UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, 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 October 31, 2004

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 ___      No X

APPLICABLE ONLY TO
CORPORATE ISSUERS:

4,447,658
shares of common stock, $.0001 par value (the issuers only class of common stock), were
outstanding as of October 31, 2004.

| |  | 
| |  | 

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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

October 31, 
2004
      
      February 1, 
2004(Unaudited)Current assets:Cash and cash equivalents
      $3,131
      
      
      $1,084Receivables
      2,029
      
      
      1,521Refundable income tax
      681
      
      
      0Inventories
      149,268
      
      
      131,661Prepaid expenses
      2,784
      
      
      2,188Total current assets
      157,893
      
      
      136,454Property and equipment
      90,803
      
      
      86,349Less accumulated depreciation
      63,828
      
      
      59,586Net property and equipment
      26,975
      
      
      26,763Property under capital leases
      18,228
      
      
      20,120Less accumulated amortization
      15,549
      
      
      17,041Net property under capital leases
      2,679
      
      
      3,079Other non-current assets
      108
      
      
      164Deferred income taxes
      1,034
      
      
      1,033Total assets
      $188,689
      
      
      $167,493


See accompanying notes to unaudited
consolidated financial statements.

| | 2 | 
| | - | 

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

Liabilities and
Stockholders Equity

October 31,
2004
      
      February 1,
2004(Unaudited)Current liabilities:Current maturities of:Long term debt
      $136
      
      
      $533Capital lease obligations
      802
      
      
      802Accounts payable
      33,921
      
      
      27,799Income taxes payable
      0
      
      
      1,944Accrued salaries and commissions
      5,101
      
      
      5,475Accrued taxes other than income
      5,316
      
      
      4,496Other current liabilities
      6,084
      
      
      4,276Deferred income taxes
      1,626
      
      
      1,668Total current liabilities
      52,986
      
      
      46,993Notes payable under revolving loan
      18,087
      
      
      4,958Capital lease obligations - less current maturities
      3,981
      
      
      4,583Other noncurrent liabilities
      1,271
      
      
      1,347Deferred revenue
      105
      
      
      419Total liabilities
      76,430
      
      
      58,300Stockholders equity:Common stock, $.0001 par value, authorized20,000,000 shares; issued and outstanding4,447,658 shares and 4,299,816 shares respectively
      1
      
      
      1Additional paid-in capital
      50,566
      
      
      49,329Retained earnings
      61,692
      
      
      59,863Total stockholders equity
      112,259
      
      
      109,193Total liabilities and stockholders equity
      $188,689
      
      
      $167,493


See accompanying notes to unaudited
consolidated financial statements.

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| | - | 

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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 Thirty-Nine Week 
      Periods EndedOctober 31, 
2004
      
      November 2, 
2003
      
      October 31, 
2004
      
      November 2, 
2003Net Sales
      $99,907
      
      
      $98,608
      
      
      $310,199
      
      
      $304,239Cost of sales
      65,655
      
      
      64,889
      
      
      206,488
      
      
      202,617Gross margin
      34,252
      
      
      33,719
      
      
      103,711
      
      
      101,622Selling, general and administrative
      31,906
      
      
      30,763
      
      
      94,259
      
      
      91,223Depreciation and amortization
      1,693
      
      
      1,768
      
      
      5,051
      
      
      5,372Total operating expenses
      33,599
      
      
      32,531
      
      
      99,310
      
      
      96,595Operating income from continuing operations
      653
      
      
      1,188
      
      
      4,401
      
      
      5,027Interest expense
      368
      
      
      357
      
      
      929
      
      
      1,075Earnings from continuing operations before 
        income taxes
      285
      
      
      831
      
      
      3,472
      
      
      3,952Income tax  expense
      75
      
      
      301
      
      
      1,285
      
      
      1,432Earnings from continuing operations
      210
      
      
      530
      
      
      2,187
      
      
      2,520(Loss) earnings from discontinued operations, 
         net of income tax
      (256
      )
      
      (7
      )
      
