|   | (X)      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE      ACT OF 1934 |
|--------|----------------------------------------------------------------------------------------------------|

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

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

----

| TABLE      OF CONTENTS |          |   |                                                                                                                   |
|------------------------|---------------|--------|------------------------------------------------------------------------------------------------------------------------|
|                   |          |   |                                                                                                                   |   |   |
| PART      I            |          |   |
|                   | Item      1.  |   | Business                                                                                                               | 3 |   |
|                   | Item      1A. |   | Risk      Factors                                                                                                      | 6 |   |
|                   | Item      1B. |   | Unresolved      Staff Comments                                                                                         | 8 |   |
|                   | Item      2.  |   | Properties                                                                                                             | 8 |   |
|                   | Item      3.  |   | Legal      Proceedings                                                                                                 | 8 |   |
|                   | Item      4.  |   | Submission      of Matters to a Vote of Security Holders                                                               | 8 |   |
|                   |          |   |
| PART      II           |          |   |
|                   | Item      5.  |   | Market      for Registrant's Common Equity, Related Stockholder Matters and Issuer      Purchases of Equity Securities | 9 |   |
|                   | Item      6.  |   | Selected      Financial Data                                                                                           | 11 |   |
|                   | Item      7.  |   | Management's      Discussion and Analysis of Financial Condition and Results of      Operations                        | 12 |   |
|                   | Item      7A. |   | Quantitative      and Qualitative Disclosures About Market Risk                                                        | 20 |   |
|                   | Item      8.  |   | Financial      Statements and Supplementary Data                                                                       | 21 |   |
|                   | Item      9.  |   | Changes      in and Disagreements With Accountants on Accounting and Financial      Disclosure                         | 37 |   |
|                   | Item      9A. |   | Controls      and Procedures                                                                                           | 37 |   |
|                   | Item      9B. |   | Other      Information                                                                                                 | 39 |   |
|                   |          |   |
| PART      III          |          |   |
|                   | Item      10. |   | Directors      and Executive Officers of the Registrant                                                                | 39 |   |
|                   | Item      11. |   | Executive      Compensation                                                                                            | 40 |   |
|                   | Item      12. |   | Security      Ownership of Certain Beneficial Owners and Management and Related      Stockholder Matters               | 40 |   |
|                   | Item      13. |   | Certain      Relationships and Related Transactions                                                                    | 40 |   |
|                   | Item      14. |   | Principal      Accountant Fees and Services                                                                            | 40 |   |
|                   |          |   |
| PART      IV           |          |   |
|                   | Item      15. |   | Exhibits      and Financial Statement Schedules                                                                        | 41 |   |
|                   |          |   |
| Signatures             | 42            |   |
|                   |          |   |
|                   |          |   |

----

|                                                                     |                     |   |   |
|--------------------------------------------------------------------------|--------------------------|--------|--------|
|                                                                     | Percentage      of Sales |
|                                                                     |                     |   |   |
|                                                                     | 2009                     |   | 2008   |
| Merchandise      Category:                                               |                     |   |   |
| Consumables      and commodities                                         | 32%                      |   | 30%    |
| Electronics,      entertainment, sporting goods, toys and outdoor living | 26%                      |   | 25%    |
| Apparel      and accessories                                             | 19%                      |   | 20%    |
| Home      furnishings and décor                                     | 13%                      |   | 14%    |
| Other                                                                    | 10%                      |   | 11%    |
|                                                                     |                     |   |   |
| Total                                                                    | 100%                     |   | 100%   |
|                                                                     |                     |   |   |

----

|                |   | 2009   |   |   | 2008     |   |   | 2007   |   |
|---------------------|--------|--------|--------|--------|----------|--------|--------|--------|--------|
|                |   | ALCO   |   |   | Duckwall |   |   | ALCO   |   |   | Duckwall |   |   | ALCO |   |   | Duckwall |   |
| Stores      Opened  |   |   | 15     |   |     |   | -      |   |   |   | 18 |   |   |   | - |   |   |   | 7 |   |   |   | - |   |
| Stores      Closed  |   |   | 11     |   |     |   | 8      |   |   |   | 3 |   |   |   | 9 |   |   |   | 1 |   |   |   | 1 |   |
| Net      New Stores |   |   | 4      |   |     |   | (8)    |   |   |   | 15 |   |   |   | (9) |   |   |   | 6 |   |   |   | (1) |   |
|                |   |   |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| Duckwall      Stores |   | ALCO      Stores |   |
|----------------------|--------|------------------|--------|
|                 |   |             |   |   |   |   |   |   |   |   |   |
| Colorado             |   |             | 4      |   | Arizona |   |   | 7 |   | Montana |   |   | 1 |   |
| Iowa                 |   |             | 3      |   | Arkansas |   |   | 4 |   | Nebraska |   |   | 16 |   |
| Kansas               |   |             | 21     |   | Colorado |   |   | 13 |   | New      Mexico |   |   | 8 |   |
| Nebraska             |   |             | 6      |   | Florida |   |   | 1 |   | North      Dakota |   |   | 10 |   |
| New      Mexico      |   |             | 1      |   | Georgia |   |   | 3 |   | Ohio |   |   | 4 |   |
| North      Dakota    |   |             | 1      |   | Idaho |   |   | 5 |   | Oklahoma |   |   | 9 |   |
| Oklahoma             |   |             | 5      |   | Illinois |   |   | 10 |   | South      Dakota |   |   | 11 |   |
| South      Dakota    |   |             | 1      |   | Indiana |   |   | 14 |   | Texas |   |   | 28 |   |
| Texas                |   |             | 8      |   | Iowa |   |   | 9 |   | Utah |   |   | 6 |   |
|                 |   |             |   |   | Kansas |   |   | 26 |   | Wisconsin |   |   | 1 |   |
|                 |   |             |   |   | Minnesota |   |   | 12 |   | Wyoming |   |   | 3 |   |
|                 |   |             |   |   | Missouri |   |   | 7 |   |   |   |   |   |   |

----

----

----

| ITEM      1B. | UNRESOLVED      STAFF COMMENTS. |
|---------------|---------------------------------|

| ITEM      2. | PROPERTIES. |
|--------------|-------------|

| ITEM      3. | LEGAL      PROCEEDINGS. |
|--------------|-------------------------|

| ITEM      4. | SUBMISSION      OF MATTERS TO A VOTE OF SECURITYHOLDERS. |
|--------------|----------------------------------------------------------|

----

|   |   |
|--------|--------|

| ITEM      5. | MARKET FOR REGISTRANT'S COMMON      EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY      SECURITIES. |
|--------------|------------------------------------------------------------------------------------------------------------------------------|

| Fiscal      2009    |   | High   |   |   | Low    |   |
|---------------------|--------|--------|--------|--------|--------|--------|
| First      quarter  |   | $      | 23.88  |   |   | $      | 10.55 |   |
| Second      quarter |   | $      | 16.05  |   |   | $      | 9.04 |   |
| Third      quarter  |   | $      | 16.29  |   |   | $      | 10.51 |   |
| Fourth      quarter |   | $      | 13.15  |   |   | $      | 7.52 |   |
|                |   |   |   |   |   |   |   |   |
| Fiscal      2008    |   | High   |   |   | Low    |   |
| First      quarter  |   | $      | 41.49  |   |   | $      | 34.44 |   |
| Second      quarter |   | $      | 40.50  |   |   | $      | 36.51 |   |
| Third      quarter  |   | $      | 40.88  |   |   | $      | 35.13 |   |
| Fourth      quarter |   | $      | 37.00  |   |   | $      | 21.53 |   |

|                            |   | 2004   |   |   | 2005   |   |   | 2006   |   |   | 2007   |   |   | 2008   |   |   | 2009   |   |
|---------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| NASDAQ      Composite Index     |   |   | 100.00 |   |   |   | 99.91  |   |   |   | 112.72 |   |   |   | 121.28 |   |   |   | 118.40 |   |   |   | 59.00 |   |
| S&P      Retail Index       |   |   | 100.00 |   |   |   | 115.41 |   |   |   | 122.43 |   |   |   | 140.37 |   |   |   | 113.09 |   |   |   | 69.07 |   |
| Duckwall-ALCO      Stores, Inc. |   |   | 100.00 |   |   |   | 128.21 |   |   |   | 176.07 |   |   |   | 234.40 |   |   |   | 148.61 |   |   |   | 65.33 |   |

----

|                                             |   |                 |   |   |                    |   |   |                       |   |   |                       |   |
|--------------------------------------------------|--------|----------------------|--------|--------|-------------------------|--------|--------|----------------------------|--------|--------|----------------------------|--------|
|                                             |   |                 |   |   |                    |   |   | Total      Number          |   |   | Maximum      Number        |   |
|                                             |   |                 |   |   |                    |   |   | of      Shares             |   |   | of      Shares             |   |
|                                             |   | Total      Number Of |   |   |                    |   |   | Purchased      as Part     |   |   | that      May Yet          |   |
|                                             |   | Shares               |   |   | Average      Price Paid |   |   | of      Publicly Announced |   |   | Be      Purchased Under    |   |
| Period                                           |   | Purchased            |   |   | per      Share          |   |   | Plans      or Programs     |   |   | the      Plans or Programs |   |
| First      Quarter                               |   |                 | -      |   |                    |   | -      |                       |   |   | -                          |   |   |   | 196,663 |   |
| Second      Quarter                              |   |                 | -      |   |                    |   | -      |                       |   |   | -                          |   |   |   | 196,663 |   |
| Third      Quarter                               |   |                 | 14,031 |   |                    |   | 13.65  |                       |   |   | 14,031                     |   |   |   | 182,632 |   |
|                                             |   |                 |   |   |                    |   |   |                       |   |   |                       |   |   |   |   |   |
| Fourth      Quarter:                             |   |                 |   |   |                    |   |   |                       |   |   |                       |   |   |   |   |   |
|     11/03/08      - 11/30/08 |   |                 | 5,766  |   |                    |   | 11.93  |                       |   |   | 5,766                      |   |   |   | 176,866 |   |
|     12/01/08      - 01/04/09 |   |                 | 2,400  |   |                    |   | 10.46  |                       |   |   | 2,400                      |   |   |   | 174,466 |   |
|     01/05/09      - 02/01/09 |   |                 | -      |   |                    |   | -      |                       |   |   | -                          |   |   |   | 174,466 |   |
|                                             |   |                 | 8,166  |   |                    |   |   |                       |   |   | 8,166                      |   |   |   | 174,466 |   |
|                                             |   |                 |   |   |                    |   |   |                       |   |   |                       |   |   |   |   |   |
| As      of February 1, 2009                      |   |                 | 22,197 |   |                    | $      | 12.86  |                       |   |   | 22,197                     |   |   |   | 174,466 |   |

