|   | (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)                           |

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| 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.  |   | Reserved                                                                                                     | 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                                                   | 22 |   |
|              | Item 8.  |   | Financial Statements and Supplementary Data                                                                  | 23 |   |
|              | Item 9.  |   | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                         | 38 |   |
|              | Item 9A. |   | Controls and Procedures                                                                                      | 39 |   |
|              | Item 9B. |   | Other Information                                                                                            | 40 |   |
|              |     |   |
| PART III          |     |   |
|              | Item 10. |   | Directors and Executive Officers of the Registrant                                                           | 40 |   |
|              | Item 11. |   | Executive Compensation                                                                                       | 41 |   |
|              | Item 12. |   | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               | 41 |   |
|              | Item 13. |   | Certain Relationships and Related Transactions                                                               | 41 |   |
|              | Item 14. |   | Principal Accountant Fees and Services                                                                       | 41 |   |
|              |     |   |
| PART IV           |     |   |
|              | Item 15. |   | Exhibits and Financial Statement Schedules                                                                   | 41 |   |
|              |     |   |
| Signatures        | 43       |   |
|              |     |   |
|              |     |   |

----

|                            |   |                |   |   |   |   |   |   |   |
|---------------------------------|--------|---------------------|--------|--------|--------|--------|--------|--------|--------|
|                            |   | Percentage of Sales |   |
|                            |   | 2010                |   |   | 2009   |   |   | 2008   |   |
| Merchandise Category:           |   |                |   |   |   |   |   |   |   |
| Consumables and commodities     |   |                | 34     | %      |   |   | 32     | %      |   |   | 34 | % |
| Hardlines                       |   |                | 33     | %      |   |   | 33     | %      |   |   | 34 | % |
| Apparel and accessories         |   |                | 17     | %      |   |   | 19     | %      |   |   | 19 | % |
| Home furnishings and décor |   |                | 16     | %      |   |   | 16     | %      |   |   | 13 | % |
| Total                           |   |                | 100    | %      |   |   | 100    | %      |   |   | 100 | % |

----

|           |   |   |   |   |     |   |   |   |   |   |     |   |   |   |   |   |     |   |
|----------------|--------|--------|--------|--------|----------|--------|--------|--------|--------|--------|----------|--------|--------|--------|--------|--------|----------|--------|
|           |   | 2010   |   |   | 2009     |   |   | 2008   |   |
|           |   | ALCO   |   |   | Duckwall |   |   | ALCO   |   |   | Duckwall |   |   | ALCO   |   |   | Duckwall |   |
| Stores Opened  |   |   | 1      |   |     |   | -      |   |   |   | 15       |   |   |   | -      |   |     |   | 18 |   |   |   | - |   |
| Stores Closed  |   |   | -      |   |     |   | 1      |   |   |   | 11       |   |   |   | 8      |   |     |   | 3 |   |   |   | 9 |   |
| Net New Stores |   |   | 1      |   |     |   | (1)    |   |   |   | 4        |   |   |   | (8)    |   |     |   | 15 |   |   |   | (9) |   |

----

| Duckwall Stores |   | ALCO Stores |   |
|-----------------|--------|-------------|--------|
|            |   |        |   |   |   |   |   |   |   |   |   |
| Colorado        |   |        | 4      |   | Arizona |   |   | 8 |   | Montana |   |   | 1 |   |
| Iowa            |   |        | 3      |   | Arkansas |   |   | 4 |   | Nebraska |   |   | 16 |   |
| Kansas          |   |        | 20     |   | 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. | RESERVED |
|---------|----------|

----

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

| Fiscal 2010    |   | High   |   |   | Low    |   |
|----------------|--------|--------|--------|--------|--------|--------|
| First quarter  |   | $      | 11.34  |   |   | $      | 7.77 |   |
| Second quarter |   | $      | 19.14  |   |   | $      | 11.35 |   |
| Third quarter  |   | $      | 18.21  |   |   | $      | 15.89 |   |
| Fourth quarter |   | $      | 17.60  |   |   | $      | 11.85 |   |
|           |   |   |   |   |   |   |   |   |
| 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 |   |

|                       |   | 2004   |   |   | 2005   |   |   | 2006   |   |   | 2007   |   |   | 2008   |   |   | 2009   |   |   | 2010   |   |
|----------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| NASDAQ Composite Index     |   |   | 100.00 |   |   |   | 99.91  |   |   |   | 112.72 |   |   |   | 121.28 |   |   |   | 118.40 |   |   |   | 59.00 |   |   |   | 85.89 |   |
| S&P Retail Index       |   |   | 100.00 |   |   |   | 115.41 |   |   |   | 122.43 |   |   |   | 140.37 |   |   |   | 113.09 |   |   |   | 69.07 |   |   |   | 100.06 |   |
| Duckwall-ALCO Stores, Inc. |   |   | 100.00 |   |   |   | 128.21 |   |   |   | 176.07 |   |   |   | 234.40 |   |   |   | 148.61 |   |   |   | 65.33 |   |   |   | 82.98 |   |

----

|                                        |   |              |    |   |                |   |    |                  |   |   | Maximum Number         |   |
|---------------------------------------------|--------|-------------------|---------|--------|---------------------|--------|---------|-----------------------|--------|--------|------------------------|--------|
|                                        |   |              |    |   |                |   |    | Total Number of       |   |   | (or Approximate Dollar |   |
|                                        |   |              |    |   |                |   |    | shares (or Units)     |   |   | Value) of Shares (or   |   |
|                                        |   | Total Number Of   |    |   |                |   |    | Purchased as Part     |   |   | Units) that May Yet    |   |
|                                        |   | Shares (or Units) |    |   | Average Price Paid  |   |    | of Publicly Announced |   |   | Be Purchased Under     |   |
| Period                                      |   | Purchased         |    |   | per Share (or Unit) |   |    | Plans or Programs     |   |   | the Plans or Programs  |   |
| First Quarter                               |   |              | -       |   |                |   | -       |                  |   |   | -                      |   |   |   | 174,466 |   |
| Second Quarter                              |   |              |  - |   |                |   |  - |                  |   |   | -                      |   |   |   |  174,466 |   |
| Third Quarter                               |   |              | -       |   |                |   |  - |                  |   |   | -                      |   |   |   | 174,466 |   |
|                                        |   |              |    |   |                |   |    |                  |   |   |                   |   |   |   |   |   |
| Fourth Quarter:                             |   |              |    |   |                |   |    |                  |   |   |                   |   |   |   |   |   |
|     11/02/09 - 11/29/09 |   |              | -       |   |                |   | -       |                  |   |   | -                      |   |   |   | 174,466 |   |
|     11/30/09 - 01/03/10 |   |              | -       |   |                |   | -       |                  |   |   | -                      |   |   |   | 174,466 |   |
|     01/04/10 - 01/31/10 |   |              | -       |   |                |   | -       |                  |   |   | -                      |   |   |   | 174,466 |   |
|                                        |   |              | -       |   |                |   |    |                  |   |   | -                      |   |   |   | 174,466 |   |
|                                        |   |              |    |   |                |   |    |                  |   |   |                   |   |   |   |   |   |
| As of January 31, 2010                      |   |              | 25,534  |   |                | $      | 15.16   |                  |   |   | 25,534                 |   |   |   | 174,466 |   |
|                                        |   |              |    |   |                |   |    |                  |   |   |                   |   |   |   |   |   |