      (358
      )
      
      160Net earnings (loss)
      ($46
      )
      
      $523
      
      
      $1,829
      
      
      $2,680Earnings (loss) per shareBasicContinuing operations
      $0.05
      
      
      $0.12
      
      
      $0.50
      
      
      $0.59Discontinued operations
      ($0.06
      )
      
      $0.00
      
      
      ($0.08
      )
      
      $0.04Net earnings (loss)
      ($0.01
      )
      
      $0.12
      
      
      $0.42
      
      
      $0.63DilutedContinuing operations
      $0.05
      
      
      $0.12
      
      
      $0.49
      
      
      $0.58Discontinued operations
      ($0.06
      )
      
      $0.00
      
      
      ($0.08
      )
      
      $0.04Net earnings (loss)
      ($0.01
      )
      
      $0.12
      
      
      $0.41
      
      
      $0.62


See accompanying notes to unaudited
consolidated financial statements.

| | 4 | 
| | - | 

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

For the Thirty-Nine Week 
        Periods
EndedCash Flows From Operating Activities:
      October 31, 2004
      
      November 2, 2003Net earnings
      $1,829
      
      
      $2,680Adjustments to reconcile net earnings to net cash (used in)provided by operating activitiesAmortization of debt financing costs
      56
      
      
      56Depreciation and amortization
      5,140
      
      
      5,499Increase in inventories
      (17,608
      )
      
      (17,987
      )Increase in accounts payable
      6,122
      
      
      8,517(Increase) decrease in receivables
      (508
      )
      
      260(Increase) decrease in prepaid expenses
      (596
      )
      
      142Increase in accrued taxes other than income
      819
      
      
      1,154(Decrease) increase in accrued salaries and commissions
      (374
      )
      
      10Decrease in income taxes payable
      (2,333
      )
      
      (1,161
      )Increase in deferred income taxes
      (42
      )
      
      (63
      )Decrease in deferred revenue
      (314
      )
      
      (328
      )Increase in other liabilities
      1,732
      
      
      1,272Net cash (used in) provided by operating activities
      (6,077
      )
      
      51Cash Flows From Investing Activities:Proceeds from sale of property
      767
      
      
      763Capital expenditures
      (5,719
      )
      
      (3,727
      )Net cash used in investing activities
      (4,952
      )
      
      (2,964
      )Cash Flows From Financing Activities:Proceeds from exercise of stock options
      1,024
      
      
      594Repurchase of common stock
      (80
      )
      
      (658
      )Increase in revolving loan
      13,129
      
      
      5,468Principal payments on long term notes
      (396
      )
      
      (372
      )Principal payments on capital leases
      (601
      )
      
      (534
      )Net cash provided by financing activities
      13,076
      
      
      4,498Net increase in cash and cash equivalents
      2,047
      
      
      1,585Cash and cash equivalents at beginning of period
      1,084
      
      
      1,356Cash and cash equivalents at end of period
      $3,131
      
      
      $2,941Supplemental disclosure of non-cash activity:Tax benefit related to stock options exercised
      $292
      
      
      $113


See accompanying notes to unaudited
consolidated financial statements.

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| | - | 

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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 2004 Annual Report. In the opinion
of management of Duckwall-ALCO Stores, Inc., the accompanying unaudited consolidated
financial statements reflect all adjustments (consisting of normal recurring accruals)
necessary to present fairly the financial position of the Company and the results of its
operations and cash flows for the interim periods.

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

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

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

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

For
        The Thirteen Week 
        Periods Ended
      
      For
        The Thirty-Nine Week 
        Periods EndedOctober 31, 
        2004
      
      November 2, 
        2003
      
      October 31, 
        2004
      
      November 2, 
        2003Net earnings (loss) as reported
      ($46
      )
      
      $523
      
      
      $1,829
      
      
      $2,680Pro forma stock-based employeecompensation cost, net of tax
      ($10
      )
      
      (21
      )
      
      (29
      )
      
      (63
      )Pro forma net earnings (loss)
      ($56
      )
      
      $502
      
      
      $1,800
      
      
      $2,617Earnings (loss) per share as reported:Basic
      ($0.01)
      
      
      $0.12
      
      
      $0.42
      
      
      $0.63Diluted
      ($0.01)
      
      
      $0.12
      
      
      $0.41
      
      
      $0.62Earnings (loss) per share, pro forma:Basic
      ($0.01)
      
      
      $0.12
      
      
      $0.41
      
      
      $0.62Diluted
      ($0.01)
      
      
      $0.12
      
      
      $0.40
      
      
      $0.61


|(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.