----

|                                                                                            |   | Fiscal      Year Ended |      |
|-------------------------------------------------------------------------------------------------|--------|------------------------|-----------|
|                                                                                            |   | 52      Weeks          |      |   | 53      Weeks |   |   | 52      Weeks |   |   | 52      Weeks |   |   | 52      Weeks |   |
|                                                                                            |   | February      1,       |      |   | February      3, |   |   | January      28, |   |   | January      29, |   |   | January      30, |   |
| Statement      of Operations Data                                                               |   | 2009                   |      |   | 2008 |   |   | 2007 |   |   | 2006 |   |   | 2005 |   |
| Net      sales                                                                                  |   | $                      | 490,021   |   |   |   | 481,770 |   |   |   | 446,870 |   |   |   | 408,619 |   |   |   | 385,451 |   |
| Cost      of sales                                                                              |   |                   | 336,117   |   |   |   | 329,405 |   |   |   | 304,869 |   |   |   | 277,298 |   |   |   | 256,786 |   |
| Gross      margin                                                                               |   |                   | 153,904   |   |   |   | 152,365 |   |   |   | 142,001 |   |   |   | 131,321 |   |   |   | 128,665 |   |
|                                                                                            |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling,      general and administrative expenses                                               |   |                   | 147,846   |   |   |   | 138,349 |   |   |   | 123,661 |   |   |   | 117,223 |   |   |   | 115,978 |   |
| Depreciation      and amortization                                                              |   |                   | 9,302     |   |   |   | 9,464 |   |   |   | 6,513 |   |   |   | 5,632 |   |   |   | 6,153 |   |
| Income      (loss) from continuing operations                                                   |   |                   | (3,244    | ) |   |   | 4,552 |   |   |   | 11,827 |   |   |   | 8,466 |   |   |   | 6,534 |   |
| Interest      expense                                                                           |   |                   | 1,867     |   |   |   | 3,382 |   |   |   | 2,729 |   |   |   | 1,272 |   |   |   | 1,230 |   |
| Earnings      (loss) from continuing operations before                                          |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|             income taxes and discontinued operations                   |   |                   | (5,111    | ) |   |   | 1,170 |   |   |   | 9,098 |   |   |   | 7,194 |   |   |   | 5,304 |   |
| Income      tax expense (benefit)                                                               |   |                   | (2,090    | ) |   |   | 388 |   |   |   | 3,204 |   |   |   | 2,469 |   |   |   | 1,605 |   |
| Earning      (loss) from continuing operations before                                           |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|            discontinued operations                                     |   |                   | (3,021    | ) |   |   | 782 |   |   |   | 5,894 |   |   |   | 4,725 |   |   |   | 3,699 |   |
| Income      (loss) from discontinued operations, net                                            |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           of income tax                                                          |   |                   | (1,955    | ) |   |   | (1,006 | ) |   |   | (190 | ) |   |   | (2,776 | ) |   |   | 223 |   |
| Net      earnings (loss) (1)                                                                    |   | $                      | (4,976    | ) |   |   | (224 | ) |   |   | 5,704 |   |   |   | 1,949 |   |   |   | 3,922 |   |
|                                                                                            |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per      Share Information                                                                      |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      (loss) per share - basic                                                          |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      (loss) before discontinued operations                                             |   | $                      | (0.79     | ) |   |   | 0.21 |   |   |   | 1.55 |   |   |   | 1.16 |   |   |   | 0.84 |   |
| Discontinued      operations                                                                    |   |                   | (0.51     | ) |   |   | (0.26 | ) |   |   | (0.05 | ) |   |   | (0.68 | ) |   |   | 0.05 |   |
| Net      earnings (loss)                                                                        |   | $                      | (1.30     | ) |   |   | (0.05 | ) |   |   | 1.50 |   |   |   | 0.48 |   |   |   | 0.89 |   |
|                                                                                            |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      (loss) per share - diluted                                                        |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      (loss) before discontinued operations                                             |   | $                      | (0.79     | ) |   |   | 0.21 |   |   |   | 1.54 |   |   |   | 1.15 |   |   |   | 0.83 |   |
| Discontinued      operations                                                                    |   |                   | (0.51     | ) |   |   | (0.26 | ) |   |   | (0.05 | ) |   |   | (0.67 | ) |   |   | 0.05 |   |
| Net      earnings (loss)                                                                        |   | $                      | (1.30     | ) |   |   | (0.05 | ) |   |   | 1.49 |   |   |   | 0.47 |   |   |   | 0.88 |   |
|                                                                                            |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average shares outstanding:                                                       |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                           |   |                   | 3,809,109 |   |   |   | 3,807,033 |   |   |   | 3,792,202 |   |   |   | 4,083,798 |   |   |   | 4,391,538 |   |
| Diluted                                                                                         |   |                   | 3,809,109 |   |   |   | 3,807,033 |   |   |   | 3,828,928 |   |   |   | 4,117,922 |   |   |   | 4,464,416 |   |
|                                                                                            |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating      Data                                                                             |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stores      open at year-end                                                                    |   |                   | 258       |   |   |   | 243 |   |   |   | 225 |   |   |   | 219 |   |   |   | 215 |   |
| Stores      in non-competitive markets at year-end (2)                                          |   |                   | 200       |   |   |   | 186 |   |   |   | 171 |   |   |   | 169 |   |   |   | 169 |   |
| Same-stores      open at year-end                                                               |   |                   | 225       |   |   |   | 219 |   |   |   | 215 |   |   |   | 209 |   |   |   | 203 |   |
|                                                                                            |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Percentage      of total stores in non-competitive                                              |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|               markets (2)                               |   |                   | 77.5      | % |   |   | 76.5 | % |   |   | 76.0 | % |   |   | 77.2 | % |   |   | 78.6 | % |
| Percentage      of net sales from stores in                                                     |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|              non-competitive markets , excluding fuel (2)(3) |   |                   | 77.2      | % |   |   | 76.9 | % |   |   | 75.1 | % |   |   | 75.1 | % |   |   | 74.6 | % |
| Same-store      sales (decrease) increase for all stores,                                  |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|              excluding fuel (3)                         |   |                   | (5.1      | )      % |   |   | 4.2 | % |   |   | 7.6 | % |   |   | 3.5 | % |   |   | 8.2 | % |
|                                                                                            |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance      Sheet Data                                                                         |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Assets                                                                               |   | $                      | 208,775   |   |   |   | 185,386 |   |   |   | 195,420 |   |   |   | 178,922 |   |   |   | 163,118 |   |
| Total      Debt (includes capital lease obligation      and                                     |   |                   |      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|             current maturities)                                   |   |                   | 49,841    |   |   |   | 33,013 |   |   |   | 29,988 |   |   |   | 26,240 |   |   |   | 8,605 |   |
| Stockholders'      equity                                                                       |   | $                      | 102,040   |   |   |   | 107,172 |   |   |   | 106,060 |   |   |   | 102,147 |   |   |   | 114,676 |   |

----

| (1) | Effective      January 29, 2006, the Company adopted SFAS no 123(R), Share-Based Payments.      Included in selling, general and administrative expenses is $186 of      share-based compensation in fiscal 2009 and $1.1 million in fiscal      2008, respectively.  No expense was recorded for share-based      compensation in earlieryears.  |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | “Non-competitive”markets refer to those markets where there is not a      national or regional broad line retail store located in the      primary market served by the Company. The Company's stores in such      non-competitive markets nevertheless face competition from various      sources. See Item 1“Business-Competition”. |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | Percentages,      as adjusted to a comparable 52 week year, reflect the increase or decrease      based upon a comparison of the applicable fiscal year with the immediately      preceding fiscal year for stores open during the entirety of both      years.  For fiscal 2008, sales were reduced by the week 53      amount. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (4) | An asset      impairment charge is included in depreciation and amortization, of $1.3      million for fiscal 2009, $2.1 million for fiscal 2008 and $130 for fiscal      2007, respectively.  For fiscal 2009, $299 of the impairment is      attributable to writing down the carrying value on property held for      sale. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ITEM      7. | MANAGEMENT’S      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      OPERATION. |
|--------------|-------------------------------------------------------------------------------------------------------|

| ·       | Lawrence      J. Zigerelli joined the Company on July 1, 2008 to become the President –      Chief Executive Officer.                                                                                                                          |   |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| ·       | Donny      R. Johnson was promoted to Executive Vice President - Chief Financial      Officer on July 1, 2008 after serving as Interim Chief Executive      Officer.                                                                            |   |
| ·       | Jane      F. Gilmartin joined the Company on July 24, 2008 to become the Executive      Vice President – Chief Operating Officer.                                                                                                              |   |
| ·       | Anthony      C. Corradi, Senior Vice President - Technology and Supply Chain resigned      from the Company on August 1, 2008.                                                                                                                       |   |
| ·       | Edmond      C. Beaith joined the Company on August 25, 2008 to become the Senior Vice      President - Chief Information Officer.                                                                                                                    |   |
| ·  | On      September 3, 2008, the Company entered into an agreement with Accenture,      LLP to provide the Company with consulting services to increase the      Company's operating efficiency and reduce shrink "Store Transformation      Project". |   |
| ·  | James      M. Spencer joined the Company on December 15, 2008 to become the Senior      Vice President - Store Operations.                                                                                                                           |   |
| ·  | Phillip D. Hixon,      Senior Vice President was terminated on January 29, 2009.                                                                                                                                                                     |   |

| · | Net      sales increased 1.7% to $490,021. Same-store sales decreased 5.1%,      excluding the Company's two fuel centers, compared to the prior      year, as adjusted for 52 week comparability.                                                             |   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| · | Gross      margin decreased to 31.4% of sales, compared to 31.6% in the prior      year.  Excluding the first quarter $1.3 million inventory review      initiative charge, fiscal 2009 gross margin is      31.7%.                                            |   |
| · | Selling,      general and administrative (SG&A) expenses were 30.2% of sales,      compared to 28.7% in the prior year.  Excluding executive and staff      severance and Store Transformation Project expenses, fiscal 2009 SG&A      expenses were 29.3%. |   |
| · | Net loss      per share was ($1.30), compared to a loss of ($0.05) per share in the      prior year.                                                                                                                                                                |   |
| · | Return      on average equity was (4.8%), compared to (0.2%) in the prior      year.                                                                                                                                                                                     |   |

----

|                                                                                         |   | Fiscal      Year Ended |   |
|----------------------------------------------------------------------------------------------|--------|------------------------|--------|
|                                                                                         |   | 52      Weeks          |   |   | 53      Weeks |   |   | 52      Weeks |   |
|                                                                                         |   | February      1,       |   |   | February      3, |   |   | January      28, |   |
|                                                                                         |   | 2009                   |   |   | 2008 |   |   | 2007 |   |
| Net      sales                                                                               |   |                   | 100.0  | % |   |   | 100.0 | % |   |   | 100.0 | % |
| Cost      of sales                                                                           |   |                   | 68.6   |   |   |   | 68.4 |   |   |   | 68.2 |   |
| Gross      margin                                                                            |   |                   | 31.4   |   |   |   | 31.6 |   |   |   | 31.8 |   |
| Selling,      general and administrative expenses                                            |   |                   | 30.2   |   |   |   | 28.7 |   |   |   | 27.7 |   |
| Depreciation      and amortization                                                           |   |                   | 1.9    |   |   |   | 2.0 |   |   |   | 1.5 |   |
| Total      operating expenses                                                                |   |                   | 32.1   |   |   |   | 30.7 |   |   |   | 29.2 |   |
| Operating      income (loss) from continuing operations                                      |   |                   | (0.7   | ) |   |   | 0.9 |   |   |   | 2.6 |   |
| Interest      expense                                                                        |   |                   | 0.4    |   |   |   | 0.7 |   |   |   | 0.6 |   |
| Earnings      (loss) from continuing operations before income                                |   |                   |   |   |   |   |   |   |   |   |   |   |
|          taxes      and discontinued operations |   |                   | (1.1   | ) |   |   | 0.2 |   |   |   | 2.0 |   |
| Income      tax expense (benefit)                                                            |   |                   | (0.4   | ) |   |   | 0.1 |   |   |   | 0.7 |   |
| Earnings      (loss) from continuing operations before discontinued      operations          |   |                   | (0.7   | ) |   |   | 0.1 |   |   |   | 1.3 |   |
| Earnings (loss)      from discontinued operations, net of income tax benefit            |   |                   | (0.4   | ) |   |   | (0.2 | ) |   |   | 0.0 |   |
| Net      earnings (loss)                                                                     |   |                   | (1.1   | )      % |   |   | (0.1 | )      % |   |   | 1.3 | % |

