULTS OF
OPERATIONS

Thirteen and
Twenty-Six Weeks Ended July 31, 2005 Compared to Thirteen and Twenty-Six Weeks Ended
August 1, 2004.

The
Company continues to execute its basic strategy of opening stores in under-served markets
that have no competition from national or regional full-line discount retailers. During
the second quarter of fiscal 2006 the Company opened two new ALCO stores. Eight ALCO
stores and six Duckwall stores were closed in the second quarter of fiscal 2006. Ten ALCO
and twelve Duckwall stores were closed during the twenty-six week period ended July 31,
2005. The operations of stores closed in the current and prior year, have been reflected
as discontinued operations in all periods presented. As of July 31, 2005 over 88% of the
Companys 247 stores are in non-competitive markets.

Net
Sales

Net
sales for the second quarter of fiscal 2006 increased $6,393 or 6.3% to $108,679 compared
to $102,286 for the second quarter of fiscal 2005. Same store sales increased $3,492 or
3.5%. The ALCO same store sales increased 3.4%, and the Duckwall same store sales
increased 4.7% during the second quarter of fiscal 2006. The Company has made the
decision to liquidate seasonal product within the same season. Distressed inventory,
including approximately $3,500 at retail of last years apparel has been eliminated.
Markdowns that were taken to eliminate this inventory affected gross margin as discussed
below. A number of factors contributed to the same store sales growth during the quarter,
including liquidation of seasonal items discussed above, as well as expanded store
operating hours, better in-stock position and new product offerings.

Net
sales for the twenty-six week period ending July 31, 2005 increased $9,068 or 4.6% to
$206,705 compared to $197,637 in the comparable twenty-six week period of the prior
fiscal year. Same store sales increased $3,385, or 1.7%. The ALCO same store sales
increased 1.6%, and the Duckwall same store sales increased 3.7% during the twenty-six
week period ending July 31, 2005. The majority of the same store sales growth came from
operations in the second quarter, as described above.

Gross
Margin

Gross
margin for the second quarter of fiscal 2006 decreased $867 or 2.6% to $32,683 compared
to $33,550 in the second quarter of fiscal 2005. Gross margin as a percentage of sales
was 30.1% for the second quarter of fiscal 2006 compared to 32.8% for the second quarter
of fiscal 2005. The decline in the gross margin percentage was due primarily to higher
markdowns as mentioned above to liquidate seasonal inventory. Other factors affecting
margin included higher shrink and transportation costs, offset by an improved mix of
sales and higher markup on purchases.

Gross
margin for the twenty-six week period ended July 31, 2005 was $63,243, which was $1,812
or 2.8% lower than the prior fiscal years twenty-six week gross margin of $65,055. As a
percent of net sales, gross margin was 30.6% for the twenty-six week period ending July
31, 2005, compared to 32.9% for the twenty-six week period of the prior fiscal year. The
decrease in gross margin percentage was due primarily to higher markdowns due to the
Companys efforts to lower its inventory, as well as taking more aggressive markdown
action in-season to clear out seasonal merchandise as discussed above. Also negatively
impacting the gross margin percentage were higher transportations costs resulting from
higher fuel prices and higher shrinkage costs.

| | 11 | 
| | -- | 

---

SG&A

SG&A
expense increased $178 or 0.6% to $29,878 in the second quarter of fiscal 2006 compared
to $29,700 in the second quarter of fiscal 2005. As a percentage of net sales, selling,
general and administrative expenses in the second quarter of fiscal 2006 were 27.5%,
compared to 29.0% in the second quarter of fiscal 2005. A significant factor in this
decrease was general insurance costs, which decreased $1,300 (1.2% of sales), primarily
due to an adjustment in the Companys insurance reserves for workers compensation and
general liability insurance as a result of revised actuarial estimates. The Company also
experienced savings of $550 resulting from the workforce reduction at the corporate
office that occurred at the beginning of May 2005. The Company also had lower store
remodeling costs and lower incentive compensations costs. These were partially offset by
a reduction in income related to layaways as a result of a one-time $275 reduction in
expenses related to layaways last year, while there was no such adjustment in this years
second quarter. Increases in costs associated with the Companys store manager training
program and compliance with Sarbanes-Oxley also negatively impacted the second quarter of
fiscal 2006.

SG&A
expense increased $2,240 or 3.8% to $60,470 for the twenty-six week period ended July 31,
2005 compared to $58,230 for the comparable twenty-six week period of the prior fiscal
year. Selling, general and administrative expense as a percent of net sales was 29.3% for
the twenty-six week period ending July 31, 2005 compared to 29.5% for the twenty-six week
period of the prior fiscal year. The decrease in the selling, general and administrative
expense percentage described above for the second quarter was offset by one-time costs
incurred in the first quarter associated with the workforce reduction, and the costs
associated with the retirement of the former Chief Executive Officer and the hiring of
the new Chief Executive Officer.