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

| | 6 | 
| | - | 

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Thirteen Weeks Ended
      
      Basic
      
      DilutedOctober 31, 2004
      
      4,415,926
      
      4,473,897November 2, 2003
      
      4,234,287
      
      4,362,584Thirty-Nine Weeks EndedOctober 31, 2004
      
      4,367,754
      
      4,454,273November 2, 2003
      
      4,230,181
      
      4,322,857


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

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. The Company currently operates 186 ALCO Stores          which offer
a wide variety of general merchandise and a limited variety          of food products and
accounted for 92% of the Companys sales for the          third quarter of fiscal 2005.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the
Duckwall Stores segment. The Company operates 79 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 8% of the Companys sales for          the third quarter of fiscal 2005.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
thirteen weeks ended October 31, 2004 and November 2, 2003 are referred to herein as the
third quarter of fiscal 2005 and 2004, 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 business operates in a highly competitive industry. However, to reduce the
competition and improve the Companys performance, the Companys overall business
strategy involves identifying, and opening stores in towns that currently have no direct
competition from another larger national or regional full-line discount retailer. The
Company thus positions itself as providing the most convenient access to local retail
shopping within those towns. A key aspect of this strategy includes placing the Companys
stores in towns where the Company believes no such competition is likely to develop. This
strategy does not eliminate the competition for the Companys stores 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.

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

| | 7 | 
| | - | 

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Company utilizes information
obtained from its point-of-sale system and regular input from its store associates to
determine its merchandise offerings.

The
Company is in the process of evaluating the costs and benefits of upgrading its current
point-of-sale systems over the next several years and has a project team, guided by an
outside advisor, currently evaluating new software and hardware. The project teams goal
is to complete this evaluation, select a new upgraded point-of-sale system and obtain the
Board of Directors approval of the necessary capital expenditures to allow sufficient
time to pilot the new system in one store during the first half of fiscal 2006. 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. To maintain performance levels
and upgrade stores with the latest merchandising concepts, the Company initiated a major
store remodeling program four years ago. The remodeled stores feature an improved
merchandise mix, with greater emphasis on consumables and everyday low values that are
highlighted through a new and more dominant sign program. A total of 103 ALCO stores have
been remodeled since the inception of the remodeling program. Since March, 2002, the
Company has also opened a net total of 19 new ALCO stores that incorporate these latest
merchandising concepts, bringing the total number of ALCO stores with the updated format
to 122 as of October 31, 2004. In June 2004, the Company converted its first ALCO store
to an ALCO Market Place store. This new format devotes approximately one fourth of its
floor space to a limited, but greatly expanded assortment of foods, including produce,
dry goods and products displayed in freezers and coolers. The significant enlargement of
the grocery department represents a natural progression in the Companys successful
expansion of its consumable product offering that has been rolled out through the
remodeling program. The Company converted a second store to the ALCO Market Place concept
in August 2004, and a third store was converted in November 2004. Company management is
currently evaluating the results of this new concept to determine its potential for
further expansion.

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). As
examples, in fiscal year 2004, the Company improved throughput in its distribution center
by 19% and, in the last 5 years alone, has reduced the number of labor hours required to
operate a typical store by 10%. Other examples of proactive measures the Company has
taken to control expenses include efforts to reduce rapidly escalating workers
compensation expenses and medical insurance costs, as discussed under the heading
Critical Accounting Policies.