----

----

----

|                                                                                                                                                                             |   |                     |    |   |                  |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|---------|--------|-----------------------|--------|
|                                                                                                                                                                             |   | For      the Years Ended |    |
|                                                                                                                                                                             |   | 52      Weeks            |    |   | 53      Weeks         |   |
| SG&A      Expenses Breakout                                                                                                                                                  |   | February      1, 2009    |    |   | February      3, 2008 |   |
| Store      support center (1)                                                                                                                                                    |   | $                        | 26,427  |   |                  |   | 21,430 |   |
| Distribution      center                                                                                                                                                         |   |                     | 9,470   |   |                  |   | 9,327 |   |
| 401K      expense                                                                                                                                                                |   |                     | 462     |   |                  |   | 480 |   |
| Same-store      SG&A                                                                                                                                                         |   |                     | 92,792  |   |                  |   | 98,768 |   |
| Non      same-store SG&A (2)                                                                                                                                                 |   |                     | 18,509  |   |                  |   | 7,214 |   |
| Share-based      compensation                                                                                                                                                    |   |                     | 186     |   |                  |   | 1,130 |   |
| Final      SG&A as reported                                                                                                                                                  |   |                     | 147,846 |   |                  |   | 138,349 |   |
| Less:                                                                                                                                                                            |   |                     |    |   |                  |   |   |   |
| Share-based      compensation                                                                                                                                                    |   |                     | (186    | )      |                  |   | (1,130 | ) |
| Preopening      store costs (2)                                                                                                                                                  |   |                     | (1,846  | )      |                  |   | (2,783 | ) |
| Executive      and staff severance (1)                                                                                                                                           |   |                     | (1,942  | )      |                  |   | - |   |
| Store      Transformation Project                                                                                                                                                |   |                     | (2,220  | )      |                  |   | - |   |
| Adjusted      SG&A                                                                                                                                                           |   | $                        | 141,652 |   |                  |   | 134,436 |   |
|                                                                                                                                                                             |   |                     |    |   |                  |   |   |   |
| Adjusted      SG&A as % of sales                                                                                                                                             |   |                     | 28.9    | %      |                  |   | 27.9 | % |
|                                                                                                                                                                             |   |                     |    |   |                  |   |   |   |
| Sales      per average selling square feet (3)                                                                                                                                   |   | $                        | 111.95  |   |                  |   | 119.47 |   |
|                                                                                                                                                                             |   |                     |    |   |                  |   |   |   |
| Adjusted      gross margin dollars per average selling square feet(3)(4)                                                                                                         |   | $                        | 35.47   |   |                  |   | 37.78 |   |
|                                                                                                                                                                             |   |                     |    |   |                  |   |   |   |
| Adjusted      SG&A per average selling square feet (3)                                                                                                                       |   | $                        | 32.36   |   |                  |   | 33.33 |   |
|                                                                                                                                                                             |   |                     |    |   |                  |   |   |   |
| Adjusted      EBITDA per average selling square feet (3)(5)                                                                                                                      |   | $                        | 3.11    |   |                  |   | 4.45 |   |
|                                                                                                                                                                             |   |                     |    |   |                  |   |   |   |
| Average      inventory per average selling square feet (3)(6)(7)                                                                                                                 |   | $                        | 28.29   |   |                  |   | 27.97 |   |
|                                                                                                                                                                             |   |                     |    |   |                  |   |   |   |
| Average      selling square feet (3)                                                                                                                                             |   |                     | 4,377   |   |                  |   | 4,033 |   |
|                                                                                                                                                                             |   |                     |    |   |                  |   |   |   |
| Total      stores operating beginning of period                                                                                                                                  |   |                     | 262     |   |                  |   | 256 |   |
| Total      stores operating end of period                                                                                                                                        |   |                     | 258     |   |                  |   | 262 |   |
| Total      stores less than twelve months old                                                                                                                                    |   |                     | 15      |   |                  |   |   |   |
| Total      non same-stores                                                                                                                                                       |   |                     | 33      |   |                  |   |   |   |
|                                                                                                                                                                             |   |                     |    |   |                  |   |   |   |
| Supplemental      Data: (8)                                                                                                                                                      |   |                     |    |   |                  |   |   |   |
| Same-store      gross margin dollar change                                                                                                                                       |   |                     | (8.4    | )%     |                  |   | 7.8 | % |
| Same-store      SG&A dollar change                                                                                                                                           |   |                     | (6.1    | )%     |                  |   | 5.6 | % |
| Same-store      total customer count change                                                                                                                                      |   |                     | (10.4   | )%     |                  |   | (3.1 | )% |
| Same-store      average sale per ticket change                                                                                                                                   |   |                     | 4.0     | %      |                  |   | 8.1 | % |
|                                                                                                                                                                             |   |                     |    |   |                  |   |   |   |
|                                                                                                                                                                             |   |                     |    |   |                  |   |   |   |
| (1)      Store Support Center includes executive and staffseverance                                                                                                              |   |                     |    |   |                  |
| (2)      Non same-stores are those stores opened in fiscal 2009 and fiscal      2008 and includes preopening costs                                                          |   |
| (3)      Average selling square feet is (beginning square feet plus ending square      feet) divided by 2                                                                        |   |
| (4)      Adjusted gross margin includes $1.3 million inventory review initiative      charge added back                                                                          |   |                     |    |   |                  |
| (5)      Adjusted EBITDA per selling square foot is a non-GAAP financial measure      and is calculated as Adjusted EBITDA divided by selling square      feet                   |   |
| (6)      Average inventory is store level merchandise inventory for fiscal 2009 and      fiscal 2008, respectively (beginning inventory plus ending inventory)      divided by 2 |   |
| (7)      Excludes inventory for unopened stores                                                                                                                                  |   |                     |    |   |                  |   |   |   |
| (8)      Same-store information has not been adjusted to 52 weeks for      comparability                                                                                         |   |                     |    |   |                  |   |   |   |

----

| Adjusted      EBITDA from net earnings (loss) from continuingoperations:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |             |    |                                         |   |                  |   |                  |    |                  |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------|---------|----------------------------------------------|--------|-----------------------|--------|-----------------------|---------|-----------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |             |    |                                         |   |                  |   |                  |    |                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | 53      Weeks    |    | For      the Thirty- Nine Week Periods Ended |   | 53      Weeks         |   | Thirteen      Weeks   |    | Fourteen Weeks   |   |  52      Weeks |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   | Fiscal      2008 |    | November      2, 2008                        |   | October      28, 2007 |   | November      2, 2008 |    | February      1, 2009 |   | February      3, 2008 |   | Fiscal      2009 |   |
| Net      earnings (loss) from continuing operations (1)(5)(6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $                | 782     |                                         |   | (2,379                | )      |                  | (223    | )                |   | (1,374 | ) |   | (642 | ) |   | 1,005 |   |   | (3,021 | ) |
| Plus:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             |    |                                         |   |                  |   |                  |    |                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |             | 3,382   |                                         |   | 1,219                 |   |                  | 2,526   |                  |   | 2,075 |   |   | 648 |   |   | 856 |   |   | 1,867 |   |
| Taxes      (1)(6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |             | 388     |                                         |   | (2,405                | )      |                  | (271    | )                |   | (1,746 | ) |   | 315 |   |   | 659 |   |   | (2,090 | ) |
| Depreciation      and amortization (1)(6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |             | 9,464   |                                         |   | 5,793                 |   |                  | 5,352   |                  |   | 9,905 |   |   | 3,509 |   |   | 4,112 |   |   | 9,302 |   |
| Share-based      compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |             | 1,130   |                                         |   | 34                    |   |                  | 893     |                  |   | 271 |   |   | 152 |   |   | 237 |   |   | 186 |   |
| Preopening      store costs (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |             | 2,783   |                                         |   | 1,837                 |   |                  | 1,521   |                  |   | 3,099 |   |   | 9 |   |   | 1,262 |   |   | 1,846 |   |
| Inventory      review initiative                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |             | -       |                                         |   | 1,345                 |   |                  | -       |                  |   | 1,345 |   |   | - |   |   | - |   |   | 1,345 |   |
| Executive      and staff severance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |             | -       |                                         |   | 1,942                 |   |                  | -       |                  |   | 1,942 |   |   | - |   |   | - |   |   | 1,942 |   |
| Store      Transformation Project (7)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             | -       |                                         |   | 937                   |   |                  | -       |                  |   | 937 |   |   | 1,283 |   |   | - |   |   | 2,220 |   |
| =Adjusted      EBITDA (1)(3)(4)(5)(6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |             | 17,929  |                                         |   | 8,323                 |   |                  | 9,798   |                  |   | 16,454 |   |   | 5,274 |   |   | 8,131 |   |   | 13,597 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |             |    |                                         |   |                  |   |                  |    |                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Adjusted      EBITDA                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |             |    |                                         |   |                  |   |                  |    |                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Same-stores      (6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |             | 47,722  |                                         |   | 31,147                |   |                  | 32,865  |                  |   | 46,004 |   |   | 12,814 |   |   | 14,728 |   |   | 44,090 |   |
| Non      same-stores (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |             | 1,650   |                                         |   | 1,615                 |   |                  | 641     |                  |   | 2,624 |   |   | 672 |   |   | 1,080 |   |   | 2,216 |   |
| Store      support center (5)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |             | (22,116 | )                                            |   | (17,066               | )      |                  | (16,761 | )                |   | (22,421 | ) |   | (5,930 | ) |   | (5,297 | ) |   | (23,054 | ) |
| Warehouse                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |             | (9,327  | )                                            |   | (7,373                | )      |                  | (6,947  | )                |   | (9,753 | ) |   | (2,282 | ) |   | (2,380 | ) |   | (9,655 | ) |
| Reconciled      Adjusted EBITDA (1)(3)(4)(5)(6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |             | 17,929  |                                         |   | 8,323                 |   |                  | 9,798   |                  |   | 16,454 |   |   | 5,274 |   |   | 8,131 |   |   | 13,597 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |             |    |                                         |   |                  |   |                  |    |                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |             | 5,501   |                                         |   | 5,320                 |   |                  | 4,525   |                  |   | 5,320 |   |   | 4,744 |   |   | 5,501 |   |   | 4,744 |   |
| Debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |             | 33,013  |                                         |   | 58,303                |   |                  | 55,759  |                  |   | 58,303 |   |   | 49,841 |   |   | 33,013 |   |   | 49,841 |   |
| Debt,      net of cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   | $                | 27,512  |                                         |   | 52,983                |   |                  | 51,234  |                  |   | 52,983 |   |   | 45,097 |   |   | 27,512 |   |   | 45,097 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |             |    |                                         |   |                  |   |                  |    |                  |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)      These amounts will not agree with the 2008 fiscal 2008 10-K filing due to      the 14 stores the Company closed in the first quarter of fiscal      2009. These stores are now shown in discontinued      operations.                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (2) These      costs are not consistent quarter to quarter as the Company does not open      the same number of stores in each quarter of each fiscal year. These      costs are directly associated with the number of stores that have or will      be opened and are incurred prior to the grand opening of each      store.                                                                                                                                                                                                                                                                                                                             |
| (3) For      fiscal 2009, the average open weeks for the Company's 33 non same-stores      is 54 weeks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (4) During fiscal 2009, the Company made      a change in its Executive Management team and Board of Directors resulting      in several initiatives to reduce certain SG&A expenses. For      fiscal 2009, these initiatives resulted in $7.5 million reduced      SG&A expenses when compared to the prior fiscal year.  The      initiatives include, but not limited to, executive and staff      reduction, reduced ALCO same-store hourly      wages, advertising expenses, net of coop offset and floor care      services along with reduced total Company insurance and      travel expenses. |
| (5)      Since the first quarter of fiscal 2009, the Company has incurred      approximately $1.3 million in charges related to staff and executive      management changes, relocations and professional fees related to tax      planning strategies, including tax method changes, which have reduced      these reported amounts.  This $1.3 million is also inclusive of      charges incurred during the first quarter related to Board of Directors      changes.                                                                                                                                                                                         |
| (6)      These amounts will not agree to the first, second and third quarter 10-Q      amounts due to the Company closing an ALCO store during the fourth quarter      of fiscal 2009.  This store is shown in discontinued      operations.                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (7) The      Store Transformation Project is defined on page 11 in the under recent      events.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