Depreciation
and Amortization

Depreciation
and amortization expense decreased $155 or 9.5% to $1,478 in the second quarter of fiscal
2006 compared to $1,633 in the second quarter of fiscal 2005. Depreciation and
amortization expense decreased $307 or 9.2% to $3,025 for the twenty-six week period
ended July 31, 2005 compared to $3,332 in the comparable twenty-six week period of the
prior fiscal year. The decrease is primarily due to store fixtures and equipment becoming
fully depreciated in the current fiscal year on a large number of ALCO stores that were
opened in fiscal year 1997.

Operating
Income

Operating
income from continuing operations decreased $890 or 40.1% to $1,327 in the second quarter
of fiscal 2006 compared to $2,217 in the second quarter of fiscal 2005. Operating income
from continuing operations as a percentage of net sales was 1.2% in the second quarter of
fiscal 2006 compared to 2.2% in the second quarter of fiscal 2004. The reduction in gross
margin as described above had the largest impact on the reduced operating income.

Operating
income from continuing operations decreased $3,745 or 107.2% to ($252) for the twenty-six
week period ended July 31, 2005 compared to $3,493 in the comparable twenty-six week
period of the prior fiscal year. The reduction in gross margin as described above had the
largest impact on the reduced operating income.

Interest
Expense

Interest
expense decreased $34 or 12.2% to $245 in the second quarter of fiscal 2006 compared to
$279 in the second quarter of fiscal 2005. Interest expense decreased $106 or 18.9% to
$455 for the twenty-six week period ended July 31, 2005 compared to $561 in the
comparable twenty-six week period of the prior fiscal year. The reduction in interest
expense was due primarily to lower borrowing levels for both the thirteen and twenty-six
week periods of fiscal 2006. Interest expense may increase if interest rates continue to
rise or if the Company expands its borrowing to fund capital expenditures or other
programs.

| | 12 | 
| | -- | 

---

Income
Taxes

Income
taxes were $383 in the second quarter of fiscal 2006 compared to $737 in the second
quarter of fiscal 2006. The effective tax rate was 35.4% in the thirteen and twenty-six
week periods of fiscal 2006 compared to 38.0% in the thirteen and twenty-six week periods
of fiscal 2005. The effective tax rate for fiscal 2005 was reduced to 37.0% (retroactive
to the beginning of the fiscal year) in the third quarter of that fiscal year when
legislation was passed to reinstate the work opportunity tax credit.

Earnings
from Continuing Operations

Earnings
from continuing operations for the second quarter of fiscal 2006 were $699, a decrease of
$502 or 41.8% from the earnings from continuing operations of $1,201 for the second
quarter of fiscal 2005. Earnings from continuing operations for the twenty-six week
period ended July 31, 2005 were ($457), a decrease of $2,275 or 125.1 % compared to
$1,818 in the comparable twenty-six week period of the prior fiscal year.

Loss
from Discontinued Operations

Loss
from discontinued operations, net of income tax, was $993 in the second quarter of fiscal
2006, compared to a loss of $14 in the second quarter of fiscal 2005. The operations of
closed stores have been reflected as discontinued operations in all periods presented.
Loss from discontinued operations, net of income tax, was $2,567 for the twenty-six week
period ended July 31, 2005, compared to income of $56 in the comparable twenty-six week
period of the prior fiscal year. The increase in loss from discontinued operations was
the result of closing a total of twenty-two stores in fiscal 2006, compared to three
store closings in the prior fiscal year.

Net
Earnings (loss)

Net
loss for the second quarter of fiscal 2006 was $294, a decrease of $1,481 or 124.8% from
the net earnings of $1,187 in the second quarter of fiscal 2005. Diluted net loss per
share for the second quarter of fiscal 2005 was $0.07, a decrease of $0.34, or 125.9%
from the diluted net earnings per share of $0.27 in the second quarter of fiscal 2005.
The primary reason for the decrease in net earnings was the decrease in gross margin and
the Loss from Discontinued Operations as discussed previously.

Net
loss for the twenty-six week period ended July 31, 2005 was $3,024, a decrease of $4,898
or 261.4% compared to net earnings of $1,874 in the comparable twenty-six week period of
the prior fiscal year. Diluted net loss per share for the twenty-six week period ended
July 31, 2005 was $0.71, a decrease of $1.13 or 269.0% compared to earnings of $0.42 per
share in the comparable twenty-six week period or the prior fiscal year. The reasons for
this decrease are primarily the same as those described for the thirteen-week period.