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. The Company recently engaged a
business advisory firm to do a strategic and operational review of the Company. Their
assignment has been completed, and a report has been submitted to the Companys Board of
Directors. Based upon the reports conclusions and recommendations, Company management
plans to develop 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. On November 18, 2004, the Companys Board of Directors regretfully accepted the
voluntary resignation of Glen L. Shank as the Companys Chairman of the Board and
President. Mr. Shanks retirement as Chairman of the Board was effective immediately. His
retirement as President of the Company will be effective on the earlier of April 30, 2005
or when a successor has been hired and the transition to that successor is complete. Mr.
Shank will remain a director until his retirement. Mr. Shank has served as President and
CEO since

| | 8 | 
| | - | 

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1988 and Chairman of the Board, and
CEO since 1991 and has played a key role in the Companys success over the years.

Upon
acceptance of Mr. Shanks notice, the Board of Directors appointed Mr. Warren Gfeller as
Chairman of the Board, and expanded the number of Board members from five to seven. Mr.
Gfeller joined the Board of Directors in December, 2003 and currently serves as a
director for several other public and private companies in addition to previously serving
as CEO, CFO and a director of Ferrellgas, Inc., the largest distributor of propane gas in
the United States.

Key
Items in Fiscal 2005. The Company measures itself against a number of financial metrics
to assess its performance. Some of the important financial items during the third
quarter of fiscal 2005 were:

| |  |  | Net
sales increased 1.3% to $99.9 million. Same store sales were unchanged compared to the
prior year.
| | - |  | ------------------------------------------------------------------------------------------------------

| |  |  | Gross
margin increased to 34.3% of sales, compared to 34.2% in the prior year third quarter.
| | - |  | --------------------------------------------------------------------------------------------

| |  |  | Two
ALCO stores were remodeled.
| | - |  | -------------------------------

| |  |  | In
August 2004, a second ALCO store was converted into an ALCO Market          Place store,
which includes an expanded selection of grocery products.          One additional store
was converted to this new prototype in November,          2004.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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. While the same store sales for all Company
stores was unchanged compared to the third quarter last year, the ALCO stores in
non-competitive markets, which represent 142 of the 186 ALCO stores as of the end of the
third quarter, increased 0.4% during the third quarter of fiscal 2005. Sales in the
Duckwall stores increased 2.3% during the third quarter of fiscal 2005.

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 increased
slightly to   34.3% of sales in the third quarter of fiscal 2005, compared to 34.2% in
third   quarter of fiscal 2004.

Earnings
per share (EPS) growth is an indicator of the returns   generated for the Companys
stockholders. EPS from continuing operations was   reduced to $0.05 per diluted share for
the third quarter of fiscal 2005,   compared to $0.12 per diluted share for the third
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

| | 9 | 
| | - | 

---

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
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 October 31, 2004 and November 2, 2003, the Company
had recorded markdowns that had not been taken and which served to reduce inventories to
lower of cost or market by approximately $610 and $613, 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 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. Starting June 1, 2003, the Company is essentially self insured for
workers compensation claims and has a $100 deductible. 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, in the second quarter in fiscal 2005, the
Company had to increase its workers compensation reserves significantly
and recorded additional expense of $463. While the costs per claim have
been higher than originally anticipated, the number of workers
compensation claims have dropped over 15% for this past plan year. We
attribute this to the actions we have taken to reduce our losses. Such
actions include safety training initiatives for our managers,
management training seminars, monthly safety videos and Loss Prevention
Regional Inspection/Training programs.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
During the past two fiscal years, costs were
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10 | 
| | -- | 

---

| | below
the estimates provided by the Companys insurance          broker in each of those years.
However, medical insurance expenses          began to spike upwards in the first half of
the current fiscal year.          The Company has responded to this situation by taking
steps to increase          the premiums paid by its associates and by implementing other
changes          that are designed to control future medical insurance costs. The
         expenses for the third quarter of fiscal 2005 were still higher than
         the Company anticipated. If the Company continues to experience higher
         costs, they may consider additional steps to control future medical
         insurance costs.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | General
Liability.Starting June 1, 2003, the deductible for general liability insurance
increased from $5 to $50, thus, the Company is essentially self insured for
general liability insurance.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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
Thirty-nine Weeks Ended October 31, 2004 Compared to Thirteen and Thirty-nine Weeks Ended
November 2, 2003.