----

|             |                                            |   | First   |   |   | Second  |   |   | Third   |   |   | Fourth     |   |
|------------------|-------------------------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|------------|--------|
|             |                                            |   | Quarter |   |   | Quarter |   |   | Quarter |   |   | Quarter(1) |   |
|             |                                            |   |    |   |   |    |   |   |    |   |   |       |   |
|             |                                            |   |    |   |   |    |   |   |    |   |   |       |   |
| Fiscal      2009 | Net      sales                                  |   | $       | 105.7  |   |    |   | 129.3  |    |   |   | 114.9      |   |   |   | 140.1 |   |
|             | Gross      margin                               |   |    | 31.7   |   |    |   | 43.3   |    |   |   | 37.1       |   |   |   | 41.8 |   |
|             | Earnings      (loss) from continuing operations |   |    | (4.3   | )      |    |   | 3.5    |    |   |   | (1.5       | )      |   |   | (0.7 | ) |
|             | Net      earnings (loss)                        |   |    | (5.9   | )      |    |   | 3.3    |    |   |   | (1.7       | )      |   |   | (0.7 | ) |
|             |                                            |   |    |   |   |    |   |   |    |   |   |       |   |   |   |   |   |
|             |                                            |   |    |   |   |    |   |   |    |   |   |       |   |   |   |   |   |
|             |                                            |   |    |   |   |    |   |   |    |   |   |       |   |   |   |   |   |
| Fiscal      2008 | Net      sales                                  |   | $       | 105.9  |   |    |   | 118.7  |    |   |   | 110.0      |   |   |   | 147.2 |   |
|             | Gross      margin                               |   |    | 32.7   |   |    |   | 39.4   |    |   |   | 35.7       |   |   |   | 44.6 |   |
|             | Earnings      (loss) from continuing operations |   |    | (1.8   | )      |    |   | 3.0    |    |   |   | (1.4       | )      |   |   | 1.0 |   |
|             | Net      earnings (loss)                        |   |    | (2.2   | )      |    |   | 2.6    |    |   |   | (1.6       | )      |   |   | 1.0 |   |
|             |                                            |   |    |   |   |    |   |   |    |   |   |       |   |   |   |   |   |

|   | (1) | An      asset impairment charge of $1.3 million and $2.1 million negatively      impacted net earnings for fiscal 2009 and 2008,      respectively. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                    |   |                            |    |   |            |   |   |                                |   |   |       |   |   |         |   |
|-----------------------------------------|--------|---------------------------------|---------|--------|-----------------|--------|--------|-------------------------------------|--------|--------|------------|--------|--------|--------------|--------|
|                                    |   | Payments      due by Period (1) |    |
|                                    |   |                            |    |   | Less      than  |   |   |           2 - 3 |   |   | 4 -      5 |   |   | After        |   |
| Contractual      Obligations            |   | Total                           |    |   | 1      year (2) |   |   |           years |   |   | years      |   |   | 5      years |   |
|                                    |   |                            |    |   |            |   |   |                                |   |   |       |   |   |         |   |   |   |
| Revolving      loan credit facility     |   | $                               | 40,714  |   |            |   | -      |                                |   |   | 40,714     |   |   |         | -      |   |   |   | - |   |
| FF&E      term loan                 |   |                            | 4,227   |   |            |   | 1,362  |                                |   |   | 2,865      |   |   |         | -      |   |   |   | - |   |
| Capital      lease obligations          |   |                            | 5,679   |   |            |   | 2,266  |                                |   |   | 2,638      |   |   |         | 775    |   |   |   | - |   |
| Operating      leases                   |   |                            | 164,362 |   |            |   | 18,752 |                                |   |   | 32,035     |   |   |         | 26,282 |   |   |   | 87,293 |   |
| Transportation      contract            |   |                            | 247     |   |            |   | 247    |                                |   |   | -          |   |   |         | -      |   |   |   | - |   |
| Consulting      contract                |   |                            | 1,920   |   |            |   | 1,920  |                                |   |   |       |   |   |         |   |   |   |   |   |   |
| Contingent      rentals                 |   |                            | 12,679  |   |            |   | 1,468  |                                |   |   | 3,070      |   |   |         | 3,256  |   |   |   | 4,885 |   |
|                                    |   |                            |    |   |            |   |   |                                |   |   |       |   |   |         |   |   |   |   |   |   |
| Total      contractual cash obligations |   | $                               | 229,828 |   |            |   | 26,015 |                                |   |   | 81,322     |   |   |         | 30,313 |   |   |   | 92,178 |   |

| (1)   | The      principal amount of the Company’s Revolving Loan Credit Facility is shown      in its contractual obligations table as the amount being paid during the      year that the current agreement on the credit facility expires. Interest      related to the Revolving Loan Credit Facility is dependent on the level of      borrowing and variable interest rates as more fully described in Note 3 to      the consolidated financial statements and is not shown in this      table. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | Total      liabilities for unrecognized tax benefits were $54 and $2.4 million, as of      February 1, 2009 and February 3, 2008, respectively and are classified on      the Company's consolidated balance sheet within "Other current      liabilities" and are not included in thetable. |
|-----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

|                                                                                                                                                |                                                                                                                             | Page   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                |                                                                                                                             |   |
| Report      of Independent Registered Public Accounting Firm……………………..                              | 22                                                                                                                               |
|                                                                                                                                                |                                                                                                                             |   |
| Financial      Statements:                                                                                                                          |                                                                                                                             |
|                                                                                                                                                | Consolidated      Balance Sheets --                                                                                              |   |
|                                                                                                                                                | February      1, 2009 and February 3, 2008……………………………….. | 23     |
|                                                                                                                                                |                                                                                                                             |   |
|                                                                                                                                                | Consolidated      Statements of Operations --                                                                                    |   |
|                                                                                                                                                | Fiscal      years Ended February 1, 2009,                                                                                        |   |
|                                                                                                                                                | February      3, 2008 and January 28, 2007……………………………….  | 24     |
|                                                                                                                                                |                                                                                                                             |   |
|                                                                                                                                                | Consolidated      Statements of Stockholders'                                                                                    |   |
|                                                                                                                                                | Equity      -- Fiscal years Ended February 1, 2009,                                                                              |   |
|                                                                                                                                                | February      3, 2008 and January 28, 2007……………………..………..      | 25     |
|                                                                                                                                                |                                                                                                                             |   |
|                                                                                                                                                | Consolidated      Statements of Cash Flows --                                                                                    |   |
|                                                                                                                                                | Fiscal      years Ended February 1, 2009,                                                                                        |   |
|                                                                                                                                                | February      3, 2008 and January 28, 2007……………………………….. | 26     |
|                                                                                                                                                |                                                                                                                             |   |
| Notes      to Consolidated Financial Statements…………………………………….. |                                                                                                                             |
|                                                                                                                                                |                                                                                                                             | 27     |
| Financial      Statement Schedules:                                                                                                                 |                                                                                                                             |
|                                                                                                                                                |                                                                                                                             |   |
|                                                                                                                                                | No      financial statement schedules are included as they are                                                                   |   |
|                                                                                                                                                | not      applicable to the Company                                                                                               |   |

----

----

| Duckwall-ALCO      Stores, Inc.                                                                                                                       |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| And      Subsidiaries                                                                                                                                 |   |
| Consolidated      Balance Sheets                                                                                                                      |   |
| (dollars      in thousands, except share amounts)                                                                                                     |   |
|                                                                                                                                                  |   |   |   |   |   |   |
| Assets                                                                                                                                                |   |
|                                                                                                                                                  |   | February      1, |   |   | February      3, |   |
|                                                                                                                                                  |   | 2009 |   |   | 2008 |   |
| Current      assets:                                                                                                                                  |   |   |   |   |   |   |
|    Cash      and cash equivalents                                                                                                      |   | $ | 4,744 |   |   |   | 5,501 |   |
|    Receivables                                                                                                                         |   |   | 5,142 |   |   |   | 4,905 |   |
|    Prepaid      income taxes                                                                                                           |   |   | 5,753 |   |   |   | 768 |   |
|    Inventories                                                                                                                         |   |   | 146,620 |   |   |   | 128,545 |   |
|    Prepaid      expenses                                                                                                               |   |   | 4,143 |   |   |   | 3,101 |   |
|    Deferred      income taxes                                                                                                          |   |   | 5,348 |   |   |   | 7,094 |   |
|         Assets held for sale                                                                                                                |   |   | 1,505 |   |   |   | - |   |
|           Total      current assets                                                                 |   |   | 173,255 |   |   |   | 149,914 |   |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Property      and equipment, at cost:                                                                                                                 |   |   |   |   |   |   |   |   |
|    Land      and land improvements                                                                                                     |   |   | 1,420 |   |   |   | 2,205 |   |
|    Buildings      and building improvements                                                                                            |   |   | 11,369 |   |   |   | 11,931 |   |
|    Furniture,      fixtures and equipment                                                                                              |   |   | 69,019 |   |   |   | 58,911 |   |
|    Transportation      equipment                                                                                                       |   |   | 1,322 |   |   |   | 1,310 |   |
|    Leasehold      improvements                                                                                                         |   |   | 13,974 |   |   |   | 15,419 |   |
|    Construction      work in progress                                                                                                  |   |   | 745 |   |   |   | 1,282 |   |
|           Total      property and equipment                                                         |   |   | 97,849 |   |   |   | 91,058 |   |
|    Less      accumulated depreciation                                                                                                  |   |   | 65,591 |   |   |   | 64,019 |   |
|           Net      property and equipment                                                           |   |   | 32,258 |   |   |   | 27,039 |   |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Property      under capital leases                                                                                                                    |   |   | 11,015 |   |   |   | 13,571 |   |
|    Less      accumulated amortization                                                                                                  |   |   | 7,958 |   |   |   | 8,654 |   |
|           Net      property under capital leases                                                    |   |   | 3,057 |   |   |   | 4,917 |   |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Other      non-current assets                                                                                                                         |   |   | 205 |   |   |   | 262 |   |
| Deferred      income taxes                                                                                                                            |   |   | - |   |   |   | 3,254 |   |
|           Total      assets                                                                         |   |  $ | 208,775 |   |   |   | 185,386 |   |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Liabilities      and Stockholders' Equity                                                                                                             |   |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Current      liabilities:                                                                                                                             |   |   |   |   |   |   |   |   |
|    Current      maturities of long-term debt                                                                                           |   |  $ | 1,362 |   |   |   | 1,278 |   |
|    Current      maturities of capital lease obligations                                                                                |   |   | 1,853 |   |   |   | 1,860 |   |
|    Accounts      payable                                                                                                               |   |   | 30,233 |   |   |   | 19,134 |   |
|    Accrued      salaries and commissions                                                                                               |   |   | 5,375 |   |   |   | 3,711 |   |
|    Accrued      taxes other than income                                                                                                |   |   | 4,941 |   |   |   | 4,301 |   |
|    Self-insurance      claim reserves                                                                                                  |   |   | 5,309 |   |   |   | 4,571 |   |
|    Other      current liabilities                                                                                                      |   |   | 4,676 |   |   |   | 7,360 |   |
|           Total      current liabilities                                                            |   |   | 53,749 |   |   |   | 42,215 |   |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Long      term debt, less current maturities                                                                                                          |   |   | 2,865 |   |   |   | 4,227 |   |
| Notes      payable under revolving loan                                                                                                               |   |   | 40,714 |   |   |   | 20,715 |   |
| Capital      lease obligations - less current maturities                                                                                              |   |   | 3,047 |   |   |   | 4,933 |   |
| Deferred      gain on leases                                                                                                                          |   |   | 4,598 |   |   |   | 4,985 |   |
| Deferred      income taxes                                                                                                                            |   |   | 138 |   |   |   | - |   |
| Other      noncurrent liabilities                                                                                                                     |   |   | 1,624 |   |   |   | 1,139 |   |
|           Total      liabilities                                                                    |   |   | 106,735 |   |   |   | 78,214 |   |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Stockholders'      equity:                                                                                                                            |   |   |   |   |   |   |   |   |
|         Common stock, $.0001 par value, authorized 20,000,000    shares;                                                               |   |   |   |   |   |   |   |   |
|            issued      and outstanding 3,797,947 shares and 3,810,591 shares      respectively |   |   | 1 |   |   |   | 1 |   |
|    Additional      paid-in capital                                                                                                     |   |   | 38,615 |   |   |   | 38,766 |   |
|    Retained      earnings                                                                                                              |   |   | 63,424 |   |   |   | 68,405 |   |
|           Total      stockholders' equity                                                           |   |   | 102,040 |   |   |   | 107,172 |   |
|           Total      liabilities and stockholders' equity                                           |   | $ | 208,775 |   |   |   | 185,386 |   |
|                                                                                                                                                  |   |   |   |   |   |   |   |   |
| See      accompanying notes to consolidated financial statements.                                                                                     |   |