LIQUIDITY AND
CAPITAL RESOURCES

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

At
July 31, 2005 working capital (defined as current assets less current liabilities) was
$84,221 compared to $95,431 at the end of fiscal 2005. The reduction in working capital
was primarily attributable to the reduction in inventory due to the decision to close
twenty-two stores. On June 1, 2005 the Company and its lender, Bank of America, agreed to
extend the revolving loan credit facility. The credit facility, which was due on April
15, 2006, will now be due on April 15, 2010.

The
Company has a loan agreement with its lenders that provides a revolving loan credit
facility of up to $70,000 of long-term financing. The amount advanced (through a note or
letters of credit) to the Company under the credit facility bears interest at (i) the
prime rate plus a margin, as defined, which varies based on the amount outstanding (Base
Loan) or (ii) based on the Euro dollar rate plus a margin, as defined, (Index Loan).
Based upon its

| | 13 | 
| | -- | 

---

projected financial requirements,
the Company uses a combination of short term Euro dollar contracts and borrowing at
prime. The amount advanced is generally limited to 70% of eligible inventory, as defined
in the loan agreement. Advances are secured by a security interest in the Companys
inventory. The loan agreement contains various restrictions that are applicable when
outstanding borrowings reach certain thresholds, including limitations on additional
indebtedness, acquisitions of assets and payment of dividends. The loan agreement expires
on April 15, 2010. As of July 31, 2005, the Company has borrowed $4,495 under this
facility. The lender had also issued letters of credit aggregating $4,580 at such date on
behalf of the Company.

Cash
provided by operating activities in the twenty-six week period of fiscal 2006 and 2005
was $13,921 and $203 respectively. The increase in the amount of cash provided by
operating activities in the twenty-six week period of fiscal 2006 compared to the
twenty-six week period of fiscal 2005 was primarily due to a decrease in inventory, a
larger increase in accounts payable, and an increase in accrued salary and commission.

The
Company has revised its total anticipated cash payments for acquisition of property and
equipment in fiscal 2006 due to the large outlay for hardware and software for upgrading
its point-of-sale, merchandising, human resources/payroll, and financial systems. Total
anticipated cash payments for the hardware and software, as well as for store buildings
and store and warehouse fixtures and equipment are approximately $19,000. Cash used in
investing activities (including acquisitions and remodeling) in the twenty-six week
period of fiscal 2006 and 2005 totaled $3,703 and $3,280, respectively, which were used
primarily for those same purposes.

The
Company (used) generated cash from financing activities in the twenty-six week period of
fiscal 2006 and 2005 of ($8,722) and $4,042 respectively. Borrowings on the revolving
loan generated $472 during the twenty-six week ended July 31, 2006, compared to $4,046
during the twenty-six week period of the prior fiscal year. Cash was used to purchase and
retire 482,933 shares of Common Stock during the twenty-six week period of fiscal 2006
for $8,985. The Board of Directors of the Company has authorized the Company to
repurchase up to 1,810,362 shares, of which 1,567,533 shares had been purchased as of
July 31, 2005. On August 23, 2005, the Company entered into a Rule 10b5-1 and 10b-18
Stock Repurchase Agreement. Under this agreement, the Company will purchase up to 50,000
shares of its Common Stock at or below prevailing market prices, but for an aggregate
purchase price not to exceed $1,250.

| | 14 | 
| | -- | 

---

BUSINESS OPERATIONS
AND SEGMENT INFORMATION

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

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

Segment Information
      For The Thirteen
        Week
        Periods Ended
      
      For The Twenty-Six
        Week
        Periods EndedJuly 31,
        2005
      
      August 1,
        2004
      
      July 31,
        2005
      
      August 1,
        2004Net Sales:ALCO Discount
        Stores
      $100,681
      
      $94,960
      
      $191,687
      
      $183,947All OtherExternal
      7,998
      
      7,326
      
      15,018
      
      13,690Intercompany
      52,035
      
      50,668
      
      113,782
      
      113,547$160,714
      
      $152,954
      
      $320,487
      
      $311,184Depreciation and AmortizationALCO Discount
        Stores
      $965
      
      $1,042
      
      $1,907
      
      $2,000All Other
      513
      
      591
      
      1,118
      
      1,332$1,478
      
      $1,633
      
      $3,025
      
      $3,332Income (expense) from Operations:ALCO Discount
        Stores
      $7,485
      
      $9,183
      
      $13,927
      
      $17,413All Other
      (6,074
      )
      (6,898
      )
      (14,010
      )
      (13,785
      )$1,411
      