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 third quarter of fiscal 2005 the Company did not open any stores, and converted one
ALCO store into an ALCO Market Place store. Three ALCO stores were closed in the current
period, and the operations of stores closed in the current and prior year have been
reflected as discontinued operations in all periods presented. For the thirty-nine week
period ending October 31, 2004, the Company opened five stores, closed six stores, and
converted two ALCO stores into ALCO Market Place stores. As of October 31, 2004 over 88%
of the Companys 263 stores are in non-competitive markets.

Net
Sales

Net
sales for the third quarter of fiscal 2005 increased $1,299 or 1.3% to $99,907 compared
to $98,608 for the third quarter of fiscal 2004. Same store sales were unchanged when
compared with the prior year. The Company believes that sales were unfavorably impacted
by higher gasoline prices that affected discretionary consumer spending, along with the
absence of federal tax rebates that were distributed to American families during July and
August of 2003.

Net
sales for the thirty-nine week period ending October 31, 2004 increased $5,960 or 2.0% to
$310,199 compared to $304,239 in the comparable thirty-nine week period of the prior
fiscal year. Same store sales were unchanged when compared with the prior year.

Gross
Margin

Gross
margin for the third quarter of fiscal 2005 increased $533 or 1.6% to $34,252 compared to
$33,719 in the third quarter of fiscal 2004. Gross margin as a percentage of sales was
34.3% for the third quarter of fiscal 2005 compared to 34.2% for the third quarter of
fiscal 2004. The increase in the gross margin percentage was due primarily to lower
shrinkage costs and successful efforts by the Companys logistics department to control
freight expenses, despite significantly higher fuel prices. These improvements were
partially offset by a shift in sales mix that increased the percentage of sales derived
from lower margin consumable products.

Gross
margin for the thirty-nine week period ended October 31, 2004 was $103,711, which was
$2,089 or 2.1% higher than last years thirty-nine week gross margin of $101,622. As a
percent of net sales, gross margin was 33.4% both thirty-nine week periods.

| | 11 | 
| | -- | 

---

SG&A

Selling,
general and administrative expense increased $1,143 or 3.7% to $31,906 in the third
quarter of fiscal 2005 compared to $30,763 in the third quarter of fiscal 2004. As a
percentage of net sales, selling, general and administrative expenses in the third
quarter of fiscal 2005 were 31.9%, compared to 31.2% in the third quarter of fiscal 2004.
The increase in the selling, general and administrative expense percentage was largely
attributable to costs associated with the Companys engagement of AlixPartners as
business advisors. The company also experienced increases in medical insurance and store
opening expenses, which were partially offset by lower general insurance, store
remodeling, and distribution center costs.

Selling,
general and administrative expense increased $3,036 or 3.3% to $94,259 for the
thirty-nine week period ended October 31, 2004 compared to $91,223 for the comparable
thirty-nine week period of the prior fiscal year. Selling, general and administrative
expense as a percent of net sales was 30.4% for the thirty-nine week period ending
October 31, 2004 compared to 30.0% for the thirty-nine week period of the prior fiscal
year. The increase in the selling, general and administrative expense percentage was due
primarily to higher medical and general insurance costs, along with the consulting
expenses described above.

Depreciation
and Amortization

Depreciation
and amortization expense decreased $75 or 4.2% to $1,693 in the third quarter of fiscal
2005 compared to $1,768 in the third quarter of fiscal 2004. Depreciation and
amortization expense decreased $321 or 6.0% to $5,051 for the thirty-nine week period
ended October 31, 2004 compared to $5,372 in the comparable thirty-nine week period of
the prior fiscal year. The decrease is primarily due to stores fixtures and equipment
becoming fully depreciated in the current fiscal year on a large number of ALCO stores
that were opened in fiscal years 1996 and 1997.