----

| Duckwall-ALCO      Stores, Inc.                                                                                                                |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|
| And      Subsidiaries                                                                                                                          |   |
| Consolidated      Statements of Operations                                                                                                     |   |
| Fiscal      Years ended February 1, 2009, February 3, 2008 and January 28,      2007                                                           |   |
| (dollars      in thousands, except per share amounts)                                                                                          |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |
|                                                                                                                                           |   | 52      Weeks |   |   | 53      Weeks |   |   | 52      Weeks |   |
|                                                                                                                                           |   | 2009 |   |   | 2008 |   |   | 2007 |   |
| Net      Sales                                                                                                                                 |   | $ | 490,021 |   |   |   | 481,770 |   |   |   | 446,870 |   |
| Cost      of sales                                                                                                                             |   |   | 336,117 |   |   |   | 329,405 |   |   |   | 304,869 |   |
| Gross      margin                                                                                                                              |   |   | 153,904 |   |   |   | 152,365 |   |   |   | 142,001 |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling,      general and administrative                                                                                                       |   |   | 147,846 |   |   |   | 138,349 |   |   |   | 123,661 |   |
| Depreciation      and amortization                                                                                                             |   |   | 9,302 |   |   |   | 9,464 |   |   |   | 6,513 |   |
|            Total      operating expenses                                                |   |   | 157,148 |   |   |   | 147,813 |   |   |   | 130,174 |   |
| Operating      income (loss) from continuing operations                                                                                        |   |   | (3,244 | ) |   |   | 4,552 |   |   |   | 11,827 |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      expense                                                                                                                          |   |   | 1,867 |   |   |   | 3,382 |   |   |   | 2,729 |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      (loss) from continuing operations before income taxes and discontinued      operations                                           |   |   | (5,111 | ) |   |   | 1,170 |   |   |   | 9,098 |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      tax expense (benefit)                                                                                                              |   |   | (2,090 | ) |   |   | 388 |   |   |   | 3,204 |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      (loss) from continuing operations before discontinued      operations                                                            |   |   | (3,021 | ) |   |   | 782 |   |   |   | 5,894 |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss      from discontinued operations, net of income                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|         tax      benefit of $1.2 million, $626 and $116 in 2009, 2008 and 2007,      respectively |   |   | (1,955 | ) |   |   | (1,006 | ) |   |   | (190 | ) |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      earnings (loss)                                                                                                                       |   |  $ | (4,976 | ) |   |   | (224 | ) |   |   | 5,704 |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      (loss) per share                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|      Basic                                                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |
|          Continuing      operations                                                               |   |  $ | (0.79 | ) |   |   | 0.21 |   |   |   | 1.55 |   |
|          Discontinued      operations                                                             |   |   | (0.51 | ) |   |   | (0.26 | ) |   |   | (0.05 | ) |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|          Net      earnings (loss) per share                                                       |   |  $ | (1.30 | ) |   |   | (0.05 | ) |   |   | 1.50 |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings      (loss) per share                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
|      Diluted                                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|          Continuing      operations                                                               |   |  $ | (0.79 | ) |   |   | 0.21 |   |   |   | 1.54 |   |
|          Discontinued      operations                                                             |   |   | (0.51 | ) |   |   | (0.26 | ) |   |   | (0.05 | ) |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|          Net      earnings (loss) per share                                                       |   |  $ | (1.30 | ) |   |   | (0.05 | ) |   |   | 1.49 |   |
|                                                                                                                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| See      accompanying notes to consolidated financial statements.                                                                              |   |   |   |   |   |   |   |   |   |   |   |   |

----

| Duckwall-ALCO      Stores, Inc.                                                           |   |
|-------------------------------------------------------------------------------------------|--------|
| And      Subsidiaries                                                                     |   |
| Consolidated      Statements of Stockholders' Equity                                      |   |
| Fiscal      Years ended February 1, 2009, February 3, 2008 and January 28,      2007 |   |
| (dollars      in thousands, except share amounts)                                         |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   | Common |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   | stock |   |   |   |   |   | Additional |   |   |   |   |   | Total |   |
|                                                                                      |   | shares |   |   | Common |   |   | paid-in |   |   | Retained |   |   | stockholders' |   |
|                                                                                      |   | outstanding |   |   | stock |   |   | capital |   |   | earnings |   |   | equity |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,      January 29, 2006                                                            |   |   | 3,786,953 |   |   | $ | 1 |   |   |   | 36,411 |   |   |   | 65,735 |   |   |   | 102,147 |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      earnings for the year ended January 28, 2007                                     |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 5,704 |   |   |   | 5,704 |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative      change for accounting for inventory (Note 14)                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (2,695 | ) |   |   | (2,695 | ) |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Repurchase      and retirement of   common shares                          |   |   | (3,337 | ) |   |   | - |   |   |   | (102 | ) |   |   | - |   |   |   | (102 | ) |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      tax benefit related to exercise of stock options                              |   |   | - |   |   |   | - |   |   |   | 51 |   |   |   | - |   |   |   | 51 |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Share-based      compensation                                                             |   |   |   |   |   |   |   |   |   |   | 821 |   |   |   |   |   |   |   | 821 |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Options      exercised to purchase shares                                                 |   |   | 10,687 |   |   |   | - |   |   |   | 134 |   |   |   | - |   |   |   | 134 |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,      January 28, 2007                                                            |   |   | 3,794,303 |   |   |   | 1 |   |   |   | 37,315 |   |   |   | 68,744 |   |   |   | 106,060 |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss for the year ended February 3, 2008                                         |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (224 | ) |   |   | (224 | ) |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cumulative      effect of a change in accounting principle (Note 7)                       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (115 | ) |   |   | (115 | ) |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      tax benefit related to exercise of stock options                              |   |   | - |   |   |   | - |   |   |   | 14 |   |   |   | - |   |   |   | 14 |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Share-based      compensation                                                             |   |   |   |   |   |   |   |   |   |   | 1,130 |   |   |   |   |   |   |   | 1,130 |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Options      exercised to purchase shares                                                 |   |   | 16,288 |   |   |   | - |   |   |   | 307 |   |   |   | - |   |   |   | 307 |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,      February 3, 2008                                                            |   |   | 3,810,591 |   |   |   | 1 |   |   |   | 38,766 |   |   |   | 68,405 |   |   |   | 107,172 |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      loss for the year ended February 1, 2009                                         |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (4,976 | ) |   |   | (4,976 | ) |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Repurchase and      retirement of common shares                                 |   |   | (22,644 | ) |   |   | - |   |   |   | (285 | ) |   |   | - |   |   |   | (285 | ) |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expired      stock options                                                                |   |   | - |   |   |   | - |   |   |   | (142 | ) |   |   | - |   |   |   | (142 | ) |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Share-based      compensation                                                             |   |   | - |   |   |   | - |   |   |   | 186 |   |   |   | - |   |   |   | 186 |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sale      of company stock                                                                |   |   | 10,000 |   |   |   | - |   |   |   | 90 |   |   |   | - |   |   |   | 90 |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      tax benefit rate change for stock options                                     |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (5 | ) |   |   | (5 | ) |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,      February 1, 2009                                                            |   |   | 3,797,947 |   |   | $ | 1 |   |   |   | 38,615 |   |   |   | 63,424 |   |   |   | 102,040 |   |
|                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See      accompanying notes to consolidated financial statements.                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| Duckwall-ALCO      Stores, Inc.                                                                                |          |
|----------------------------------------------------------------------------------------------------------------|---------------|
| And      Subsidiaries                                                                                          |          |
| Consolidated      Statements of Cash Flows                                                                     |          |
| Fiscal      Years ended February 1, 2009, February 3, 2008 and January 28,      2007                           |          |
| (dollars      in thousands)                                                                                    |          |
|                                                                                                           | 52      Weeks |   | 53      Weeks |   |   | 52      Weeks |   |
|                                                                                                           | 2009          |   | 2008 |   |   | 2007 |   |
| Cash      flows from operating activities:                                                                     |          |   |   |   |   |   |   |
| Net      earnings (loss)                                                                                       | $             | (4,976 | ) |   | (224 | ) |   |   | 5,704 |   |
| Adjustments      to reconcile net earnings (loss) to net cash (used in) provided by      operating activities: |          |   |   |   |   |   |   |   |   |   |
|                                                                                                           |          |   |   |   |   |   |   |   |   |   |
| Depreciation      and amortization                                                                             |          | 9,346 |   |   | 9,867 |   |   |   | 6,801 |   |
| Gain      (loss) on sale of assets                                                                             |          | 7 |   |   | (180 | ) |   |   | (307 | ) |
| Share-based      compensation                                                                                  |          | 186 |   |   | 1,130 |   |   |   | 821 |   |
| Tax      benefit of stock options exercised                                                                    |          | - |   |   | 14 |   |   |   | 51 |   |
| Deferred      income tax expense, net                                                                          |          | 5,050 |   |   | (1,428 | ) |   |   | (3,465 | ) |
| Changes      in:                                                                                               |          |   |   |   |   |   |   |   |   |   |
|     Receivables                                                                            |          | (237 | ) |   | (1,846 | ) |   |   | (325 | ) |
|     Prepaid      expenses                                                                  |          | (1,042 | )  |   | (1,540 | ) |   |   | 1,060 |   |
|     Inventories                                                                            |          | (18,075 | )  |   | 22,861 |   |   |   | (20,673 | ) |
|     Accounts      payable                                                                  |          | 11,099 |   |   | (16,129 | ) |   |   | 6,963 |   |
|     Prepaid      income taxes                                                              |          | (4,985 | )  |   | (2,560 | ) |   |   | 752 |   |
|     Accrued      salaries and commissions                                                  |          | 1,664 |   |   | (469 | ) |   |   | (1,821 | ) |
|     Accrued      taxes other than income                                                   |          | 640 |   |   | 59 |   |   |   | (501 | ) |
|     Self-insurance      claim reserves                                                     |          | 738 |   |   | 249 |   |   |   | 567 |   |
|     Other      assets and liabilities                                                      |          | (2,583 | )  |   | 1,294 |   |   |   | 358 |   |
| Net      cash (used in) provided by operating activities                                                       |          | (3,168 | )  |   | 11,098 |   |   |   | (4,015 | ) |
|                                                                                                           |          |   |   |   |   |   |   |   |   |   |
| Cash      flows from investing activities:                                                                     |          |   |   |   |   |   |   |   |   |   |
| Proceeds      from real estate sale-leasebacks                                                                 |          | - |   |   | - |   |   |   | 12,563 |   |
| Proceeds      from the sale of assets                                                                     |          |  185 |   |   |  637 |   |   |   | 1,563 |   |
| Acquisition      of property and equipment                                                                     |          | (14,402 | )  |   | (12,293 | )  |   |   | (7,627 | )  |
| Net      cash (used in) provided by in investing activities                                               |          | (14,217 | )  |   | (11,656 | ) |   |   | 6,499 |   |
|                                                                                                           |          |   |   |   |   |   |   |   |   |   |
| Cash      flows from financing activities:                                                                     |          |   |   |   |   |   |   |   |   |   |
| Net      borrowings (pay downs) under revolving loan credit    agreement                                       |          | 19,999 |   |   | (362 | ) |   |   | 4,015 |   |
| Refinancing      costs on revolving loan and term loan fees                                                    |          | - |   |   | (256 | ) |   |   | - |   |
| Proceeds      from exercise of outstanding stock options                                                       |          | - |   |   | 307 |   |   |   | 113 |   |
| Excess      tax benefit on stock options exercised                                                             |          | - |   |   | - |   |   |   | 36 |   |
| Proceeds      from stock sale                                                                                  |          | 90  |   |   | - |   |   |   | - |   |
| Income      tax benefit rate change for stock options                                                          |          | (5 | )  |   | - |   |   |   | - |   |
| Repurchase      of stock                                                                                       |          | (285 | )  |   | - |   |   |   | (2,012 | ) |
| Net (pay      downs) borrowings under term loan                                                           |          | (1,278 | )  |   | 5,505 |   |   |   | - |   |
| Principal      payments under capital lease obligations                                                        |          | (1,893 | )  |   | (2,118 | ) |   |   | (2,125 | ) |
| Net      cash provided by financing activities                                                                 |          | 16,628 |   |   | 3,076 |   |   |   | 27 |   |
|                                                                                                           |          |   |   |   |   |   |   |   |   |   |
| Net (decrease)      increase in cash and cash equivalents                                                 |          | (757 | )  |   | 2,518 |   |   |   | 2,511 |   |
| Cash      and cash equivalents at beginning of year                                                            |          | 5,501 |   |   | 2,983 |   |   |   | 472 |   |
|                                                                                                           |          |   |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents at end of year                                                                  | $             | 4,744 |   |   | 5,501 |   |   |   | 2,983 |   |
|                                                                                                           |          |   |   |   |   |   |   |   |   |   |
| Supplemental      disclosure of non-cash activity:                                                             |          |   |   |   |   |   |   |   |   |   |
| Tax      benefit related to stock options exercised                                                            | $        | - |   |   | 14 |   |   |   | - |   |
| Assets      acquired under capital lease                                                                       | $        | - |   |   | - |   |   |   | 1,858 |   |
|                                                                                                           |          |   |   |   |   |   |   |   |   |   |
| See      accompanying notes to consolidated financial statements.                                              |          |   |   |   |   |   |   |   |   |   |