----

|                                                                                            |   | Fiscal Year Ended |       |
|-------------------------------------------------------------------------------------------------|--------|-------------------|------------|
|                                                                                            |   | 52 Weeks          |       |   | 52 Weeks |   |   | 53 Weeks |   |   | 52 Weeks |   |   | 52 Weeks |   |
|                                                                                            |   | January 31,       |       |   | February 1, |   |   | February 3, |   |   | January 28, |   |   | January 29, |   |
| Statement of Operations Data                                                                    |   | 2010              |       |   | 2009 |   |   | 2008 |   |   | 2007 |   |   | 2006 |   |
| Net sales                                                                                       |   | $                 | 488,691    |   |   |   | 489,753 |   |   |   | 481,475 |   |   |   | 446,575 |   |   |   | 408,272 |   |
| Cost of sales                                                                                   |   |              | 330,179    |   |   |   | 335,934 |   |   |   | 329,195 |   |   |   | 304,653 |   |   |   | 277,060 |   |
| Gross margin                                                                                    |   |              | 158,512    |   |   |   | 153,819 |   |   |   | 152,280 |   |   |   | 141,922 |   |   |   | 131,212 |   |
|                                                                                            |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative (1)                                                         |   |              | 141,208    |   |   |   | 147,735 |   |   |   | 138,250 |   |   |   | 123,564 |   |   |   | 117,115 |   |
| Depreciation and amortization (2)                                                               |   |              | 9,983      |   |   |   | 9,302 |   |   |   | 9,463 |   |   |   | 6,512 |   |   |   | 5,632 |   |
| Operating income (loss) from continuing operations                                              |   |              | 7,321      |   |   |   | (3,218 | ) |   |   | 4,567 |   |   |   | 11,846 |   |   |   | 8,465 |   |
| Interest expense                                                                                |   |              | 2,149      |   |   |   | 1,867 |   |   |   | 3,382 |   |   |   | 2,729 |   |   |   | 1,272 |   |
| Earnings (loss) from continuing operations before                                               |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          income taxes                                   |   |              | 5,172      |   |   |   | (5,085 | ) |   |   | 1,185 |   |   |   | 9,117 |   |   |   | 7,193 |   |
| Income tax expense (benefit)                                                                    |   |              | 2,135      |   |   |   | (2,080 | ) |   |   | 394 |   |   |   | 3,213 |   |   |   | 2,188 |   |
| Earnings (loss) from continuing operations                                                      |   |              | 3,037      |   |   |   | (3,005 | ) |   |   | 790 |   |   |   | 5,904 |   |   |   | 5,005 |   |
| Loss from discontinued operations, net                                                          |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         of income tax benefit                                |   |              | (42        | ) |   |   | (1,971 | ) |   |   | (1,015 | ) |   |   | (200 | ) |   |   | (3,056 | ) |
| Net earnings (loss) (1)(2)                                                                      |   | $                 | 2,995      |   |   |   | (4,976 | ) |   |   | (224 | ) |   |   | 5,704 |   |   |   | 1,949 |   |
|                                                                                            |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Per Share Information                                                                           |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings (loss) per share - basic                                                               |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings (loss) from continuing operations                                                      |   | $                 | 0.80       |   |   |   | (0.79 | ) |   |   | 0.21 |   |   |   | 1.56 |   |   |   | 1.23 |   |
| Discontinued operations                                                                         |   |              | (0.01      | ) |   |   | (0.52 | ) |   |   | (0.27 | ) |   |   | (0.05 | ) |   |   | (0.75 | ) |
| Net earnings (loss)                                                                             |   | $                 | 0.79       |   |   |   | (1.31 | ) |   |   | (0.06 | ) |   |   | 1.51 |   |   |   | 0.48 |   |
|                                                                                            |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                            |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings (loss) per share - diluted                                                             |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings (loss) from continuing operations                                                      |   | $                 | 0.78       |   |   |   | (0.79 | ) |   |   | 0.21 |   |   |   | 1.54 |   |   |   | 1.22 |   |
| Discontinued operations                                                                         |   |              | (0.01      | ) |   |   | (0.52 | ) |   |   | (0.27 | ) |   |   | (0.05 | ) |   |   | (0.74 | ) |
| Net earnings (loss)                                                                             |   | $                 | 0.77       |   |   |   | (1.31 | ) |   |   | (0.06 | ) |   |   | 1.49 |   |   |   | 0.48 |   |
|                                                                                            |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average shares outstanding:                                                            |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                                                           |   |              | 3,797,947  |   |   |   | 3,809,109 |   |   |   | 3,807,033 |   |   |   | 3,792,202 |   |   |   | 4,083,798 |   |
| Diluted                                                                                         |   |              | 3,879,656  |   |   |   | 3,809,109 |   |   |   | 3,807,033 |   |   |   | 3,828,928 |   |   |   | 4,117,922 |   |
|                                                                                            |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating Data                                                                                  |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stores open at year-end                                                                         |   |              | 258        |   |   |   | 257 |   |   |   | 242 |   |   |   | 224 |   |   |   | 218 |   |
| Stores in non-competitive markets at year-end (3)                                               |   |              | 199        |   |   |   | 199 |   |   |   | 185 |   |   |   | 170 |   |   |   | 168 |   |
| Same-same stores at year-end (4)                                                                |   |              | 257        |   |   |   | 224 |   |   |   | 218 |   |   |   | 214 |   |   |   | 208 |   |
|                                                                                            |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Percentage of total stores in non-competitive                                                   |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          markets (3)                                    |   |              | 77.1       | % |   |   | 77.4 | % |   |   | 76.4 | % |   |   | 75.9 | % |   |   | 77.1 | % |
| Percentage of net sales from stores in                                                          |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          non-competitive markets, excluding fuel (3)(5) |   |              | 82.6  | % |   |   | 83.0  | % |   |   | 81.8  | % |   |   | 82.3 | % |   |   | 82.6 | % |
| Same-store sales increase (decrease) for all stores,                                            |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|          excluding fuel (4)                             |   |              | (0.7       | )% |   |   | (5.1 | )% |   |   | 1.8 | % |   |   | 4.9 | % |   |   | 3.4 | % |
|                                                                                            |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance Sheet Data                                                                              |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total assets                                                                                    |   | $            | 194,808    |   |   |   | 208,775 |   |   |   | 185,386 |   |   |   | 195,420 |   |   |   | 178,992 |   |
| Total debt (includes capital lease                                                              |   |              |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| obligation and current maturities)                                                              |   |              | 40,992     |   |   |   | 49,841 |   |   |   | 33,013 |   |   |   | 29,988 |   |   |   | 26,240 |   |
| Stockholders' equity                                                                            |   | $            | 105,733    |   |   |   | 102,040 |   |   |   | 107,172 |   |   |   | 106,060 |   |   |   | 102,147 |   |

----

| (1)    | Included in selling, general and administrative expenses is $757 of share-based compensation in fiscal 2010, $186 in fiscal 2009, $1.1 million in fiscal 2008, respectively.  No expense was recorded for share-based compensation in earlier years.                                                                              |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                  |
| (2)    | An asset impairment charge is included in depreciation and amortization of $831 for fiscal 2010, $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.                  |
|   |                                                                                                                                                                                                                                                                                                                                                  |
| (3)    | “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”. |
|   |                                                                                                                                                                                                                                                                                                                                                  |
| (4)    | 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.                                |
|   |                                                                                                                                                                                                                                                                                                                                                  |
| (5)    | In fiscal 2010, the Company began including stores as same-stores in their fourteenth fiscal period of operation.                                                                                                                                                                                                                           |

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

----

| · | The Company completed its store transformation project during fiscal 2010.  The store transformation project involved two principal components: improving work processes and shrink reduction.  Improving work processes principally involved industrial engineering of work flow, stocking, cleanliness, and the efficient use of labor within our stores.  Shrink reduction principally involved improving paperwork processing and vendor receipts and returns processes, cashier monitoring, manager override monitoring, reducing customer and employee theft, and enhancing physical security.  During fiscal 2010, the Company achieved store level labor and benefit savings improvement of approximately $4.2 million.  In addition, for fiscal 2010, the Company experienced an approximate $1.4 million decrease in gross margin due to shrink increase.  Increases in shrink are contrary to the desired result of our store transformation project.  In order to address the increase in shrink that we experienced, the Company has implemented a Company-wide Shrink Awareness Program to devote additional efforts to improving paperwork processing, the vendor receipts and returns processes, cashier monitoring, and manager override monitoring, reducing customer and employee theft, and enhancing physical security. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | On January 29, 2010 the Company received a United States Securities and Exchange Commission Comment Letter regarding the Company's Annual Report on Form 10-K for the Year Ended February 1, 2009, Filed on April 17, 2009, File No. 0-20269, and Related Filings.  The Company completed and provided its response to the Comment Letter on March 5, 2010.  The Company received a follow-up Comment Letter on March 18, 2010.  The Company responded to the follow-up letter on April 1, 2010.  On April 13, 2010, the Company received notification from the United States Securities and Exchange Commission that they had completed their review of the Company's responses and had no further comments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| · | On February 10, 2010, the Company closed on an Amended and Restated Credit Agreement (the "Facility") with Bank of America, N.A. and Wells Fargo Retail Finance, LLC.  The $120 million Facility has a term of four years and replaces the Company's previous revolving credit facility which was in the amount of $105 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| · | Richard E. Wilson joined the Company on February 15, 2010 to become the President-Chief Executive Officer                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| · | Lawrence J. Zigerelli, President – Chief Executive Officer resigned from the Company on February 19, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| · | James M. Spencer, Senior Vice President - Store Operations resigned from the Company on February 26, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| · | James Worth, Director, resigned from the Board of Directors on March 2, 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| · | On March 18, 2010, the Company filed Form S-8 with the Securities and Exchange Commission registering the shares of the Company's Non-Qualified Stock Option Agreement and the Company's Incentive Stock Option Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| · | Lawrence J. Zigerelli exercised his vested options for 27,500 shares on March 19, 2010.  Of which, 25,000 were vested under the Incentive Stock Option Plan and 2,500 were vested under the Non-Qualified Stock Option Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| · | James M. Spencer elected net exercise for vested options, receiving 1,405 shares on March 19, 2010 under the Incentive Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| · | The Company has closed four Duckwall Stores during the first quarter of fiscal 2011.  They were located in underperforming markets and were at the end of their lease term.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

| · | Net sales decreased 0.2% to $488.7 million. Same-store sales decreased 0.7%, excluding the Company's two fuel centers, compared to the prior year.                                                                                                                                                                                                                                                                        |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · | Gross margin increased to 32.4% of sales, compared to 31.4% in the prior year.  Excluding the prior year first quarter $1.3 million inventory review initiative charge, fiscal 2009 gross margin is 31.7%.                                                                                                                                                                                                                |
| · | Selling, general and administrative (SG&A) expenses were 28.9% of sales, compared to 30.2% in the prior year.  Excluding the prior year executive and staff severance along with the current and prior year store transformation project expenses, preopening costs and share-based compensation, fiscal 2010 and fiscal 2009 SG&A expenses, as a percent of sales, were 28.3% and 28.9%, respectively. |
| · | Net earnings per diluted share was $0.79, compared to a loss of ($1.31) per diluted share in the prior year.                                                                                                                                                                                                                                                                                                                   |
| · | Return on average equity was 2.9%, compared to (4.8%) in the prior year.                                                                                                                                                                                                                                                                                                                                                            |

