UNITED STATES
                   SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C.  20549
                                   
                                   
                               FORM 10-K
                                   
 (Mark One)

 (X)  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
                                   
                For the fiscal year ended January 31, 1999

                                  OR

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

      For the transition period from _____________ to ___________
                                   
                    Commission File Number 0-20269
                                   
                      DUCKWALL-ALCO STORES, INC.          
      (Exact name of registrant as specified in its charter)

       Kansas                                         48-0201080     

      (State or other jurisdiction of                (I.R.S. Employer
       incorporation or organization)                 Identification No.)

       401 Cottage Street
       Abilene, Kansas                                67410-2832

      (Address of principal executive offices)       (Zip Code)
                                   

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

                                  

       Securities registered pursuant to Section 12(b) of the Act:

                                NONE
                                  
       Securities registered pursuant to Section 12(g) of the Act:  

               Common Stock, par value $.0001 per share

                           (Title of Class)


    Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  Yes  [ X ]      No [   ]


    Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [X]


    Indicate by check mark whether the Registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.  Yes  [ X ]     No [   ]


    At March 16, 1999,  there were 5,093,074 shares of Common Stock
outstanding, of which 3,517,476 shares were owned by affiliates.

    Documents incorporated by reference:  portions of the Registrant's Proxy
Statement for the 1999 Annual Meeting of Stockholders are incorporated by
reference in Part III hereof.


<PAGE 1>


PART I

ITEM 1.  BUSINESS


History

    Duckwall-ALCO Stores, Inc., (the "Company" or "Registrant"), was founded
as a general merchandising operation at the turn of the century in Abilene,
Kansas by A. L. Duckwall.  From its founding until 1968, the Company
conducted its retail operations as small variety or "dime" stores.  In 1968,
the Company followed an emerging trend to discount retailing when it opened
its first ALCO discount store.   In 1991, the Company adopted its current
business strategy that focuses on under-served markets that have no direct
competition from another full-line discount retailer.  This strategy includes
opening either an ALCO discount store or a Duckwall variety store, depending
upon the market size.  As of May 1, 1999, the Company operates 263 retail
stores located in the central United States, consisting of 167 ALCO retail
discount stores and 96 Duckwall variety stores.

    The Company was incorporated on July 2, 1915 under the laws of Kansas.
The Company's executive offices are located at 401 Cottage Avenue, Abilene,
Kansas  67410-2832, and its telephone number is (785) 263-3350.


General

    The Company, which was established in 1901, is a regional retailer
operating 263 stores in 19 states in the central United States.  The
Company's strategy is to target smaller markets not served by other regional
or national full-line retail discount chains and to provide the most
convenient access to retail shopping within each market.  The Company's ALCO
discount stores offer a full line of merchandise consisting of approximately
35,000 items, including automotive, candy, crafts, domestics, electronics,
fabrics, furniture, hardware, health and beauty aids, housewares, jewelry,
ladies', men's and children's apparel and shoes, pre-recorded music and
video, sporting goods, seasonal items, stationery and toys.  The Company's
smaller Duckwall variety stores offer a more limited selection of merchandise.

    Of the Company's 167 ALCO discount stores, 121 stores are located in
communities that do not have another full-line discounter.  The Company
intends to continue its strategy of opening ALCO stores in markets that do
not have other full-line discount retailers and where the opening of an ALCO
store is likely to be preemptive to the entry by other competitors in the
market.  The ALCO discount stores account for 91% of the Company's net sales.
While the current ALCO stores average 21,700 square feet of selling space,
the Company's store expansion program is primarily directed toward stores
with a design prototype of approximately 18,000 square feet of selling space
("Class 18 Stores"), which, based on the Company's experience, has been a
design that maximizes return on investment for newly-constructed stores.

    The Company's 96 Duckwall variety stores are primarily located in
communities of less than 2,500 residents and are designed to act as the
primary convenience retailer in these smaller communities.  These stores,
which account for the remaining 9% of the Company's net sales, average
approximately 5,500 square feet of selling space and offer approximately
12,000 items.  Operating Duckwall stores offers the Company the opportunity
to serve the needs of a community that would not support a full-line retail
discount store with a reduced investment per store and a higher return on
investment than the Company's average. 

    All of the Company's discount and variety stores are serviced by the
Company's 352,000 square foot distribution center in Abilene, Kansas.


Business Strategy

    The Company believes that its improved operating performance and
financial condition over the last five fiscal years is the result of the
focused execution of a business strategy that includes the following key
components:

    Markets: The Company intends to open ALCO stores in towns with
    populations of typically less than 5,000 that are in trade areas with
    populations of less than 16,000 where:  (1) there is no direct
    competition from national or regional full-line discount retailers;
    (2) economic and demographic criteria indicate the market is able to
    commercially support a discount retailer; and (3) the opening of an
    ALCO store would significantly reduce the likelihood of the entry into
    such market by another discount retailer.  This key component of the
    Company's strategy has guided the Company in both its opening of new
    stores and in the closing of existing stores.  Since 1991, the Company
    has opened 105 ALCO discount stores (with an approximate average size
    18,400 square feet of selling space) and 83 Duckwall variety stores.
    Except for eight stores, each of the new ALCO and Duckwall stores was
    opened in a primary market in which there was no direct competition
    from a national or regional full-line discount retailer.