      $2,285
      
      ($83
      )
      $3,628Capital Expenditures:ALCO Discount
        Stores
      $1,650
      
      $1,580
      
      $2,718
      
      $2,081All Other
      777
      
      638
      
      985
      
      1,199$2,427
      
      $2,218
      
      $3,703
      
      $3,280Identifiable Assets:ALCO Discount
        Stores
      $120,907
      
      $131,578
      
      $120,907
      
      $131,578All Other
      34,228
      
      39,317
      
      34,228
      
      39,317$155,135
      
      $170,895
      
      $155,135
      
      $170,895




| | 15 | 
| | -- | 

---

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

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

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

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

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

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

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

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

For The Thirteen Week
        Periods Ended
      
      For The Twenty-Six Week
        Periods EndedJuly 31,
        2005
      
      August 1,
        2004
      
      July 31,
        2005
      
      August 1,
        2004Net sales per above segment information
      $160,714
      
      $152,954
      
      $320,487
      
      $311,184Intercompany elimination
      52,035
      
      50,668
      
      113,782
      
      113,547Net sales per consolidated
        statementsof operations
      $108,679
      
      $102,286
      
      $206,705
      
      $197,637Income (loss) from operations per above segmentinformation
      $1,411
      
      $2,285
      
      ($83
      )
      $3,628Leases
      84
      
      68
      
      169
      
      135Income (loss) from operations
        per consolidatedstatements of
        operations
      $1,327
      
      $2,217
      
      ($252
      )
      $3,493


| | 16 | 
| | -- | 

---

ITEM 3. QUANTITATIVE
AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

INSTRUMENTS ENTERED
INTO OTHER THAN FOR TRADING - INTEREST RATE RISK

The
Company is exposed to various types of market risk in the normal course of its business,
including the impact of interest rate changes. The Company may enter into interest rate
swaps to manage its exposure to interest rate changes, and we may employ other risk
management strategies, including the use of foreign currency forward contracts. The
Company does not currently hold any derivative instruments and would enter into such
instruments solely for cash flow hedging purposes and not for trading purposes.

As
described under Managements Discussion and Analysis of Financial Condition and Results
of Operations-Liquidity and Capital Resources, the Company has a variable interest rate
debt facility that is subject to interest rate risk. The Company uses this facility to
meet the short-term needs of its capital improvements and inventory purchases. These
obligations expose the Company to variability in interest payments due to changes in
interest rates. If interest rates increase, interest expense increases. Conversely, if
interest rates decrease, interest expense also decreases. Based on amounts outstanding
under this facility as of July 31, 2005, the Company does not consider its exposure to
interest rate risk to be material.

ITEM 4. CONTROLS AND
PROCEDURES

As
of the end of the period covered by this report, an evaluation was carried out under the
supervision and with the participation of Company management, including the Companys
President and Chief Financial Officer, of the effectiveness of the design and operation
of the Companys disclosure controls and procedures. There are inherent limitations to
the effectiveness of any system of disclosure controls and procedures, including the
possibility of human error and the circumvention or overriding of the controls and
procedures. Accordingly, even effective disclosure controls and procedures can only
provide reasonable assurance of achieving their control objectives. Based upon and as of
the date of the evaluation, the Companys President and Chief Financial Officer concluded
that the design and operation of these disclosure controls and procedures were effective
in all material respects to provide reasonable assurance that information required to be
disclosed in the reports it files and submits under the Exchange Act is recorded,
processed, summarized and reported as and when required.

There
were no changes in the Companys internal control over financial reporting that occurred
during the quarter ended July 31, 2005 that materially affected, or are reasonably likely
to materially affect, the Companys internal control over financial reporting.

| | 17 | 
| | -- | 

---

PART II - OTHER
INFORMATION

| | Item 1. | Legal Proceedings
      
      The Company is a party to routine litigation from time to time in the ordinary
      course of business.
| | ------- | ---------------------------------------------------------------------------------------------------------------------------------------
| |         |                                                                                                                                        
| | Item 2. | Unregistered
      Sales of Equity Securities and Use of Proceeds 
      Not applicable                                                
| |         |                                                                                                                                        
| | Item 3. | Defaults
      Upon Senior Securities 
      Not Applicable                                                                            
| |         |                                                                                                                                        
| | Item 5. | Other Information
      
      None                                                                                                    
| |         |                                                                                                                                        
| | Item 6. | Exhibits
      