----

|                                                                |   | Fiscal Year Ended |   |
|---------------------------------------------------------------------|--------|-------------------|--------|
|                                                                |   | 52 Weeks          |   |   | 52 Weeks |   |   | 53 Weeks |   |
|                                                                |   | January 31,       |   |   | February 1, |   |   | February 3, |   |
|                                                                |   | 2010              |   |   | 2009 |   |   | 2008 |   |
| Net sales                                                           |   |              | 100.0  | % |   |   | 100.0 | % |   |   | 100.0 | % |
| Cost of sales                                                       |   |              | 67.6   |   |   |   | 68.6 |   |   |   | 68.4 |   |
| Gross margin                                                        |   |              | 32.4   |   |   |   | 31.4 |   |   |   | 31.6 |   |
| Selling, general and administrative                                 |   |              | 28.9   |   |   |   | 30.2 |   |   |   | 28.7 |   |
| Depreciation and amortization                                       |   |              | 2.0    |   |   |   | 1.9 |   |   |   | 2.0 |   |
| Total operating expenses                                            |   |              | 30.9   |   |   |   | 32.1 |   |   |   | 30.7 |   |
| Operating income (loss) from continuing operations                  |   |              | 1.5    |   |   |   | (0.7 | ) |   |   | 0.9 |   |
| Interest expense                                                    |   |              | 0.4    |   |   |   | 0.4 |   |   |   | 0.7 |   |
| Earnings (loss) from continuing operations before income taxes |   |              | 1.1    |   |   |   | (1.1 | ) |   |   | 0.2 |   |
| Income tax expense (benefit)                                        |   |              | 0.4    |   |   |   | (0.4 | ) |   |   | 0.1 |   |
| Earnings (loss) from continuing operations                          |   |              | 0.7    |   |   |   | (0.7 | ) |   |   | 0.1 |   |
| Loss from discontinued operations, net of income tax benefit        |   |              | 0.0    |   |   |   | (0.4 | ) |   |   | (0.2 | ) |
| Net earnings (loss)                                                 |   |              | 0.7    | % |   |   | (1.1 | ) % |   |   | (0.1 | )% |

----

----

----

|                                                                                                                                                                                                                                 |   | For the Years Ended |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|---------|
|                                                                                                                                                                                                                                 |   | 52 Weeks            |    |   | 52 Weeks |   |
| SG&A Expenses Breakout                                                                                                                                                                                                           |   | January 31, 2010    |    |   | February 1, 2009 |   |
| Store support center (1)                                                                                                                                                                                                             |   | $                   | 23,221  |   |   |   | 26,427 |   |
| Distribution center                                                                                                                                                                                                                  |   |                | 8,728   |   |   |   | 9,470 |   |
| 401K expense                                                                                                                                                                                                                         |   |                | 381     |   |   |   | 462 |   |
| Same-store SG&A                                                                                                                                                                                                                  |   |                | 104,482 |   |   |   | 108,324 |   |
| Non same-store SG&A (2)                                                                                                                                                                                                          |   |                | 3,639   |   |   |   | 2,866 |   |
| Share-based compensation                                                                                                                                                                                                             |   |                | 757     |   |   |   | 186 |   |
| SG&A as reported                                                                                                                                                                                                                 |   |                | 141,208 |   |   |   | 147,735 |   |
| Less:                                                                                                                                                                                                                                |   |                |    |   |   |   |   |   |
| Share-based compensation                                                                                                                                                                                                             |   |                | (757    | ) |   |   | (186 | ) |
| Preopening store costs (2)                                                                                                                                                                                                           |   |                | (128    | ) |   |   | (1,846 | ) |
| Executive and staff severance (1)                                                                                                                                                                                                    |   |                | -       |   |   |   | (1,942 | ) |
| Store transformation project costs (1)                                                                                                                                                                                               |   |                | (2,096  | ) |   |   | (2,220 | ) |
| Adjusted SG&A                                                                                                                                                                                                                    |   | $                   | 138,227 |   |   |   | 141,541 |   |
|                                                                                                                                                                                                                                 |   |                |    |   |   |   |   |   |
| Adjusted SG&A as % of sales                                                                                                                                                                                                      |   |                | 28.3    | % |   |   | 28.9 | % |
|                                                                                                                                                                                                                                 |   |                |    |   |   |   |   |   |
| Sales per average selling square foot (3)                                                                                                                                                                                            |   | $                   | 107.77  |   |   |   | 112.03 |   |
|                                                                                                                                                                                                                                 |   |                |    |   |   |   |   |   |
| Adjusted Gross Margin dollars per average selling square feet (3)(4)                                                                                                                                                                 |   | $                   | 34.95   |   |   |   | 35.49 |   |
|                                                                                                                                                                                                                                 |   |                |    |   |   |   |   |   |
| Adjusted SG&A per average selling square foot (3)                                                                                                                                                                                |   | $                   | 30.48   |   |   |   | 32.37 |   |
|                                                                                                                                                                                                                                 |   |                |    |   |   |   |   |   |
| Adjusted EBITDA per average selling square foot (3)(5)                                                                                                                                                                               |   | $                   | 4.47    |   |   |   | 3.12 |   |
|                                                                                                                                                                                                                                 |   |                |    |   |   |   |   |   |
| Average inventory per average selling square feet (3)(6)(7)                                                                                                                                                                          |   | $                   | 27.02   |   |   |   | 26.75 |   |
|                                                                                                                                                                                                                                 |   |                |    |   |   |   |   |   |
| Average selling square feet (3)                                                                                                                                                                                                      |   |                | 4,535   |   |   |   | 4,372 |   |
|                                                                                                                                                                                                                                 |   |                |    |   |   |   |   |   |
| Total stores operating beginning of period                                                                                                                                                                                           |   |                | 258     |   |   |   | 262 |   |
| Total stores operating end of period                                                                                                                                                                                                 |   |                | 258     |   |   |   | 258 |   |
| Total stores less than twelve months old                                                                                                                                                                                             |   |                | 1       |   |   |   | 15 |   |
| Total non same-stores                                                                                                                                                                                                                |   |                | 1       |   |   |   |  33 |   |
|                                                                                                                                                                                                                                 |   |                |    |   |   |   |   |   |
| Supplemental Data:                                                                                                                                                                                                                   |   |                |    |   |   |   |   |   |
| Same-store adjusted gross margin dollar change                                                                                                                                                                                       |   |                | (0.4    | )% |   |   | (8.4 | )% |
| Same-store SG&A dollar change                                                                                                                                                                                                    |   |                | (3.6    | )% |   |   | (6.1 | )% |
| Same-store total customer count change                                                                                                                                                                                               |   |                | (0.1    | )% |   |   | (10.4 | )% |
| Same-store average sale per ticket change                                                                                                                                                                                            |   |                | (0.6    | )% |   |   | 4.0 |  % |
|                                                                                                                                                                                                                                 |   |                |    |   |   |   |   |   |
|                                                                                                                                                                                                                                 |   |                |    |   |   |   |   |   |
| (1) Store support center includes executive and staff severance for first quarter of fiscal 2009 and store transformation project costs for first and second quarters of fiscal 2010 and the third and fourth quarter of fiscal 2009 |   |
| (2) Non same-stores are those stores opened in Fiscal 2009 which have not reached their fourteenth period of operation                                                                                                               |   |
| (3) Average selling square feet is calculated as beginning square feet plus ending square feet divided by 2                                                                                                                          |   |
| (4) Adjusted Gross Margin includes $1.3 million inventory review initiative charge added back in first quarter fiscal 2009                                                                                                           |
| (5) Adjusted EBITDA per average selling square foot is calculated as Adjusted EBITDA divided by average selling square feet                                                                                                          |   |
| (6) Average store level merchandise inventory for fiscal 2010 and 2009 is calculated as beginning inventory plus ending inventory divided by 2                                                                                       |   |
| (7) Excludes inventory for unopened stores                                                                                                                                                                                           |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |        |   |   | For the Thirty-Nine |   |   | Trailing Twelve  |   |   | For the Thirteen   |   |   |             |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------|--------|--------|---------------------|--------|--------|------------------|--------|--------|--------------------|--------|--------|------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 52 Weeks    |   |   | Week Periods Ended  |   |   | Periods Ended    |   |   | Week Periods Ended |   |   | 52 Weeks         |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | Fiscal 2009 |   |   | November 1, 2009    |   |   | November 2, 2008 |   |   | November 1, 2009   |   |   | January 31, 2010 |   |   | February 1, 2009 |   |   | Fiscal 2010 |   |
| Net earnings (loss) from continuing operations (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $           | (3,005 | )      |                |   | 1,549  |             |   |   | (2,368             | )      |   |             | 912    |   |   |   | 1,487 |   |   |   | (638 | ) |   |   | 3,037 |   |
| Plus:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |        |   |   |                |   |   |             |   |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |        | 1,867  |   |                |   | 1,590  |             |   |   | 1,219              |   |   |             | 2,238  |   |   |   | 559 |   |   |   | 648 |   |   |   | 2,149 |   |
| Taxes (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |        | (2,080 | )      |                |   | 1,310  |             |   |   | (2,397             | )      |   |             | 1,627  |   |   |   | 825 |   |   |   | 317 |   |   |   | 2,135 |   |
| Depreciation and amortization (1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |        | 9,302  |   |                |   | 6,973  |             |   |   | 5,794              |   |   |             | 10,481 |   |   |   | 3,011 |   |   |   | 3,509 |   |   |   | 9,983 |   |
| Share-based compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |        | 186    |   |                |   | 601    |             |   |   | 34                 |   |   |             | 753    |   |   |   | 156 |   |   |   | 152 |   |   |   | 757 |   |
| Preopening store costs (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |        | 1,845  |   |                |   | 2      |             |   |   | 1,837              |   |   |             | 10     |   |   |   | 127 |   |   |   | 9 |   |   |   | 128 |   |
| Inventory review initiative                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |        | 1,345  |   |                |   | -      |             |   |   | 1,345              |   |   |             | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Executive and staff severance                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |        | 1,942  |   |                |   | -      |             |   |   | 1,942              |   |   |             | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Store transformation project costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |        | 2,220  |   |                |   | 2,096  |             |   |   | 937                |   |   |             | 3,379  |   |   |   | - |   |   |   | 1,283 |   |   |   | 2,096 |   |
| =Adjusted EBITDA (1)(3)(4)(5)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |        | 13,622 |   |                |   | 14,121 |             |   |   | 8,343              |   |   |             | 19,400 |   |   |   | 6,165 |   |   |   | 5,280 |   |   |   | 20,285 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |        |   |   |                |   |   |             |   |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |        |   |   |                |   |   |             |   |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |        | 4,744  |   |                |   | 5,703  |             |   |   | 5,320              |   |   |             | 5,703  |   |   |   | 5,164 |   |   |   | 4,744 |   |   |   | 5,164 |   |
| Debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |        | 49,841 |   |                |   | 54,180 |             |   |   | 58,303             |   |   |             | 54,180 |   |   |   | 40,992 |   |   |   | 49,841 |   |   |   | 40,992 |   |
| Debt, net of cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $           | 45,097 |   |                |   | 48,477 |             |   |   | 52,983             |   |   |             | 48,477 |   |   |   | 35,828 |   |   |   | 45,097 |   |   |   | 35,828 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |        |   |   |                |   |   |             |   |   |               |   |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1) These amounts will not agree with the fiscal 2009 first quarter 10-Q filing due to the one store the Company closed in the third quarter of fiscal 2009. These amounts will not agree with the fiscal year end 2009 or fiscal 2010 first quarter 10-Q filing due to the one store the Company closed in the second quarter of fiscal 2010. 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 been or will be opened and are incurred prior to the grand opening of each store.                                                                                                                                                                                                                                                                                                                                                |   |
| (3) For the trailing twelve periods ended January 31, 2010 the average open weeks for the Company's one non same-store is 3 weeks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |
| (4) During fiscal year 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 the trailing twelve periods ended January 31, 2010, these initiatives resulted in approximately $4.3 million reduced SG&A expenses when compared to the same prior year trailing twelve periods.  The initiatives include, but are 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) In addition to continued efforts regarding the fiscal 2009 cost reduction initiatives, the Company has also implemented new initiatives for fiscal year 2010. The fiscal 2010 initiatives include, but are not limited to, reduced point-of-sale hardware lease expense, energy expense and accident reduction programs. These initiatives achieved approximately $2.6 million in SG&A savings in fiscal 2010 when compared to the prior year same period.                                                                                                                                                                                         |   |