Operating
Income

Operating
income from continuing operations decreased $535 or 45.0% to $653 in the third quarter of
fiscal 2005 compared to $1,188 in the third quarter of fiscal 2004. The decrease resulted
from costs associated with the engagement of the consulting firm of AlixPartners, which
reduced operating income by $520, and by higher medical insurance expenses, which reduced
operating income by $248. Operating income from continuing operations as a percentage of
net sales was 0.7% in the thirteen week period ending October 31, 2004 compared to 1.2%
for the thirteen week period of the prior fiscal year.

Operating
income from continuing operations decreased $626 or 12.5% to $4,401 for the thirty-nine
week period ended October 31, 2004 compared to $5,027 in the comparable thirty-nine week
period of the prior fiscal year. The decrease was attributable to items described above
in the third quarter, and higher general insurance expenses. These were partially offset
by lower store opening, remodeling, and distribution center costs. Operating income from
continuing operations as a percentage of net sales was 1.4% in the thirty-nine week
period ending October 31, 2004 compared to 1.7% for the thirty-nine week period of the
prior fiscal year.

Interest
Expense

Interest
expense increased $11 or 3.1% to $368 in the third quarter of fiscal 2005 compared to
$357 in the third quarter of fiscal 2004. The increase was due to a $49 accrual related
to an Internal Revenue Service audit. Interest expense decreased $146 or 13.6% to $929
for the thirty-nine week period ended October 31, 2004 compared to $1,075 in the
comparable thirty-nine week period of the prior fiscal year. The reduction in interest
expense was due primarily to lower levels of borrowing for the thirty-nine week periods
of fiscal 2004.

Income
Taxes

The
Companys effective tax rate for the third quarter of fiscal 2005 was 26.3%, compared to
36.2% in the third quarter of fiscal 2004. During the third quarter of this year,
legislation was passed to reinstate the work opportunity tax credit, and the Company
adjusted its tax provision to reflect this change.

| | 12 | 
| | -- | 

---

For
the thirty-nine week period ending October 31, 2004, the Companys effective tax rate was
37.0%, compared to 36.2% for the thirty-nine week period of the prior fiscal year. The
Company expects its effective tax rate to be 37% for the full fiscal year.

Earnings
from Continuing Operations

Earnings
from continuing operations for the third quarter of fiscal 2005 were $210, a decrease of
$320 or 60.4% from the earnings from continuing operations of $530 for the third quarter
of fiscal 2004. The decrease resulted from costs associated with the engagement of the
consulting firm of AlixPartners, which reduced earnings by $328, and by higher medical
insurance expenses, which reduced earnings by $157.

Earnings
from continuing operations for the thirty-nine week period ended October 31, 2004 were
$2,187, a decrease of $333 or 13.2% compared to $2,520 in the comparable thirty-nine week
period of the prior fiscal year. The decrease was attributable to items described above
in the third quarter, and higher general insurance expenses which reduced earnings by
$469. These were partially offset by lower store opening, remodeling, and distribution
center costs.

Loss
from Discontinued Operations

Loss
from discontinued operations, net of income tax, was $256 in the third quarter of fiscal
2005, compared to a loss of $7 in the third quarter of fiscal 2004. The increase in Loss
from discontinued operations was the result of closing three ALCO stores in the third
quarter of fiscal 2005, compared to no store closings in the prior fiscal year. The
operations of closed stores have been reflected as discontinued operations in all periods
presented.

Loss
from discontinued operations, net of income tax, was $358 for the thirty-nine week period
ended October 31, 2004, compared to earnings of $160 in the comparable thirty-nine week
period of the prior fiscal year. The decrease in earnings from discontinued operations
was impacted by store closing costs in the current fiscal year, and by the gain on the
sale of a store building in the prior year that increased earnings by $259, or $0.06 per
diluted share.