----

| 1. | Summary      of Significant Accounting Policies |
|----|-------------------------------------------------|

|   | (a) | Nature      of Business |
|--------|-----|-------------------------|

|   | (b) | Principles      of Consolidation |
|--------|-----|----------------------------------|

|   | (c) | Basis      of Presentation |
|--------|-----|----------------------------|

|   | (d) | Inventories |
|--------|-----|-------------|

|   | (e) | Property      and Equipment |
|--------|-----|-----------------------------|

| Buildings                              | 25      years     |
|----------------------------------------|-------------------|
| Building      improvements             | 10      years     |
| Software                               | 3 -      5 years  |
| Furniture,      fixtures and equipment | 3 -      15 years |
| Transportation      equipment          | 3 -      5 years  |
| Leasehold      improvements            | 2 -      10 years |

|   | (f) | Operating      Leases |
|--------|-----|-----------------------|

----

|   | (g) | Insurance |
|--------|-----|-----------|

|   | (h) | Income      Taxes |
|--------|-----|-------------------|

|   | (i) | Net      Sales |
|--------|-----|----------------|

|   | (j) | Net      Earnings (Loss) Per Share |
|--------|-----|------------------------------------|

|   | (k) | Consolidated      Statements of Cash Flows |
|--------|-----|--------------------------------------------|

|                                                                                                                          |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Interest,      excluding interest on capital lease obligation and amortization of debt      financing                         |   |   |   |   |   |   |   |   |   |
|    costs      (net of capitalized interest of $0 in fiscal 2009, $0 in fiscal 2008 and      $0 in fiscal 2007) |   | $      | 2,242  |   |   |   | 2,823  |   |   |   | 1,713 |   |
| Income      taxes                                                                                                             |   |   | 987    |   |   |   | 3,716  |   |   |   | 5,738 |   |

|   | (l) | Use      of Estimates |
|--------|-----|-----------------------|

|   | (m) | Long-lived      Assets |
|--------|-----|------------------------|

----

|   |  (n) | Store      Closings and DiscontinuedOperations |
|--------|-----------|------------------------------------------------|

|                                                                         |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                         |   |   |   |   |   |   |   |   |   |
|                                                                         |   |   |   |   |   |   |   |   |   |
| Store      closure liability at beginning of year                            |   | $      | -      |   |   |   | 105    |   |   |   | 477 |   |
| Store      closure (income) expense (included in discontinued    operations) |   |   | 769    |   |   |   | (71    | )      |   |   | (30 | ) |
| Payments                                                                     |   |   | (506   | )      |   |   | (34    | )      |   |   | (342 | ) |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Store      closure liability at end of year                                  |   | $      | 263    |   |   |   | -      |   |   |   | 105 |   |

|   |  (o) | Consideration      Received from Vendors |
|--------|-----------|------------------------------------------|

|   | (p) | Advertising      Costs |
|--------|-----|------------------------|

|   | (q) | Share-based      Compensation |
|--------|-----|-------------------------------|

----

|                                                     |   | 2006    |   |
|----------------------------------------------------------|--------|---------|--------|
| Net      earnings as reported                       |   | $       | 1,949  |   |
|                                                     |   |    |   |   |
| Pro      forma share-based compensation, net of tax |   |    | (250   | ) |
| Pro      forma net earnings                              |   |    | 1,699  |   |
|                                                     |   |    |   |   |
| Net      earnings per share as reported:            |   |    |   |   |
| Basic                                                    |   |  $ | 0.48   |   |
| Diluted                                                  |   |    | 0.47   |   |
|                                                     |   |    |   |   |
| Net      earnings per share, pro forma:             |   |    |   |   |
| Basic                                                    |   |  $ | 0.42   |   |
| Diluted                                                  |   |    | 0.41   |   |

|   | (r) | Fair      Value of Financial Instruments |
|--------|-----|------------------------------------------|

|   | (s) | Pre-opening      Costs |
|--------|-----|------------------------|

|   | (t) | Future      Accounting Pronouncements |
|--------|-----|---------------------------------------|

| 2. | Inventories |
|----|-------------|

|                                 |   | 2009   |    |   | 2008   |   |
|--------------------------------------|--------|--------|---------|--------|--------|--------|
|                                 |   |   |    |   |   |   |
| FIFO      cost                       |   | $      | 150,867 |   |   |   | 132,385 |   |
| Less      LIFO and markdown reserves |   |   | (4,247  | )      |   |   | (3,840 | ) |
| LIFO      Cost                       |   | $      | 146,620 |   |   |   | 128,545 |   |

----

| 3. | Credit      Arrangements, Notes Payable and Long-termDebt |
|----|-----------------------------------------------------------|

|                                |   |                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|-------------------------------------|--------|------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                |   | Payments      due by Fiscal Period |   |
| Contractual      Obligations        |   | Total                              |   |   | 2010   |   |   | 2011   |   |   | 2012   |   |   | 2013   |   |   | 2014   |   |
| Revolving      loan credit facility |   | $                                  | 40,714 |   |   |   | -      |   |   |   | 40,714 |   |   |   | -      |   |   |   | - |   |   |   | - |   |
| FF&E      term loan             |   |                               | 4,227  |   |   |   | 1,362  |   |   |   | 1,451  |   |   |   | 1,414  |   |   |   | - |   |   |   | - |   |
|                                |   | $                                  | 44,941 |   |   |   | 1,362  |   |   |   | 42,165 |   |   |   | 1,414  |   |   |   | - |   |   |   | - |   |

| 4. | Employee      Benefits |
|----|------------------------|

| 5. | Self-Insurance      Claim Reserves |
|----|------------------------------------|

|                   |   | 2009   |   |   | 2008   |   |
|------------------------|--------|--------|--------|--------|--------|--------|
| Beginning      balance |   | $      | 4,571  |   |   |   | 4,322 |   |
| Reserve      additions |   |   | 2,326  |   |   |   | 1,791 |   |
| Claims      paid       |   |   | (1,588 | )      |   |   | (1,542 | ) |
| Ending      balance    |   | $      | 5,309  |   |   |   | 4,571 |   |

| 6.  | Leases |
|----------|--------|

|                                   |   | 2009   |   |   | 2008   |   |         | 2007   |   |
|----------------------------------------|--------|--------|--------|--------|--------|--------|--------------|--------|--------|
| Buildings                              |   | $      | 2,494  |   |   |   | 3,375   |   |   |   | 14,375  |   |
| Fixtures                               |   |   | 1,663  |   |   |   | 3,338   |   |   |   | 3,338  |   |
| Software                               |   |   | 6,858  |   |   |   | 6,858   |   |   |   | 6,858  |   |
|                                   |   |   | 11,015 |   |   |   | 13,571  |   |   |   | 24,571  |   |
| Less      accumulated amortization     |   |   | 7,958  |   |   |   | 8,654   |   |   |   | 17,618  |   |
| Net      property under capital leases |   | $      | 3,057  |   |   |   | 4,917   |   |   |   | 6,953  |   |