----

|        |                                       |   | First   |   |   | Second  |   |   | Third   |   |   | Fourth     |   |
|-------------|--------------------------------------------|--------|---------|--------|--------|---------|--------|--------|---------|--------|--------|------------|--------|
|        |                                       |   | Quarter |   |   | Quarter |   |   | Quarter |   |   | Quarter(1) |   |
|        |                                       |   |    |   |   |    |   |   |    |   |   |       |   |
| Fiscal 2010 | Net sales                                  |   | $       | 115.4  |   |    |   | 125.3  |    |   |   | 111.5      |   |   |   | 136.5 |   |
|        | Gross margin                               |   |    | 38.5   |   |    |   | 42.4   |    |   |   | 35.7       |   |   |   | 41.9 |   |
|        | Earnings (loss) from continuing operations |   |    | (0.0   | )      |    |   | 3.0    |    |   |   | (1.4       | )      |   |   | 1.5 |   |
|        | Net earnings (loss)                        |   |    | (0.1   | )      |    |   | 3.0    |    |   |   | (1.4       | )      |   |   | 1.5 |   |
|        |                                       |   |    |   |   |    |   |   |    |   |   |       |   |   |   |   |   |
| Fiscal 2009 | Net sales                                  |   | $       | 105.6  |   |    |   | 129.2  |    |   |   | 114.9      |   |   |   | 140.1 |   |
|        | Gross margin                               |   |    | 31.7   |   |    |   | 43.3   |    |   |   | 37.1       |   |   |   | 41.7 |   |
|        | Earnings (loss) from continuing operations |   |    | (4.3   | )      |    |   | 3.5    |    |   |   | (1.5       | )      |   |   | (0.6 | ) |
|        | Net earnings (loss)                        |   |    | (5.9   | )      |    |   | 3.3    |    |   |   | (1.7       | )      |   |   | (0.7 | ) |
|        |                                       |   |    |   |   |    |   |   |    |   |   |       |   |   |   |   |   |
| Fiscal 2008 | Net sales                                  |   | $       | 105.9  |   |    | $      | 118.6  |    |   | $      | 109.9      |   |   | $ | 147.1 |   |
|        | Gross margin                               |   |    | 32.7   |   |    |   | 39.4   |    |   |   | 35.7       |   |   |   | 44.5 |   |
|        | 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) | Asset impairment charges of $831, $1.3 million and $2.1 million negatively impacted net earnings for fiscal 2010, 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     |   | $                          | 35,159  |   |   |   | - |   |   |   | - |   |   |   | 35,159 |   |   |   | - |   |
| FF&E term loan                 |   |                       | 2,865   |   |   |   | 1,451 |   |   |   | 1,414 |   |   |   | - |   |   |   | - |   |
| Capital lease obligations          |   |                       | 3,413   |   |   |   | 2,638 |   |   |   | 775 |   |   |   | - |   |   |   | - |   |
| Operating leases                   |   |                       | 164,650 |   |   |   | 19,676 |   |   |   | 34,660 |   |   |   | 26,783 |   |   |   | 83,531 |   |
| Transportation contract            |   |                       | 255     |   |   |   | 255 |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Contingent rentals                 |   |                       | 9,898   |   |   |   | 1,192 |   |   |   | 2,430 |   |   |   | 2,510 |   |   |   | 3,766 |   |
|                               |   |                       |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total contractual cash obligations |   | $                          | 216,240 |   |   |   | 25,212 |   |   |   | 39,279 |   |   |   | 64,452 |   |   |   | 87,297 |   |

| (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 February 10, 2010 amended 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 uncertain tax positions were $54, as of January 31, 2010 and February 1, 2009, are classified on the Company's consolidated balance sheet within "Other current liabilities" and are not included in the table. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·  | the Company’s ability to hire, train, and retain qualified personnel                                                                                             |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ·  | the availability of adequate capital resources for us to purchase inventory, equipment, and fixtures and make other capital expenditures necessary for store expansion |
| ·  | the ability of our landlords and developers to find appropriate financing in the current credit market to develop property to be leased by the Company                 |

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|                                                                                                                                           |   | Page   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|                                                                                                                                           |   |   |   |
| Report of Independent Registered Public Accounting Firm……………………..                              |   |   | 24     |   |
|                                                                                                                                           |   |   |   |   |
| Financial Statements:                                                                                                                          |   |   |   |   |
| Consolidated Balance Sheets --                                                                                                                 |   |   |   |   |
| January 31, 2010 and February 1, 2009………………………………..                    |   |   | 25     |   |
|                                                                                                                                           |   |   |   |   |
| Consolidated Statements of Operations --                                                                                                       |   |   |   |   |
| Fiscal years Ended January 31, 2010,                                                                                                           |   |   |   |   |
| February 1, 2009 and February 3, 2008……………………………….                     |   |   | 26     |   |
|                                                                                                                                           |   |   |   |   |
| Consolidated Statements of Stockholders'                                                                                                       |   |   |   |   |
| Equity -- Fiscal years Ended January 31, 2010,                                                                                                 |   |   |   |   |
| February 1, 2009 and February 3, 2008……………………..………..                         |   |   | 27     |   |
|                                                                                                                                           |   |   |   |   |
| Consolidated Statements of Cash Flows --                                                                                                       |   |   |   |   |
| Fiscal years Ended January 31, 2010,                                                                                                           |   |   |   |   |
| February 1, 2009 and February 3, 2008………………………………..                    |   |   | 28     |   |
|                                                                                                                                           |   |   |   |   |
| Notes to Consolidated Financial Statements…………………………………….. |   |   |   |   |
|                                                                                                                                           |   |   | 29     |   |
| Financial Statement Schedules:                                                                                                                 |   |   |   |   |
|                                                                                                                                           |   |   |   |   |
| No financial statement schedules are included as they are not applicable to the Company                                                        |   |   |   |   |