Net
Earnings

Net
loss for the third quarter of fiscal 2005 was $46, a decrease of $569 or 108.8% from the
net earnings of $523 in the third quarter of fiscal 2004. Diluted net loss per share for
the third quarter of fiscal 2005 was $0.01, a decrease of $0.13, or 108.3% from the
diluted net earnings per share of $0.12 in the third quarter of fiscal 2004.

Net
earnings for the thirty-nine week period ended October 31, 2004 were $1,829, an decrease
of $851 or 31.8% compared to $2,680 in the comparable thirty-nine week period of the
prior fiscal year. Diluted net earnings per share for the thirty-nine week period ended
October 31, 2004 were $0.41, a decrease of $0.21 or 33.9% compared to $0.62 per share in
the comparable thirty-nine week period or the prior fiscal year.

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
October 31, 2004 working capital (defined as current assets less current liabilities) was
$104,907 compared to $89,461 at the end of fiscal 2004.

| | 13 | 
| | -- | 

---

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 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, 2006. As of October 31,
2004, the Company has borrowed $18,087 under this facility. The lender had also issued
letters of credit aggregating $3,234 at such date on behalf of the Company.

Cash
(used in) provided by operating activities in the thirty-nine week period of fiscal 2005
and 2004 was ($6,077) and $51 respectively. The decrease in the amount of cash provided
by operating activities in the thirty-nine week period of fiscal 2005 compared to the
thirty-nine week period of fiscal 2004 was primarily due to a increase in receivables,
prepaid expenses, and other liabilities, a smaller increase in accounts payable, and a
larger decrease in income taxes payable.

Total
anticipated cash payments for acquisition of property and equipment in fiscal 2005,
principally for improvements, store buildings and store and warehouse fixtures and
equipment are approximately $8,000. Cash used in investing activities (including
acquisitions and remodeling) in the thirty-nine week period of fiscal 2005 and 2004
totaled $4,952 and $2,964, respectively, which were used primarily for those same
purposes.

The
Company generated cash from financing activities in the thirty-nine week period of fiscal
2005 and 2004 of $13,076 and $4,498 respectively. Borrowings on the revolving loan
generated $13,129 during the thirty-nine week ended October 31, 2004, compared to $5,468
during the thirty-nine week period of the prior fiscal year. Five thousand shares of
Common Stock was repurchased and retired during the thirty-nine week period of fiscal
2005 for $80, and cash of $658 was used to purchase and retire 69,300 shares of Common
Stock during the thirty-nine week period of fiscal 2004. The Board of Directors of the
Company has authorized the Company to repurchase up to 1,411,000 shares, of which
1,084,600 shares had been purchased as of October 31, 2004. The Company continues to
evaluate the timing and pricing of future share repurchases.

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.

| | 14 | 
| | -- | 

---

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 Thirty-Nine Week 
        Periods EndedOctober 31, 
        2004
      
      November 2, 
        2003
      
      October 31, 
        2004
      
      November 2, 
        2003Net Sales:ALCO Discount Stores
      $92,051
      
      
      $91,088
      
      
      $286,285
      
      
      $281,166All OtherExternal
      7,856
      
      
      7,520
      
      
      23,914
      
      
      23,073Intercompany
      65,981
      
      
      67,999
      
      
      179,528
      
      
      180,202$165,888
      
      
      $166,607
      
      
      $489,727
      
      
      $484,441Depreciation and AmortizationALCO Discount Stores
      $1,022
      
      
      $1,050
      
      
      $3,047
      
      
      $3,212All Other
      671
      
      
      718
      
      
      2,004
      
      
      2,160$1,693
      
      
      $1,768
      
      
      $5,051
      
      
      $5,372Income (expense) from Operations:ALCO Discount Stores
      $6,650
      
      
      $6,747
      
      
      $23,483
      
      
      $23,686All Other
      (5,869
      )
      
      (5,457
      )
      
      (18,880
      )
      