----

|                                                                   |   | Capital |   |   | Operating |   |
|-----------------------------------------------------------------------------|--------|---------|--------|--------|-----------|--------|
|                                                                        |   | Leases  |   |   | Leases    |   |
| Fiscal      year:                                                           |   |    |   |   |      |   |
|            2010                                    |   | $       | 2,266  |   |      | $      | 18,752 |   |
|            2011                                    |   |    | 1,933  |   |      |   | 16,853 |   |
|            2012                                    |   |    | 705    |   |      |   | 15,182 |   |
|            2013                                    |   |    | 455    |   |      |   | 13,897 |   |
|            2014                               |   |    | 320    |   |      |   | 12,385 |   |
| Later      years                                                            |   |    | -      |   |      |   | 87,293 |   |
| Total      minimum lease payments                                           |   |    | 5,679  |   |      | $      | 164,362 |   |
|             Less amount representing interest |   |    | 779    |   |      |   |   |   |
| Present      value of net minimum lease payments                            |   |    | 4,900  |   |      |   |   |   |
|            Less current maturities                 |   |    | 1,853  |   |      |   |   |   |
| Capital      lease obligations, less current maturities                     |   | $       | 3,047  |   |      |   |   |   |

|                       |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|----------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Minimum      rentals       |   | $      | 20,136 |   |   |   | 15,180 |   |   |   | 12,488 |   |
| Contingent      rentals    |   |   | 1,323  |   |   |   | 1,468  |   |   |   | 1,496 |   |
| Less      sublease rentals |   |   | (74    | )      |   |   | (51    | )      |   |   | (51 | ) |
|                       |   | $      | 21,385 |   |   |   | 16,597 |   |   |   | 13,933 |   |

| 7.  | Income      Taxes |
|----------|-------------------|

|                                                                           |   | 2009    |   |   | 2008   |   |   | 2007   |   |
|--------------------------------------------------------------------------------|--------|---------|--------|--------|--------|--------|--------|--------|--------|
|                                                                           |   |    |   |   |   |   |   |   |   |
| Income      tax expense (benefit) allocated to continuing      operations |   |  $ | (2,090 | )      |   |   | 388    |   |   |   | 3,204 |   |
|                                                                           |   |    |   |   |   |   |   |   |   |   |   |   |
| Income      tax benefit allocated to discontinued      operations         |   |    | (1,217 | )      |   |   | (626   | )      |   |   | (116 | ) |
| Total      income tax expense (benefit)                                        |   |  $ | (3,307 | )      |   |   | (238   | )      |   |   | 3,088 |   |

|                                                    |   | Current |   |   | Deferred |   |   | Total  |   |
|---------------------------------------------------------|--------|---------|--------|--------|----------|--------|--------|--------|--------|
|  2009:                                             |   |    |   |   |     |   |   |   |   |
|              Federal |   |  $ | (4,278 | )      |     |   | 2,420  |   |   |   | (1,858 | ) |
|              State   |   |    | (466   | )      |     |   | 234    |   |   |   | (232 | ) |
|                                                    |   |    | (4,744 | )      |     |   | 2,654  |   |   |   | (2,090 | ) |
| 2008:                                                   |   |    |   |   |     |   |   |   |   |   |   |   |
|              Federal |   |    | 1,538  |   |     |   | (1,221 | )      |   |   | 317 |   |
|              State   |   |    | 278    |   |     |   | (207   | )      |   |   | 71 |   |
|                                                    |   |    | 1,816  |   |     |   | (1,428 | )      |   |   | 388 |   |
|                                                    |   |    |   |   |     |   |   |   |   |   |   |   |
| 2007:                                                   |   |    |   |   |     |   |   |   |   |   |   |   |
|              Federal |   |    | 5,772  |   |     |   | (2,889 | )      |   |   | 2,883 |   |
|              State   |   |    | 897    |   |     |   | (576   | )      |   |   | 321 |   |
|                                                    |   |  $ | 6,669  |   |     |   | (3,465 | )      |   |   | 3,204 |   |

----

|                                                           |   | 2009    |   |   | 2008   |   |   | 2007    |   |
|----------------------------------------------------------------|--------|---------|--------|--------|--------|--------|--------|---------|--------|
| Computed      “expected” tax expense (benefit)     |   |  $ | (1,738 | )      |   |   | 398    |    |   |   | 3,184 |   |
| State      income taxes, net of the federal income tax benefit |   |    | (153   | )      |   |   | 47     |    |   |   | 211 |   |
| Adjustment      for prior period taxes                         |   |    | (48    | )      |   |   | (76    | )       |   |   | (115 | ) |
| Federal      employment credits                                |   |    | (291   | )      |   |   | (242   | )  |   |   | (166 | )  |
| Share-based      compensation                                  |   |    | 86     |   |   |   | 179    |    |   |   | 121 |   |
| Other,      net                                                |   |    | 54     |   |   |   | 82     |    |   |   | (31 | ) |
|                                                           |   |  $ | (2,090 | )      |   |   | 388    |    |   |   | 3,204 |   |

|                                                                                                                                    |   | 2009    |   |   | 2008   |   |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|---------|--------|--------|--------|--------|
| Deferred      tax assets:                                                                                                               |   |    |   |   |   |   |
|                  Capital leases                                                  |   |  $ | 283    |   |   |   | 335 |   |
|                  Other liabilities                                               |   |    | 1,682  |   |   |   | 1,205 |   |
|                  Insurance reserves                                              |   |    | 1,650  |   |   |   | 1,863 |   |
|             Vacation      and sick pay accrual                              |   |    | 801    |   |   |   | 894 |   |
|             Property      and equipment, due to differences in depreciation |   |    | -      |   |   |   | 205 |   |
|                  Inventory                                                       |   |    | 4,068  |   |   |   | 3,939 |   |
|                  Deferred gain property and equipment                            |   |    | 1,825  |   |   |   | 1,989 |   |
|         Net      operating loss carryforwards                                                   |   |    | 1,326  |   |   |   | 45 |   |
| Total      deferred tax assets, net of $0 valuation allowance                                                                           |   |    | 11,635 |   |   |   | 10,475 |   |
|                                                                                                                                    |   |    |   |   |   |   |   |   |
| Deferred      tax liabilities:                                                                                                          |   |    |   |   |   |   |   |   |
|       Property      and equipment, due to differences in depreciation                                     |   |    | 4,284  |   |   |   | - |   |
|            Property taxes                                                                                      |   |    | 303    |   |   |   | - |   |
|            481(a) adjustments                                                                                  |   |    | 1,329  |   |   |   | - |   |
|       Other      assets                                                                                   |   |    | 509    |   |   |   | 127 |   |
| Total      deferred tax liabilities                                                                                                     |   |    | 6,425  |   |   |   | 127 |   |
|                                                                                                                                    |   |    |   |   |   |   |   |   |
| Net      deferred tax asset                                                                                                             |   |  $ | 5,210  |   |   |   | 10,348 |   |

----

|                                                                      |   | 2009    |   |   | 2008   |   |
|---------------------------------------------------------------------------|--------|---------|--------|--------|--------|--------|
| Gross      unrecognized tax benefits at the beginning of:                 |   |  $ | 2,521  |   |   |   | 2,124 |   |
| Increases      related to prior period tax positions                      |   |    | 57     |   |   |   | 51 |   |
| Decreases      related to prior period tax positions                      |   |    | (2,481 | )      |   |   | - |   |
| Increases      related to current year tax positions                      |   |    | -      |   |   |   | 346 |   |
| Settlements                                                               |   |    | (40    | )      |   |   | - |   |
| Expiration      of the statute of limitations for the assessment of taxes |   |    | -      |   |   |   | - |   |
| Gross      unrecognized tax benefits at the end of:                       |   |  $ | 57     |   |   |   | 2,521 |   |
|                                                                      |

| 8. | Stockholders’      Equity |
|----|---------------------------------|

| 9. | Earnings      Per Share |
|----|-------------------------|

|                                                     |   | 2009   |      |   | 2008   |   |      | 2007   |   |
|----------------------------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|
|                                                     |   |   |      |   |   |   |      |   |   |
| Weighted      average shares outstanding (basic)         |   |   | 3,809,109 |   |   |   | 3,807,033 |   |   |   | 3,792,202 |   |
|                                                     |   |   |      |   |   |   |      |   |   |   |   |   |
| Effect      of dilutive options to purchase common stock |   |   | -         |   |   |   | -         |   |   |   | 36,726 |   |
|                                                     |   |   |      |   |   |   |      |   |   |   |   |   |
| As      adjusted for diluted calculation                 |   |   | 3,809,109 |   |   |   | 3,807,033 |   |   |   | 3,828,928 |   |

| 10.   | Share-Based      Compensation |
|-----------------|-------------------------------|

|                                                      |   |   |   |   |   |   |   |   |   |
|-----------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                      |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|                                                      |   |   |   |   |   |   |   |   |   |
| Share-based      compensation before income taxes         |   | $      | 186    |   |   |   | 1,130  |   |   |   | 821 |   |
| Income      tax benefits                                  |   |   | (76    | )      |   |   | (375   | )      |   |   | (289 | ) |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Share-based      compensation net of income benefits |   | $      | 110    |   |   |   | 755    |   |   |   | 532 |   |
|                                                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect      on:                                           |   |   |   |   |   |   |   |   |   |   |   |   |
|   Basic      earnings per share            |   | $      | 0.03   |   |   |   | 0.20   |   |   |   | 0.14 |   |
|   Diluted      earnings per share          |   | $      | 0.03   |   |   |   | 0.20   |   |   |   | 0.14 |   |

----

|                                          |   |   |   |   |   |   |   |   |   |
|-----------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                          |   |   |   |   |   |   |   |   |   |
|                                          |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|                                          |   |   |   |   |   |   |   |   |   |
| Expected      price volatility                |   |   | 36.60  | %      |   |   | 25.64  | %      |   |   | 37.40 | % |
|                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk-free      interest rate                  |   |   | 2.54   | %      |   |   | 4.79   | %      |   |   | 5.00 | % |
|                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average expected lives in years |   |   | 4.5    |   |   |   | 3.8    |   |   |   | 3.8 |   |
|                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividend      yield                           |   |   | 0.00   | %      |   |   | 0.00   | %      |   |   | 0.00 | % |

----

|                                                 |   |   |     |   |     |   |   | Weighted    |   |   |           |   |
|------------------------------------------------------|--------|--------|----------|--------|----------|--------|--------|-------------|--------|--------|----------------|--------|
|                                                 |   |   |     |   | Weighted |   |   | Average     |   |   | Aggregate      |   |
|                                                 |   | Number |     |   | Average  |   |   | Remaining   |   |   | Intrinsic      |   |
|                                                 |   | Of     |     |   | Exercise |   |   | Contractual |   |   | Value      (in |   |
|                                                 |   | Shares |     |   | Price    |   |   | Term        |   |   | thousands)     |   |
|                                                 |   |   |     |   |     |   |   |        |   |   |           |   |
| Outstanding      February 3, 2008                    |   |   | 531,375  |   |     | $      | 29.39  |        |   |   |           |   |   |   |
|                                                 |   |   |     |   |     |   |   |        |   |   |           |   |   |   |
| Granted                                              |   |   | 414,500  |   |     |   | 12.26  |        |   |   |           |   |   |   |
|                                                 |   |   |     |   |     |   |   |        |   |   |           |   |   |   |
| Exercised                                            |   |   | -        |   |     |   | -      |        |   |   |           |   |   |   |
|                                                 |   |   |     |   |     |   |   |        |   |   |           |   |   |   |
| Forfeited/Expired                                    |   |   | (390,500 | )      |     |   | 26.04  |        |   |   |           |   |   |   |
|                                                 |   |   |     |   |     |   |   |        |   |   |           |   |   |   |
| Outstanding      February 1, 2009                    |   |   | 555,375  |   |     | $      | 18.86  |        |   |   | 3.8            |   |   | $ | - |   |
|                                                 |   |   |     |   |     |   |   |        |   |   |           |   |   |   |   |   |
| Vested      and expected to vest at February 1, 2009 |   |   | 475,300  |   |     | $      | 18.88  |        |   |   | 3.8            |   |   | $ | - |   |
|                                                 |   |   |     |   |     |   |   |        |   |   |           |   |   |   |   |   |
| Exercisable      at February 1, 2009                 |   |   | 95,375   |   |     | $      | 31.90  |        |   |   | 2.5            |   |   | $ | - |   |