----

----

| Duckwall-ALCO Stores, Inc.                                                                             |   |
|--------------------------------------------------------------------------------------------------------|--------|
| Consolidated Balance Sheets                                                                            |   |
| (dollars in thousands, except share amounts)                                                           |   |
|                                                                                                   |   |   |   |   |   |   |
| Assets                                                                                                 |   |
|                                                                                                   |   | January 31, |   |   | February 1, |   |
|                                                                                                   |   | 2010 |   |   | 2009 |   |
|                                                                                                   |   |   |   |   |   |   |
| Current assets:                                                                                        |   |   |   |   |   |   |
|    Cash and cash equivalents                                                            |   | $ | 5,164 |   |   | $ | 4,744 |   |
|    Receivables                                                                          |   |   | 7,437 |   |   |   | 5,142 |   |
|    Prepaid income taxes                                                                 |   |   | 594 |   |   |   | 5,753 |   |
|    Inventories                                                                          |   |   | 140,375 |   |   |   | 146,620 |   |
|    Prepaid expenses                                                                     |   |   | 3,517 |   |   |   | 4,143 |   |
|    Deferred income taxes                                                                |   |   | 3,863 |   |   |   | 5,348 |   |
|   Property held for sale                                                                     |   |   | 1,631 |   |   |   | 1,505 |   |
|           Total current assets                       |   |   | 162,581 |   |   |   | 173,255 |   |
|                                                                                                   |   |   |   |   |   |   |   |   |
| Property and equipment, at cost:                                                                       |   |   |   |   |   |   |   |   |
|    Land and land improvements                                                           |   |   | 1,455 |   |   |   | 1,420 |   |
|    Buildings and building improvements                                                  |   |   | 11,844 |   |   |   | 11,369 |   |
|    Furniture, fixtures and equipment                                                    |   |   | 67,304 |   |   |   | 69,019 |   |
|    Transportation equipment                                                             |   |   | 1,303 |   |   |   | 1,322 |   |
|    Leasehold improvements                                                               |   |   | 14,855 |   |   |   | 13,974 |   |
|    Construction work in progress                                                        |   |   | 1,744 |   |   |   | 745 |   |
|           Total property and equipment               |   |   | 98,505 |   |   |   | 97,849 |   |
|    Less accumulated depreciation                                                        |   |   | 67,959 |   |   |   | 65,591 |   |
|           Net property and equipment                 |   |   | 30,546 |   |   |   | 32,258 |   |
|                                                                                                   |   |   |   |   |   |   |   |   |
| Property under capital leases                                                                          |   |   | 11,015 |   |   |   | 11,015 |   |
|    Less accumulated amortization                                                        |   |   | 9,385 |   |   |   | 7,958 |   |
|           Net property under capital leases          |   |   | 1,630 |   |   |   | 3,057 |   |
|                                                                                                   |   |   |   |   |   |   |   |   |
| Other non-current assets                                                                               |   |   | 51 |   |   |   | 205 |   |
|           Total assets                               |   | $  | 194,808 |   |   |   | 208,775 |   |
|                                                                                                   |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity                                                                   |   |
|                                                                                                   |   |   |   |   |   |   |   |   |
| Current liabilities:                                                                                   |   |   |   |   |   |   |   |   |
|    Current maturities of long-term debt                                                 |   | $  | 1,451 |   |   |   | 1,362 |   |
|    Current maturities of capital lease obligations                                      |   |   | 1,623 |   |   |   | 1,853 |   |
|    Accounts payable                                                                     |   |   | 23,076 |   |   |   | 30,233 |   |
|    Accrued salaries and commissions                                                     |   |   | 4,122 |   |   |   | 5,375 |   |
|    Accrued taxes other than income                                                      |   |   | 4,913 |   |   |   | 4,941 |   |
|    Self-insurance claim reserves                                                        |   |   | 4,852 |   |   |   | 5,309 |   |
|    Other current liabilities                                                            |   |   | 4,499 |   |   |   | 4,676 |   |
|           Total current liabilities                  |   |   | 44,536 |   |   |   | 53,749 |   |
|                                                                                                   |   |   |   |   |   |   |   |   |
| Long term debt, less current maturities                                                                |   |   | 1,414 |   |   |   | 2,865 |   |
| Notes payable under revolving loan                                                                     |   |   | 35,159 |   |   |   | 40,714 |   |
| Capital lease obligations - less current maturities                                                    |   |   | 1,345 |   |   |   | 3,047 |   |
| Deferred gain on leases                                                                                |   |   | 4,212 |   |   |   | 4,598 |   |
| Deferred income taxes                                                                                  |   |   | 694 |   |   |   | 138 |   |
| Other noncurrent liabilities                                                                           |   |   | 1,715 |   |   |   | 1,624 |   |
|           Total liabilities                          |   |   | 89,075 |   |   |   | 106,735 |   |
|                                                                                                   |   |   |   |   |   |   |   |   |
| Stockholders' equity:                                                                                  |   |   |   |   |   |   |   |   |
|   Common stock, $.0001 par value, authorized 20,000,000 shares; issued and outstanding       |   |   |   |   |   |   |   |   |
|     3,797,947 shares and 3,797,947 shares, respectively                            |   |   | 1 |   |   |   | 1 |   |
|    Additional paid-in capital                                                           |   |   | 39,313 |   |   |   | 38,615 |   |
|    Retained earnings                                                                    |   |   | 66,419 |   |   |   | 63,424 |   |
|           Total stockholders' equity                 |   |   | 105,733 |   |   |   | 102,040 |   |
|           Total liabilities and stockholders' equity |   | $ | 194,808 |   |   | $ | 208,775 |   |
|                                                                                                   |   |   |   |   |   |   |   |   |
| See accompanying notes to consolidated financial statements.                                           |   |

----

| Duckwall-ALCO Stores, Inc.                                                                       |   |
|--------------------------------------------------------------------------------------------------|--------|
| Consolidated Statements of Operations                                                            |   |
| Fiscal Years ended January 31, 2010, February 1, 2009 and February 3, 2008                       |   |
| (dollars in thousands, except per share amounts)                                                 |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |
|                                                                                             |   | 52 Weeks |   |   | 52 Weeks |   |   | 53 Weeks |   |
|                                                                                             |   | 2010 |   |   | 2009 |   |   | 2008 |   |
| Net sales                                                                                        |   | $ | 488,691 |   |   |   | 489,753 |   |   |   | 481,475 |   |
| Cost of sales                                                                                    |   |   | 330,179 |   |   |   | 335,934 |   |   |   | 329,195 |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross margin                                                                                     |   |   | 158,512 |   |   |   | 153,819 |   |   |   | 152,280 |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative                                                              |   |   | 141,208 |   |   |   | 147,735 |   |   |   | 138,250 |   |
| Depreciation and amortization                                                                    |   |   | 9,983 |   |   |   | 9,302 |   |   |   | 9,463 |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
|            Total operating expenses       |   |   | 151,191 |   |   |   | 157,037 |   |   |   | 147,713 |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating income (loss) from continuing operations                                               |   |   | 7,321 |   |   |   | (3,218 | ) |   |   | 4,567 |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                                                                 |   |   | 2,149 |   |   |   | 1,867 |   |   |   | 3,382 |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings (loss) from continuing operations before income taxes                                   |   |   | 5,172 |   |   |   | (5,085 | ) |   |   | 1,185 |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax expense (benefit)                                                                     |   |   | 2,135 |   |   |   | (2,080 | ) |   |   | 394 |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings (loss) from continuing operations                                                       |   |   | 3,037 |   |   |   | (3,005 | ) |   |   | 790 |   |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss from discontinued operations, net of income                                            |   |   |   |   |   |   |   |   |   |   |   |   |
|    tax benefit of $25, $1.2 million and $632 in 2010, 2009 and 2008, respectively |   |   | (42 | ) |   |   | (1,971 | ) |   |   | (1,015 | ) |
| Net earnings (loss)                                                                              |   | $ | 2,995 |   |   |   | (4,976 | ) |   |   | (224 | ) |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings (loss) per share                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
|      Basic                                                              |   |   |   |   |   |   |   |   |   |   |   |   |
|          Continuing operations                      |   | $ | 0.80 |   |   |   | (0.79 | ) |   |   | 0.21 |   |
|          Discontinued operations                    |   |   | (0.01 | ) |   |   | (0.52 | ) |   |   | (0.27 | ) |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
|          Net earnings (loss) per share              |   | $ | 0.79 |   |   |   | (1.31 | ) |   |   | (0.06 | ) |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings (loss) per share                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
|      Diluted                                                            |   |   |   |   |   |   |   |   |   |   |   |   |
|          Continuing operations                      |   | $ | 0.78 |   |   |   | (0.79 | ) |   |   | 0.21 |   |
|          Discontinued operations                    |   |   | (0.01 | ) |   |   | (0.52 | ) |   |   | (0.27 | ) |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
|          Net earnings (loss) per share              |   | $ | 0.77 |   |   |   | (1.31 | ) |   |   | (0.06 | ) |
|                                                                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| See accompanying notes to consolidated financial statements.                                     |   |   |   |   |   |   |   |   |   |   |   |   |