      See the Exhibit Index immediately following the signature page hereto.                                           

SIGNATURES

Pursuant
to the requirements of the Securities Exchange Act of 1934 the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.

| |                                | DUCKWALL-ALCO
      STORES, INC. 
                     (Registrant)
| | ------------------------------ | -------------------------------------------------------------------
| |                                |                                                                    
| |                                |                                                                    
| | Date, September
      12, 2005 |                                                                    
| |                                |                                                                    
| |                                |                                                                    
| |                                |                                                                    



| | 18 | 
| | -- | 

---

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.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------

|10.11 |  | Employment
Agreement dated December 28, 2000 between the Company and          James E. Schoenbeck
(filed as Exhibit 10.12 to Companys Annual Report          on Form 10-K for the fiscal
year ended February 2, 2003, and          incorporated herein by reference).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.12 |  | Employment
 Agreement  dated  December 28, 2000 between the Company and Richard A.  Mansfield.
 (filed as          Exhibit  10.14 to Companys  Annual  Report on Form 10-K for the
fiscal year ended  February 2, 2003,  and          incorporated herein by reference.).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.13 |  | Employment
 Agreement  dated  December 28, 2000  between the Company and Tom L.  Canfield,  Jr.
 (filed as          Exhibit  10.15 to Companys  Annual  Report on Form 10-K for the
fiscal year ended  February 2, 2003,  and          incorporated herein by reference).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.14 |  | Loan
and Security Agreement, dated as of April 15, 2002, between the          Company and
Fleet Retail Finance Inc. (filed as Exhibit 10.16 to          Companys Annual Report on
Form 10-K for the fiscal year ended February          2, 2003, and incorporated herein by
reference).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.15 |  | Joinder
Agreement and First Amendment to Loan and Security Agreement          dated September 9,
2002 among the Company, Fleet Retail Finance Inc.,          and DA Good Buys, Inc. (filed
as Exhibit 10.17 to Companys Annual          Report on Form 10-K for the fiscal year
ended February 2, 2003, and          incorporated herein by reference).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.18 |  | Separation
Agreement and Release, dated as of December 27, 2004,          between the Company and
Glen L. Shank (filed as Exhibit 10.1 to the          Companys Current Report on Form 8-K
on December 28, 2004 and          incorporated herein by reference).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.19 |  | Employment
Agreement dated August 1, 2005 between the Company and Bruce          C. Dale (filed as
Exhibit 10.1 to the Companys Form 8-K filed August          3, 2005, and incorporated
herein by reference).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.20 |  | Memorandum
of Understanding dated April 19, 2005 with K&A Asset          Management, LLC on
behalf of Kenneth A. Macke Revocable Trust (filed as          Exhibit 10.1 to the
Companys Current Report on Form 8-K on April 22,          2005 and incorporated herein
by reference).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.21 |  | 2003
Duckwall-ALCO Stores, Inc. Incentive Stock Option Plan (filed as          Appendix 3,
Schedule 14-A for the fiscal year ended February 2, 2003,          and incorporated
herein by reference).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.22 |  | Second
 Amendment to Loan and Security  Agreement  dated as of June 1, 2005,  between the
Company and Bank          of America, N.A.
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------

|10.23 |  | Rule
10b-5 and 10b-18  Stock  Purchase  Agreement  dated as of August 23,  2005  between  the
 Company and          Jefferies & Co.,  Inc.  (filed as Exhibit 10.1 to the Companys
 Current  Report on Form 8-K on August 29,          2005, and incorporated herein by
reference).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.24 |  | First
Amendment to Employment Agreement dated as of August 23, 2005          between the
Company and Bruce Dale (filed as Exhibit 10.1 to the          Companys Current Report on
Form 8-K filed August 25, 2005, and          incorporated herein by reference).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 19 | 
| | -- | 

---

|21.1 |  | Amended
and Restated List of Subsidiaries of the Company (filed as          Exhibit 21.1 to the
Companys Annual Report on Form 10-K for the fiscal          year ended February 2, 2003
and incorporated herein by reference).
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|31.1 |  | Certification
of Chief Executive Officer of Duckwall-ALCO Stores, Inc.          dated September 12,
2005, 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 12,
2005, 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 12,
2005, 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 31, 2005 and is not treated as filed in
reliance          upon ss. 601(b)(32) of Regulations S-K.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|32.2 |  | Certification
of Chief Financial Officer of Duckwall-ALCO Stores, Inc.,          dated September 12,
2005, 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 31, 2005 and is not treated as filed in
reliance          upon ss. 601(b)(32) of Regulations S-K.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 20 | 
| | -- | 

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