|                                                  |   |   |   |   |   |   |   |   |   |
|-------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                  |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|                                                  |   |   |   |   |   |   |   |   |   |
| Weighted      Average Grant Date Fair Value of Stock  |   |   |   |   |   |   |   |   |   |
| Options      Granted (per share)                      |   | $      | 4.16   |   |   | $      | 10.93  |   |   |   | 10.59 |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Fair Value of Stock Options Vested         |   |   | 632    |   |   |   | 1,262  |   |   |   | 249 |   |
|                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Intrinsic Value of Stock Options Exercised |   |   | -      |   |   |   | 396    |   |   |   | 184 |   |

| 11. | Quarterly      Financial Information (Unaudited) |
|-----|--------------------------------------------------|

|             |                                            |   |    |    |   |    |   |    |    |   |   |          |   |
|------------------|-------------------------------------------------|--------|---------|---------|--------|---------|--------|---------|---------|--------|--------|---------------|--------|
|             |                                            |   | First   |    |   | Second  |   |    | Third   |   |   | Fourth        |   |
|             |                                            |   | Quarter |    |   | Quarter |   |    | Quarter |   |   | Quarter(1)(2) |   |
|             |                                            |   |    |    |   |    |   |    |    |   |   |          |   |
| Fiscal      2009 | Net      sales                                  |   | $       | 105,688 |   |    |   | 129,260 |    |   |   | 114,941       |   |   |   | 140,132 |   |
|             | Gross      margin                               |   |    | 31,736  |   |    |   | 43,348  |    |   |   | 37,144        |   |   |   | 41,676 |   |
|             | Earnings      (loss) from continuing operations |   |    | (4,325  | )      |    |   | 3,452   |    |   |   | (1,506        | )      |   |   | (642 | ) |
|             | Net      earnings (loss)                        |   |    | (5,852  | )      |    |   | 3,256   |    |   |   | (1,665        | )      |   |   | (715 | ) |
|             | Net      earnings (loss) per share (2):         |   |    |    |   |    |   |    |    |   |   |          |   |   |   |   |   |
|             |     Basic                   |   |    | (1.54   | )      |    |   | 0.85    |    |   |   | (0.44         | )      |   |   | (0.19 | ) |
|             |     Diluted                 |   |    | (1.54   | )      |    |   | 0.85    |    |   |   | (0.44         | )      |   |   | (0.19 | ) |
|             |                                            |   |    |    |   |    |   |    |    |   |   |          |   |   |   |   |   |
|             |                                            |   |    |    |   |    |   |    |    |   |   |          |   |   |   |   |   |
| Fiscal      2008 | Net      sales                                  |   | $       | 105,946 |   |    |   | 118,713 |    |   |   | 109,974       |   |   |   | 147,137 |   |
|             | Gross      margin                               |   |    | 32,715  |   |    |   | 39,379  |    |   |   | 35,735        |   |   |   | 44,536 |   |
|             | Earnings      (loss) from continuing operations |   |    | (1,827  | )      |    |   | 2,982   |    |   |   | (1,378        | )      |   |   | 1,005 |   |
|             | Net      earnings (loss)                        |   |    | (2,232  | )      |    |   | 2,594   |    |   |   | (1,635        | )      |   |   | 1,049 |   |
|             | Net      earnings (loss) per share (2):         |   |    |    |   |    |   |    |    |   |   |          |   |   |   |   |   |
|             |     Basic                   |   |    | (0.59   | )      |    |   | 0.68    |    |   |   | (0.43         | )      |   |   | 0.28 |   |
|             |     Diluted                 |   |    | (0.59   | )      |    |   | 0.67    |    |   |   | (0.43         | )      |   |   | 0.27 |   |

|   | (1) | An      asset impairment charge of $1.3 million and $2.1 million negatively      impacted net earnings for fiscal 2009 and 2008,      respectively. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Earnings      per share amounts are computed independently for each of the quarters      presented. Therefore, the sum of the quarterly earnings per share in      fiscal 2009 and fiscal 2008 does not equal the total computed for the      year. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| 12. | Related      Party Transactions |
|-----|---------------------------------|

| 13. | Business      Operations |
|-----|--------------------------|

|                                                                     |   | Percentage      of Sales |   |
|--------------------------------------------------------------------------|--------|--------------------------|--------|
|                                                                     |   |                     |   |   |   |   |
|                                                                     |   | 2009                     |   |   | 2008 |   |
| Merchandise      Category:                                               |   |                     |   |   |   |   |
| Consumables      and commodities                                         |   |                     | 32     | % |   |   | 30 | % |
| Electronics,      entertainment, sporting goods, toys and outdoor living |   |                     | 26     | % |   |   | 25 | % |
| Apparel      and accessories                                             |   |                     | 19     | % |   |   | 20 | % |
| Home      furnishings and décor                                     |   |                     | 13     | % |   |   | 14 | % |
| Other                                                                    |   |                     | 10     | % |   |   | 11 | % |
|                                                                     |   |                     |   |   |   |   |   |   |
| Total                                                                    |   |                     | 100    | % |   |   | 100 | % |

| 14. | Staff      Accounting Bulletin 108 (SAB 108) |
|-----|----------------------------------------------|

| Description             |   | Current |   |   | Deferred          |   |   | Retained |   |
|-------------------------|--------|---------|--------|--------|-------------------|--------|--------|----------|--------|
|                    |   | Assets  |   |   | Income      Taxes |   |   | Earnings |   |
| Inventory               |   | $       | (4,344 | )      |              |   | -      |     |   |   | 4,344 |   |
| Deferred      tax asset |   |    | -      |   |              |   | 1,649  |     |   |   | (1,649 | ) |
|                    |   |    |   |   |              |   |   |     |   |   |   |   |
| Total                   |   | $       | (4,344 | )      |              |   | 1,649  |     |   |   | 2,695 |   |

----

----

| Name                       | Age    | Position                                 |
|----------------------------|--------|------------------------------------------|
|                       |   |                                     |
| Lawrence      J. Zigerelli | 50     | President      - Chief Executive Officer |
| Jane      F. Gilmartin     | 53     | Executive      Vice President            |
| Donny      R. Johnson      | 48     | Executive      Vice President            |
| Edmond      C. Beaith      | 45     | Senior      Vice President               |
| Tom      L. Canfield       | 55     | Senior      Vice President               |
| James      M. Spencer      | 42     | Senior      Vice President               |

----

----

| (a) | Documents      filed as part of this report |
|-----|---------------------------------------------|

| (1)    | Consolidated Financial      Statements                                                                                                                                                        |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | The      financial statements are listed in the index for Item 8 of this Form      10-K.                                                                                                      |
|   |                                                                                                                                                                                          |
| (2)    | Financial Statement    Schedules                                                                                                                                                              |
|   | All      schedules are omitted because they are inapplicable, not required, or the      information is included elsewhere in the Consolidated Financial Statements      or the notes thereto. |
|   |                                                                                                                                                                                          |
| (3)    | Exhibits                                                                                                                                                                                      |
|   | The      exhibits filed with or incorporated by reference in this report are listed      below:                                                                                               |

| 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 3, 2008 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.                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                         |
| 10.1   | Employment      Agreement dated July 1, 2008 between the Company and Lawrence J.      Zigerelli is incorporated by reference to Exhibit 10.1 to the Current      Report on Form 8-K of the Company dated July 3,  2008.                                                                                                                 |

| 10.2   | Stock      Purchase Agreement dated July 1, 2008 between the Company and Lawrence J.      Zigerelli is incorporated by reference to Exhibit 10.2 to the Current      Report on Form 8-K of the Company dated July 3, 2008.              |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                    |
| 10.3   | Non-Qualified      Stock Option Agreement dated July 1, 2008 between the Company and Lawrence      J. Zigerelli is incorporated by reference to Exhibit 10.3 to the Current      Report on Form 8-K of the Company dated July 3,  2008. |

| 10.4 | Employment      Agreement dated July 24, 2008 between the Company and Jane F.      Gilmartin is incorporated by reference to Exhibit 10.4 to the Current      Report on Form 8-K of the Company dated July 24,  2008. |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.5   | Employment      Agreement dated August 25, 2008 between the Company and Edmond C.      Beaith is incorporated by reference to Exhibit 10.5 to the Current Report      on Form 8-K of the Company dated August 25, 2008.                       |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                               |
| 10.6   | Separation      Agreement and Release, dated as of August 1, 2008, between the Company and      Anthony C. Corradi is incorporated by reference to Exhibit 10.6 to the      Current Report on Form 8-K of the Company dated August 1,      2008.   |
|   |                                                                                                                                                                                                                                               |
| 10.7   | Employment      Agreement dated December 11, 2009 between the Company and Jim M.      Spencer is incorporated by reference to Exhibit 10.7 to the Current Report      on Form 8-K of the Company dated December 17, 2009.                     |
|   |                                                                                                                                                                                                                                               |
| 10.8   | Separation      Agreement and Release, dated as of February 4, 2009, between the Company      and Phillip D. Hixon is incorporated by reference to Exhibit 10.8 to the      Current Report on Form 8-K of the Company dated February 4,      2009. |

|  23.1 | Consent      of Independent Registered Public AccountingFirm |
|------------|--------------------------------------------------------------|

| 31.1 | Certification      of Chief Executive Officer of Duckwall-ALCO Stores, Inc. dated April 16,      2009, 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      2003. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 31.2 | Certification      of Chief Financial Officer of Duckwall-ALCO Stores, Inc. dated April 16,      2009, 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      2003. |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.1 | Certification      of Chief Executive Officer of Duckwall-ALCO Stores, Inc, dated April 16,      2009, 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 Annual      Report on Form 10-K for the year ended February 1, 2009 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 April 16,      2009, 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 Annual      Report on Form 10-K for the year ended February 1, 2009 and is not treated      as filed in reliance upon § 601(b)(32) of Regulations      S-K. |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Signature      and Title                                |   |   | Date                |
|---------------------------------------------------------|--------|--------|---------------------|
|                                                    |   |   |                |
| /s/      Lawrence J. Zigerelli                          |   |   | April      16, 2009 |
| Lawrence      J. Zigerelli                              |   |   |                |
| President      and Chief Executive Officer              |   |   |                |
| (Principal      Executive Officer)                      |   |   |                |
|                                                    |   |   |                |
| /s/      Donny R. Johnson                               |   |   | April      16, 2009 |
| Donny      R. Johnson                                   |   |   |                |
| Executive      Vice President - Chief Financial Officer |   |   |                |
| (Principal      Financial and Accounting Officer)       |   |   |                |
|                                                    |   |   |                |
| /s/      Raymond A.D. French                            |   |   | April      16, 2009 |
| Raymond      A.D. French                                |   |   |                |
| Director                                                |   |   |                |
|                                                    |   |   |                |
| /s/      James G. Hyde                                  |   |   | April      16, 2009 |
| James      G. Hyde                                      |   |   |                |
| Director                                                |   |   |                |
|                                                    |   |   |                |
| /s/      Dennis E. Logue                                |   |   | April      16, 2009 |
| Dennis      E. Logue                                    |   |   |                |
| Director                                                |   |   |                |
|                                                    |   |   |                |
| /s/      Lolan C. Mackey                                |   |   | April      16, 2009 |
| Lolan      C. Mackey                                    |   |   |                |
| Director                                                |   |   |                |
|                                                    |   |   |                |
| /s/      Royce L. Winsten                               |   |   | April      16, 2009 |
| Royce      L. Winsten                                   |   |   |                |
| Director      - Chairman of Board                       |   |   |                |

----