----

| Duckwall-ALCO Stores, Inc.                                                 |   |
|----------------------------------------------------------------------------|--------|
| Consolidated Statements of Stockholders' Equity                            |   |
| Fiscal Years ended January 31, 2010, February 1, 2009 and February 3, 2008 |   |
| (dollars in thousands, except share amounts)                               |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   | Common |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   | stock |   |   |   |   |   | Additional |   |   |   |   |   | Total |   |
|                                                                       |   | shares |   |   | Common |   |   | paid-in |   |   | Retained |   |   | stockholders' |   |
|                                                                       |   | outstanding |   |   | stock |   |   | capital |   |   | earnings |   |   | equity |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| 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 |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net earnings for the year ended January 31, 2010                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 2,995 |   |   |   | 2,995 |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Expired stock options                                                      |   |   | - |   |   |   | - |   |   |   | (59 | ) |   |   | - |   |   |   | (59 | ) |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Share-based compensation                                                   |   |   | - |   |   |   | - |   |   |   | 757 |   |   |   | - |   |   |   | 757 |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance, January 31, 2010                                                  |   |   | 3,797,947 |   |   | $ | 1 |   |   |   | 39,313 |   |   |   | 66,419 |   |   |   | 105,733 |   |
|                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| See accompanying notes to consolidated financial statements.               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| Duckwall-ALCO Stores, Inc.                                                                           |   |
|------------------------------------------------------------------------------------------------------|--------|
| Consolidated Statements of Cash Flows                                                                |   |
| Fiscal Years ended January 31, 2010, February 1, 2009 and February 3, 2008                           |   |
| (dollars in thousands)                                                                               |   |
|                                                                                                 |   | 52 Weeks |   |   | 52 Weeks |   |   | 53 Weeks |   |
|                                                                                                 |   | 2010 |   |   | 2009 |   |   | 2008 |   |
| Cash flows from operating activities:                                                                |   |   |   |   |   |   |   |   |   |
| Net earnings (loss)                                                                                  |   | $ | 2,995 |   |   |   | (4,976 | ) |   |   | (224 | ) |
| Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: |   |   |   |   |   |   |   |   |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and amortization                                                                        |   |   | 9,944 |   |   |   | 9,346 |   |   |   | 9,867 |   |
| Loss (gain) on sale of assets                                                                        |   |   | 43 |   |   |   | 7 |   |   |   | (180 | ) |
| Share-based compensation                                                                             |   |   | 757 |   |   |   | 186 |   |   |   | 1,130 |   |
| Tax benefit of stock options exercised                                                               |   |   | - |   |   |   | - |   |   |   | 14 |   |
| Deferred income tax expense, net                                                                     |   |   | 1,982 |   |   |   | 5,050 |   |   |   | (1,428 | ) |
| Changes in:                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |
|     Receivables                                                                  |   |   | (2,295 | ) |   |   | (237 | ) |   |   | (1,846 | ) |
|     Prepaid expenses                                                             |   |   | 626 |   |   |   | (1,042 | ) |   |   | (1,540 | ) |
|     Inventories                                                                  |   |   | 6,245 |   |   |   | (18,075 | ) |   |   | 22,861 |   |
|     Accounts payable                                                             |   |   | (7,157 | ) |   |   | 11,099 |   |   |   | (16,129 | ) |
|     Prepaid income taxes                                                         |   |   | 5,159 |   |   |   | (4,985 | ) |   |   | (2,560 | ) |
|     Accrued salaries and commissions                                             |   |   | (1,253 | ) |   |   | 1,664 |   |   |   | (469 | ) |
|     Accrued taxes other than income                                              |   |   | (28 | ) |   |   | 640 |   |   |   | 59 |   |
|     Self-insured claims reserves                                                 |   |   | (457 | ) |   |   | 738 |   |   |   | 249 |   |
|     Other assets and liabilities                                                 |   |   | (318 | ) |   |   | (2,583 | ) |   |   | 1,294 |   |
| Net cash provided by (used in) operating activities                                                  |   |   | 16,243 |   |   |   | (3,168 | ) |   |   | 11,098 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from the sale of assets                                                                     |   |   | 77 |   |   |   | 185 |   |   |   | 637 |   |
| Acquisition of property and equipment                                                                |   |   | (7,051 | ) |   |   | (14,402 | ) |   |   | (12,293 | ) |
| Net cash used in investing activities                                                                |   |   | (6,974 | ) |   |   | (14,217 | ) |   |   | (11,656 | ) |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                                |   |   |   |   |   |   |   |   |   |   |   |   |
| Net borrowings (pay downs) under revolving loan credit agreement                                     |   |   | (5,555 | ) |   |   | 19,999 |   |   |   | (362 | ) |
| Refinancing costs on revolving loan and term loan fees                                               |   |   | - |   |   |   | - |   |   |   | (256 | ) |
| Proceeds from exercise of outstanding stock options                                                  |   |   | - |   |   |   | - |   |   |   | 307 |   |
| Proceeds from stock sale                                                                             |   |   | - |   |   |   | 90 |   |   |   |   |   |
| Income tax benefit rate change for stock options                                                     |   |   | - |   |   |   | (5 | ) |   |   | - |   |
| Repurchase of stock                                                                                  |   |   | - |   |   |   | (285 | ) |   |   | - |   |
| Net borrowings (pay downs) under term loan                                                           |   |   | (1,362 | ) |   |   | (1,278 | ) |   |   | 5,505 |   |
| Principal payments under capital lease obligations                                                   |   |   | (1,932 | ) |   |   | (1,893 | ) |   |   | (2,118 | ) |
| Net cash (used in) provided by financing activities                                                  |   |   | (8,849 | ) |   |   | 16,628 |   |   |   | 3,076 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Net increase (decrease) in cash and cash equivalents                                                 |   |   | 420 |   |   |   | (757 | ) |   |   | 2,518 |   |
| Cash and cash equivalents at beginning of year                                                       |   |   | 4,744 |   |   |   | 5,501 |   |   |   | 2,983 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents at end of year                                                             |   | $ | 5,164 |   |   |   | 4,744 |   |   |   | 5,501 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental disclosure of non-cash activity:                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Tax benefit related to stock options exercised                                                       |   | $ | - |   |   |   | - |   |   |   | 14 |   |
|                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| 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 years                                 |
| Furniture, fixtures and equipment | 3 - 8 years                             |
| Transportation equipment          | 3 - 5 years                             |
| Leasehold improvements            | 2 - 10 years (not to exceed lease term) |

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

----

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

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

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

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

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

|                                                                                                              |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|-------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Interest, excluding interest on capital lease obligations and amortization of debt financing                      |   |   |   |   |   |   |   |   |   |
|     costs (net of capitalized interest of $0 in each of the fiscal years 2010, 2009 and 2008) |   | $      | 2,109  |   |   |   | 2,242  |   |   |   | 2,823 |   |
| Income taxes (received) paid                                                                                      |   |   | (4,778 | )      |   |   | 987    |   |   |   | 3,716 |   |

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

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

----

|   | (n) | Store Closings and Discontinued Operations |
|--------|-----|--------------------------------------------|

|                                                                 |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|----------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Store closure liability at beginning of year                         |   | $      | 263    |   |   |   | -      |   |   |   | 105 |   |
| Store closure (income) expense (included in discontinued operations) |   |   | (20    | )      |   |   | 769    |   |   |   | (71 | ) |
| Payments                                                             |   |   | (153   | )      |   |   | (506   | )      |   |   | (34 | ) |
|                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Store closure liability at end of year                               |   | $      | 90     |   |   |   | 263    |   |   |   | - |   |

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

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

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

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

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

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

----

|   | (u) | Subsequent Events |
|--------|-----|-------------------|

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

|                            |   | 2010   |    |   | 2009   |   |
|---------------------------------|--------|--------|---------|--------|--------|--------|
|                            |   |   |    |   |   |   |
| FIFO cost                       |   | $      | 144,712 |   |   |   | 150,867 |   |
| Less LIFO and markdown reserves |   |   | (4,337  | )      |   |   | (4,247 | ) |
| LIFO cost                       |   | $      | 140,375 |   |   |   | 146,620 |   |

| 3. | Credit Arrangements, Notes Payable and Long-term Debt |
|----|-------------------------------------------------------|

|                           |   | Payments due by Fiscal Period |   |
|--------------------------------|--------|-------------------------------|--------|
| Contractual Obligations        |   | Total                         |   |   | 2011 |   |   | 2012 |   |   | 2013 |   |   | 2014 |   |   | 2015 |   |
| Revolving loan credit facility |   | $                             | 35,159 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 35,159 |   |   |   | - |   |
| FF&E term loan             |   |                          | 2,865  |   |   |   | 1,451 |   |   |   | 1,414 |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                           |   | $                             | 38,024 |   |   |   | 1,451 |   |   |   | 1,414 |   |   |   | - |   |   |   | 35,159 |   |   |   | - |   |

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

----

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

|              |   | 2010   |   |   | 2009   |   |
|-------------------|--------|--------|--------|--------|--------|--------|
| Beginning balance |   | $      | 5,309  |   |   |   | 4,571 |   |
| Reserve additions |   |   | 1,044  |   |   |   | 2,326 |   |
| Claims paid       |   |   | (1,501 | )      |   |   | (1,588 | ) |
| Ending balance    |   | $      | 4,852  |   |   |   | 5,309 |   |

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

|                              |   | 2010   |   |   | 2009   |   |
|-----------------------------------|--------|--------|--------|--------|--------|--------|
| Buildings                         |   | $      | 2,494  |   |   | $      | 2,494 |   |
| Fixtures                          |   |   | 1,663  |   |   |   | 1,663 |   |
| Software                          |   |   | 6,858  |   |   |   | 6,858 |   |
|                              |   |   | 11,015 |   |   |   | 11,015 |   |
| Less accumulated amortization     |   |   | 9,385  |   |   |   | 7,958 |   |
| Net property under capital leases |   | $      | 1,630  |   |   | $      | 3,057 |   |

|                                                             |   | Capital |   |   | Operating |   |
|-----------------------------------------------------------------------|--------|---------|--------|--------|-----------|--------|
|                                                                  |   | Leases  |   |   | Leases    |   |
| Fiscal year:                                                          |   |    |   |   |      |   |
| 2011                                                                  |   | $       | 1,933  |   |      |   | 19,676 |   |
| 2012                                                                  |   |    | 705    |   |      |   | 18,031 |   |
| 2013                                                                  |   |    | 455    |   |      |   | 16,629 |   |
| 2014                                                                  |   |    | 252    |   |      |   | 14,270 |   |
| 2015                                                                  |   |    | 68     |   |      |   | 12,513 |   |
| Later years                                                           |   |    | -      |   |      |   | 83,531 |   |
| Total minimum lease payments                                          |   |    | 3,413  |   |      | $      | 164,650 |   |
|       Less amount representing interest |   |    | 445    |   |      |   |   |   |
| Present value of net minimum lease payments                           |   |    | 2,968  |   |      |   |   |   |
|       Less current maturities                |   |    | 1,623  |   |      |   |   |   |
| Capital lease obligations, less current maturities                    |   | $       | 1,345  |   |      |   |   |   |

|                  |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|-----------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Minimum rentals       |   | $      | 19,618 |   |   |   | 20,129 |   |   |   | 15,172 |   |
| Contingent rentals    |   |   | 1,180  |   |   |   | 1,323  |   |   |   | 1,468 |   |
| Less sublease rentals |   |   | (51    | )      |   |   | (74    | )      |   |   | (51 | ) |
|                  |   | $      | 20,747 |   |   |   | 21,378 |   |   |   | 16,589 |   |