      (18,524
      )$720
      
      
      $1,233
      
      
      $4,603
      
      
      $5,162Capital Expenditures:ALCO Discount Stores
      $1,892
      
      
      $756
      
      
      $3,973
      
      
      $3,050All Other
      547
      
      
      275
      
      
      1,746
      
      
      677$2,439
      
      
      $1,031
      
      
      $5,719
      
      
      $3,727Identifiable Assets:ALCO Discount Stores
      $145,083
      
      
      $145,621
      
      
      $145,083
      
      
      $145,621All Other
      43,606
      
      
      40,858
      
      
      43,606
      
      
      40,858$188,689
      
      
      $186,479
      
      
      $188,689
      
      
      $186,479


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 for purposes of
determining income from operations for the segment information.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

| | 15 | 
| | -- | 

---

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 Thirty-Nine Week 
                                                           Periods EndedOctober 31,
2004
      
      November 2,
2003
      
      October 31,
2004
      
      November 2,
2003Net sales per above segment information
      $165,888
      
      
      $166,607
      
      
      $489,727
      
      
      $484,441Intercompany elimination
      65,981
      
      
      67,999
      
      
      179,528
      
      
      180,202Net sales per consolidated statementsof operations
      $99,907
      
      
      $98,608
      
      
      $310,199
      
      
      $304,239Income from operations per above segmentinformation
      $720
      
      
      $1,233
      
      
      $4,603
      
      
      $5,162Leases
      67
      
      
      45
      
      
      202
      
      
      135Income from operations per consolidatedstatements of operations
      $653
      
      
      $1,188
      
      
      $4,401
      
      
      $5,027


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 October 31, 2004, 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 October 31, 2004 that materially affected, or are reasonably
likely to materially affect, the Companys internal control over financial reporting.

| | 16 | 
| | -- | 

---

PART II - OTHER
INFORMATION



Item 1.
      
      Legal ProceedingsThe 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 ProceedsNot applicableItem 3.
      
      Defaults Upon Senior SecuritiesNot ApplicableItem 4.
      
      Submission of Matters to a Vote
  of Security HoldersNot ApplicableItem 5.
      
      Other InformationNoneItem 6.
      
      ExhibitsSee the Exhibit Index
  immediately following the signature page hereto.


| | 17 | 
| | -- | 

---

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, December 9, 2004 |                                       
| |                        |                                       
| |                        |                                       



| | 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 and Bylaws described above
under 3.1 above.
|--- |  | -------------------------------------------------------------------------------------------------------------------

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

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

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

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

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

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

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

|10.18 |  | 2003
Duckwall-ALCO  Stores,  Inc.  Incentive Stock Option Plan. (filed as Exhibit 10.18 to
Companys  Quarterly Report on Form          10-Q for the fiscal quarter ended August 1,
2004 and incorporated herein by reference).
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.19 |  | Form
of Duckwall-ALCO  Stores,  Inc. Incentive Stock Option Agreement.  (filed as Exhibit
10.19 to Companys  Quarterly Report          on Form 10-Q for the fiscal quarter ended
August 1, 2004 and incorporated herein by reference).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.20 |  | Duckwall-ALCO
 Stores,  Inc.  Profit  Sharing Plan Amended and  Restated as of December 31, 2002.
 (filed as Exhibit  10.20 to          Companys Quarterly Report on Form 10-Q for the
fiscal quarter ended August 1, 2004 and incorporated herein by reference
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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 hereby incorporated by reference).
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|31.1 |  | Certification
      of Chief Executive Officer of Duckwall-ALCO Stores, Inc. dated December
      9, 2004, 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.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 19 | 
| | -- | 

---

|31.2 |  | Certification
      of Chief Financial Officer of Duckwall-ALCO Stores, Inc. dated December
      9, 2004, 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 December
      9, 2004, 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 October 31, 2004 and is not treated
      as filed in reliance upon § 601(b)(32) of Regulations S-K.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|32.2 |  | Certification
      of Chief Financial Officer of Duckwall-ALCO Stores, Inc., dated December
      9, 2004, 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 October 31, 2004 and is not treated
      as filed in reliance upon § 601(b)(32) of Regulations S-K.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 20 | 
| | -- | 

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