----

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

|                                                            |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                            |   |   |   |   |   |   |   |   |   |
| Income tax expense (benefit) allocated to continuing operations |   | $      | 2,135  |   |   |   | (2,080 | )      |   |   | 394 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax benefit allocated to discontinued operations    |   |   | (25    | )      |   |   | (1,227 | )      |   |   | (632 | ) |
| Total income tax expense (benefit)                              |   | $      | 2,110  |   |   |   | (3,307 | )      |   |   | (238 | ) |

|        |   | Current |   |   | Deferred |   |   | Total  |   |
|-------------|--------|---------|--------|--------|----------|--------|--------|--------|--------|
|  2010: |   |    |   |   |     |   |   |   |   |
| Federal     |   | $       | (380   | )      |     |   | 1,855  |   |   |   | 1,475 |   |
| State       |   |    | 533    |   |     |   | 127    |   |   |   | 660 |   |
|        |   |    | 153    |   |     |   | 1,982  |   |   |   | 2,135 |   |
| 2009:       |   |    |   |   |     |   |   |   |   |   |   |   |
| Federal     |   |    | (4,270 | )      |     |   | 2,420  |   |   |   | (1,850 | ) |
| State       |   |    | (464   | )      |     |   | 234    |   |   |   | (230 | ) |
|        |   |    | (4,734 | )      |     |   | 2,654  |   |   |   | (2,080 | ) |
|        |   |    |   |   |     |   |   |   |   |   |   |   |
| 2008:       |   |    |   |   |     |   |   |   |   |   |   |   |
| Federal     |   |    | 1,543  |   |     |   | (1,221 | )      |   |   | 322 |   |
| State       |   |    | 279    |   |     |   | (207   | )      |   |   | 72 |   |
|        |   | $       | 1,822  |   |     |   | (1,428 | )      |   |   | 394 |   |
|        |   |    |   |   |     |   |   |   |   |   |   |   |

|                                                                |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|---------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Computed “expected” tax expense (benefit)               |   | $      | 1,758  |   |   |   | (1,729 | )      |   |   | 403 |   |
| State income taxes, net of the Federal income tax expense (benefit) |   |   | 417    |   |   |   | (152   | )      |   |   | 48 |   |
| Adjustment for prior period taxes                                   |   |   | 82     |   |   |   | (48    | )      |   |   | (76 | ) |
| Federal employment credits                                          |   |   | (329   | )      |   |   | (291   | )      |   |   | - |   |
| Share-based compensation                                            |   |   | 149    |   |   |   | 86     |   |   |   | - |   |
| Other, net                                                          |   |   | 58     |   |   |   | 54     |   |   |   | 19 |   |
|                                                                |   | $      | 2,135  |   |   |   | (2,080 | )      |   |   | 394 |   |

|                                                                                                                          |   | 2010   |   |   | 2009   |   |
|-------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Deferred tax assets:                                                                                                          |   |   |   |   |   |   |
|             Capital leases                                             |   | $      | 240    |   |   |   | 283 |   |
|             Other liabilities                                          |   |   | 1,325  |   |   |   | 1,825 |   |
|             Insurance reserves                                         |   |   | 1,435  |   |   |   | 1,650 |   |
|             Vacation and sick pay accrual                         |   |   | 810    |   |   |   | 801 |   |
|             Inventory                                                  |   |   | 1,064  |   |   |   | 4,068 |   |
|             Deferred gain property and equipment                       |   |   | 1,599  |   |   |   | 1,825 |   |
|             Net operating loss carryforwards and credits               |   |   | 2,017  |   |   |   | 1,326 |   |
| Total deferred tax assets, net of $0 valuation allowance                                                                      |   |   | 8,490  |   |   |   | 11,778 |   |
|                                                                                                                          |   |   |   |   |   |   |   |   |
|                                                                                                                          |   |   |   |   |   |   |   |   |
| Deferred tax liabilities:                                                                                                     |   |   |   |   |   |   |   |   |
|             Property and equipment, due to differences in depreciation |   |   | 3,714  |   |   |   | 4,284 |        |
|             Property taxes                                             |   |   | 239    |   |   |   | 303 |   |
|             481 (a) adjustments                                        |   |   | 851    |   |   |   | 1,329 |   |
|             Stock options - APIC                                       |   |   | 200    |   |   |   | 143 |   |
|             Other assets                                               |   |   | 317    |   |   |   | 509 |   |
| Total deferred tax liabilities                                                                                                |   |   | 5,321  |   |   |   | 6,568 |   |
|                                                                                                                          |   |   |   |   |   |   |   |   |
| Net deferred tax asset                                                                                                        |   | $      | 3,169  |   |   |   | 5,210 |   |

----

|                                                                                                               |   | 2010   |   |   | 2009   |   |
|--------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Gross unrecognized tax benefits at the beginning of:                                                               |   | $      | 57     |   |   |   | 2,521 |   |
|             Increases related to prior period tax positions |   |   | -      |   |   |   | 57 |   |
|             Decreases related to prior period tax positions |   |   | -      |   |   |   | (2,481 | )  |
|             Settlements                                     |   |   | -      |   |   |   | (40 | ) |
| Gross unrecognized tax benefits at the end of:                                                                |   | $      | 57     |   |   |   | 57 |   |

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

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

|                                                |   | 2010   |      |   | 2009   |   |      | 2008   |   |
|-----------------------------------------------------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|
|                                                |   |   |      |   |   |   |      |   |   |
| Weighted average shares outstanding (basic)         |   |   | 3,797,947 |   |   |   | 3,809,109 |   |   |   | 3,807,033 |   |
|                                                |   |   |      |   |   |   |      |   |   |   |   |   |
| Effect of dilutive options to purchase common stock |   |   | 81,709    |   |   |   | -         |   |   |   | - |   |
|                                                |   |   |      |   |   |   |      |   |   |   |   |   |
| As adjusted for diluted calculation                 |   |   | 3,879,656 |   |   |   | 3,809,109 |   |   |   | 3,807,033 |   |

----

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

|                                                        |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|-------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                                        |   |   |   |   |   |   |   |   |   |
| Share-based compensation expense before income taxes        |   | $      | 757    |   |   |   | 186    |   |   |   | 1,130 |   |
| Income tax benefits                                         |   |   | (319   | )      |   |   | (76    | )      |   |   | (375 | ) |
|                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Share-based compensation expense net of income tax benefits |   | $      | 438    |   |   |   | 110    |   |   |   | 755 |   |
|                                                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect on:                                                  |   |   |   |   |   |   |   |   |   |   |   |   |
|   Basic earnings per share                        |   | $      | 0.12   |   |   |   | 0.03   |   |   |   | 0.20 |   |
|   Diluted earnings per share                      |   | $      | 0.11   |   |   |   | 0.03   |   |   |   | 0.20 |   |

----

|                                     |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                     |   |   |   |   |   |   |   |   |   |
| Expected price volatility                |   |   | 48.93  | %      |   |   | 36.60  | %      |   |   | 25.64 | % |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Risk-free interest rate                  |   |   | 1.48   | %      |   |   | 2.54   | %      |   |   | 4.79 | % |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average expected lives in years |   |   | 4.8    |   |   |   | 4.5    |   |   |   | 3.8 |   |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividend yield                           |   |   | 0.00   | %      |   |   | 0.00   | %      |   |   | 0.00 | % |

|                                            |   |   |    |   |     |   |   | Weighed     |   |   |       |   |
|-------------------------------------------------|--------|--------|---------|--------|----------|--------|--------|-------------|--------|--------|------------|--------|
|                                            |   |   |    |   | Weighed  |   |   | Average     |   |   | Aggregate  |   |
|                                            |   | Number |    |   | Average  |   |   | Remaining   |   |   | Intrinsic  |   |
|                                            |   | Of     |    |   | Exercise |   |   | Contractual |   |   | Value (in  |   |
|                                            |   | Shares |    |   | Price    |   |   | Term        |   |   | thousands) |   |
|                                            |   |   |    |   |     |   |   |        |   |   |       |   |
| Outstanding February 1, 2009                    |   |   | 555,375 |   |     | $      | 18.86  |        |   |   |       |   |   |   |
|                                            |   |   |    |   |     |   |   |        |   |   |       |   |   |   |
| Granted                                         |   |   | 45,000  |   |     |   | 13.95  |        |   |   |       |   |   |   |
|                                            |   |   |    |   |     |   |   |        |   |   |       |   |   |   |
| Forfeited/Expired                               |   |   | (75,500 | )      |     |   | 22.67  |        |   |   |       |   |   |   |
|                                            |   |   |    |   |     |   |   |        |   |   |       |   |   |   |
| Outstanding January 31, 2010                    |   |   | 524,875 |   |     | $      | 17.99  |        |   |   | 3.0        |   |   | $ | - |   |
|                                            |   |   |    |   |     |   |   |        |   |   |       |   |   |   |   |   |
| Vested and expected to vest at January 31, 2010 |   |   | 409,900 |   |     | $      | 18.00  |        |   |   | 3.0        |   |   | $ | - |   |
|                                            |   |   |    |   |     |   |   |        |   |   |       |   |   |   |   |   |
| Exercisable at January 31, 2010                 |   |   | 181,625 |   |     | $      | 23.29  |        |   |   | 2.4        |   |   | $ | - |   |

|                                             |   | 2010   |   |   | 2009   |   |   | 2008   |   |
|--------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
|                                             |   |   |   |   |   |   |   |   |   |
| Weighted Average Grant Date Fair Value of Stock  |   |   |   |   |   |   |   |   |   |
| Options Granted (per share)                      |   | $      | 5.47   |   |   | $      | 4.16   |   |   | $ | 10.93 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Fair Value of Stock Options Vested         |   |   | 790    |   |   |   | 632    |   |   |   | 1,262 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Intrinsic Value of Stock Options Exercised |   |   | -      |   |   |   | -      |   |   |   | 396 |   |

----

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

|        |                                       |   | First   |    |   | Second  |   |    | Third   |   |   | Fourth        |   |
|-------------|--------------------------------------------|--------|---------|---------|--------|---------|--------|---------|---------|--------|--------|---------------|--------|
|        |                                       |   | Quarter |    |   | Quarter |   |    | Quarter |   |   | Quarter(1)(2) |   |
|        |                                       |   |    |    |   |    |   |    |    |   |   |          |   |
| Fiscal 2010 | Net sales                                  |   | $       | 115,405 |   |    |   | 125,291 |    |   |   | 111,494       |   |   |   | 136,501 |   |
|        | Gross margin                               |   |    | 38,537  |   |    |   | 42,411  |    |   |   | 35,659        |   |   |   | 41,905 |   |
|        | Earnings (loss) from continuing operations |   |    | (47     | )      |    |   | 3,031   |    |   |   | (1,434        | )      |   |   | 1,487 |   |
|        | Net earnings (loss)                        |   |    | (50     | )      |    |   | 3,031   |    |   |   | (1,437        | )      |   |   | 1,451 |   |
|        | Net earnings (loss) per share (2):         |   |    |    |   |    |   |    |    |   |   |          |   |   |
|        |     Basic              |   |    | (0.01   | )      |    |   | 0.80    |    |   |   | (0.38         | )      |   |   | 0.38 |   |
|        |     Diluted            |   |    | (0.01   | )      |    |   | 0.78    |    |   |   | (0.38         | )      |   |   | 0.37 |   |
|        |                                       |   |    |    |   |    |   |    |    |   |   |          |   |   |   |   |   |
| Fiscal 2009 | Net sales                                  |   | $       | 105,626 |   |    |   | 129,186 |    |   |   | 114,880       |   |   |   | 140,061 |   |
|        | Gross margin                               |   |    | 31,723  |   |    |   | 43,318  |    |   |   | 37,124        |   |   |   | 41,654 |   |
|        | Earnings (loss) from continuing operations |   |    | (4,316  | )      |    |   | 3,452   |    |   |   | (1,503        | )      |   |   | (638 | ) |
|        | 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                                  |   | $       | 105,878 |   |    |   | 118,635 |    |   |   | 109,909       |   |   |   | 147,053 |   |
|        | Gross margin                               |   |    | 32,710  |   |    |   | 39,353  |    |   |   | 35,711        |   |   |   | 44,506 |   |
|        | Earnings (loss) from continuing operations |   |    | (1,815  | )      |    |   | 2,981   |    |   |   | (1,379        | )      |   |   | 1,003 |   |
|        | 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) | Asset impairment charges of $831, $1.3 million and $2.1 million negatively impacted net earnings for fiscal 2010, 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 2010, 2009 and 2008 does not equal the total computed for the year. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

|                            |   | Percentage of Sales |   |
|---------------------------------|--------|---------------------|--------|
|                            |   | 2010                |   |   | 2009 |   |   | 2008 |   |
| Merchandise Category:           |   |                |   |   |   |   |   |   |   |
| Consumables and commodities     |   |                | 34     | % |   |   | 32 | % |   |   | 34 | % |
| Hardlines                       |   |                | 33     | % |   |   | 33 | % |   |   | 34 | % |
| Apparel and accessories         |   |                | 17     | % |   |   | 19 | % |   |   | 19 | % |
| Home furnishings and décor |   |                | 16     | % |   |   | 16 | % |   |   | 13 | % |
| Total                           |   |                | 100    | % |   |   | 100 | % |   |   | 100 | % |
|                            |   |                |   |   |   |   |   |   |   |   |   |   |

| ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
|---------|--------------------------------------------------------------------------------------|

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| Name              |   | Age    |   | Position |
|-------------------|--------|--------|--------|----------|
|              |   |   |   |     |
| Richard E. Wilson |   |   | 48     |     | President - Chief Executive Officer |
| Jane F. Gilmartin |   |   | 54     |     | Executive Vice President |
| Donny R. Johnson  |   |   | 49     |     | Executive Vice President |
| Edmond C. Beaith  |   |   | 46     |     | Senior Vice President |
| Tom L. Canfield   |   |   | 56     |     | Senior Vice President |
|              |   |   |   |     |   |

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| (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 January 5, 2006 between the Company and Tom L. Canfield, Jr. is incorporated as Exhibit 10.1.                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                |   |
| 10.2   | Employment Agreement dated August 1, 2007 between the Company and Donny R. Johnson is incorporated as Exhibit 10.2.                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                |   |
| 10.3   | Employment Agreement dated January 5, 2006 between the Company and Jon A. Ramsey is incorporated as Exhibit 10.3.                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                |   |
| 10.4   | Addendum to Employment Agreement dated December 31, 2008 between the Company and Tom L. Canfield, Jr. is incorporated as Exhibit 10.4.                                                                                                                                                                              |   |
|   |                                                                                                                                                                                                                                                                                                                |   |
| 10.5   | Addendum to Employment Agreement dated December 31, 2008 between the Company and Donny R. Johnson is incorporated as Exhibit 10.5.                                                                                                                                                                                  |   |
|   |                                                                                                                                                                                                                                                                                                                |   |
| 10.6   | Addendum to Employment Agreement dated December 31, 2008 between the Company and Jon A. Ramsey is incorporated as Exhibit 10.6.                                                                                                                                                                                     |   |

----

| 10.7   | Employment Agreement dated August 25, 2008 between the Company and Edmond C. Beaith is incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K of the Company dated August 25, 2008.                                                                                                                                                                                                      |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.8   | Separation Agreement and Release, dated as of August 1, 2008, between the Company and Anthony C. Corradi, including consulting agreement is incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K of the Company dated August 1, 2008.                                                                                                                                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.9   | Employment Agreement dated December 11, 2009 between the Company and James M. Spencer is incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K of the Company dated December 17, 2009.                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.10  | Separation Agreement and Release, dated as of February 4, 2009, between the Company and Phillip D. Hixon is incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K of the Company dated February 4, 2009.                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.11  | Addendum to Employment Agreement effective as of May 31, 2009 between the Company and Mr. Zigerelli is incorporated by reference to Exhibit 10.11 to the Current Report on Form 8-K of the Company dated June 3, 2009.                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.12  | Addendum to Employment Agreement effective as of May 31, 2009 between the Company and Ms. Gilmartin is incorporated by reference to Exhibit 10.12 to the Current Report on Form 8-K of the Company dated June 3, 2009.                                                                                                                                                                                             |
|   |                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.13  | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements is incorporated by reference to Exhibit 10.13 to the Current Report on Form 8-K of the Company dated January 12, 2010.  On December 31, 2009, Royce Winsten, the Chairman of the Board of Directors of the Company, was awarded a special bonus for the amount of $50,000. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.14  | Separation Release, dated as of February 1, 2010, between the Company and James M. Spencer, is incorporated by reference to Exhibit 10.14 to the Current Report on Form 8-K of the Company dated February 1, 2010.                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.15  | Loan and Security Agreement, dated as of February 10, 2010, between the Company and Bank of America, N.A., and Wells Fargo Retail Finance, LLC.                                                                                                                                                                                                                                                                    |
|   |                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.16  | Employment Agreement dated December 11, 2009 between the Company and Richard E. Wilson is incorporated by reference to Exhibit 10.16 to the Current Report on Form 8-K of the Company dated February 25, 2010.                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.17  | Resignation of Director.  On March 2, 2010 James V. Worth resigned from the Board of Directors is incorporated by reference to Exhibit 10.17 to the Current Report on Form 8-K of the Company dated March 2, 2010.                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                               |
| 10.18  | Separation Agreement and Release, dated as of March 17, 2010, between the Company and Lawrence J. Zigerelli, is incorporated by reference to Exhibit 10.18 to the Current Report on Form 8-K of the Company dated March 16, 2010.                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                               |
| 23.1   | Consent of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                                                                                                                          |
|   |                                                                                                                                                                                                                                                                                                                                                                                                               |
| 31.1   | Certification of Chief Executive Officer of Duckwall-ALCO Stores, Inc. dated April 15, 2010, 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 15, 2010, 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 15, 2010, 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 January 31, 2010 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 15, 2010, 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 January 31, 2010 and is not treated as filed in reliance upon § 601(b)(32) of Regulations S-K.                        |

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| Signature and Title                                |   |   | Date           |   |
|----------------------------------------------------|--------|--------|----------------|--------|
|                                               |   |   |           |   |
| /s/ Richard E. Wilson                              |   |   | April 15, 2010 |   |
| Richard E. Wilson                                  |   |   |           |   |
| President and Chief Executive Officer              |   |   |           |   |
| (Principal Executive Officer)                      |   |   |           |   |
|                                               |   |   |           |   |
| /s/ Donny R. Johnson                               |   |   | April 15, 2010 |   |
| Donny R. Johnson                                   |   |   |           |   |
| Executive Vice President - Chief Financial Officer |   |   |           |   |
| (Principal Financial and Accounting Officer)       |   |   |           |   |
|                                               |   |   |           |   |
| /s/ Raymond A.D. French                            |   |   | April 15, 2010 |   |
| Raymond A.D. French                                |   |   |           |   |
| Director                                           |   |   |           |   |
|                                               |   |   |           |   |
| /s/ Dennis E. Logue                                |   |   | April 15, 2010 |   |
| Dennis E. Logue                                    |   |   |           |   |
| Director                                           |   |   |           |   |
|                                               |   |   |           |   |
| /s/ Lolan C. Mackey                                |   |   | April 15, 2010 |   |
| Lolan C. Mackey                                    |   |   |           |   |
| Director                                           |   |   |           |   |
|                                               |   |   |           |   |
| /s/ Royce L. Winsten                               |   |   | April 15, 2010 |   |
| Royce L. Winsten                                   |   |   |           |   |
| Director - Chairman of Board                       |   |   |           |   |

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