<PAGE 2>


    Market Selection:  The Company has a detailed process that it uses to
    analyze under-served markets which includes examining factors such as
    distance from competition, trade area, disposable income and retail
    sales levels.  Markets that are determined to be sizable enough to
    support an ALCO or a Duckwall store, and that have no direct competition
    from another discount retailer, are examined closely and eventually
    selected or passed over by the Company's experienced management team. 

    Store Expansion:  The Company's expansion program is designed around
    the prototype Class 18 Store.  This prototype details for each new store
    plans for shelf space, merchandise presentation, store items to be
    offered, parking, storage, as well as other store design considerations.
    The 18,000 square feet of selling space is large enough to permit a full
    line of the Company's merchandise, while minimizing capital expenditures,
    required labor costs and general overhead costs. The Company will also
    consider opportunities in acceptable markets to open ALCO stores in
    available space in buildings already constructed.  The Company's
    expansion strategy for its Duckwall variety stores is based on
    opportunities presented to the Company in and by smaller communities
    where there is a need and where existing premises are available for
    lease with a relatively low cost and which provide the Company with
    limited exposure.

    Technology.  The Company is continually improving its management
    information technologies to support the operation of the Company.
    In fiscal 1999, the Company implemented a new system for merchandise
    administration and distribution, and continued the roll-out of new
    point-of-sale (POS) store software that has extended the life and
    capabilities of its POS hardware.  In conjunction with this, the stores
    are receiving radio frequency hand held devices to allow for additional
    operating efficiencies.  The Company has also, as discussed separately,
    devoted resources to identify and fix or replace software and hardware
    that was not year 2000 compliant.

    Advertising and Promotion:  The Company utilizes full-color photography
    advertising circulars of 8 to 28 pages distributed by insertion into
    newspapers or by direct mail where newspaper service is inadequate.
    During fiscal 1999, these circulars were distributed 43 times in ALCO
    markets.  In its Duckwall markets, the Company advertises approximately
    13 times a year during seasonal promotions.  The Company's marketing
    program is designed to create an awareness, on the part of its
    identified target customer base, of the Company's comprehensive selection
    of merchandise and its competitive pricing.  During fiscal 1999, the
    Company began market research and planning for the initial roll-out in
    fiscal 2000, of its new pricing strategy "New Low Prices Everyday" (NLPE).
    This strategy will benefit customers by offering sharper prices everyday
    on products that typically would have been subject to promotional pricing
    and markdowns.  NLPE will also reduce the Company's reliance on
    advertising circulars and promotions to drive traffic in its stores.
    During fiscal 2000, the Company will distribute approximately 33 circulars
    in ALCO markets.

    Store Environment:  The Company's stores are open, clean, bright and
    offer a pleasant atmosphere with disciplined product presentation,
    attractive displays and efficient check-out procedures.  The Company
    endeavors to staff its stores with courteous, highly motivated,
    knowledgeable store associates in order to provide a convenient,
    friendly and enjoyable shopping experience.


Store Development

    The Company plans to open at least 12 ALCO stores and 10 Duckwall stores
during fiscal year 2000, and a  minimum of 12 ALCO stores and 10 Duckwall
stores during each of the fiscal years 2001 and 2002.

    The Company's strategy regarding store development is to increase sales
and profitability at existing stores by continually refining the
merchandising mix and improving operating efficiencies, and through
new store openings in the Company's targeted base of under-served markets
in the central United States.  Since fiscal 1995, the Company has opened
a total of 73 ALCO stores with an average selling area of approximately
18,600 square feet, and 63 Duckwall stores. The following table summarizes
the Company's growth during the past three fiscal years:

<TABLE>
<CAPTION>
                                                                       Year-to-Date
                     1997              1998              1999              2000
                 ALCO  DUCKWALL    ALCO  DUCKWALL    ALCO  DUCKWALL    ALCO  DUCKWALL
<S>              <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>
Stores Opened     15        15      25        15      16        20       4         5
Stores Closed      1         0       0         0       2         2       3         0
Net New Stores    14        15      25        15      14        18       1         5

</TABLE>

<PAGE 3>


    The Company intends to utilize the 18,000 square foot store profile for
new ALCO store openings.  Currently, the Company owns 24 ALCO and 2 Duckwall
locations, and leases 143 ALCO and 94 Duckwall store locations.  The Company's
present intention is to lease all new Duckwall stores.  The Company may own
some of the ALCO locations, but will, in general try to lease those store
locations.

    Before entering a new market with an ALCO store, the Company analyzes
available competitive, market, and demographic data to evaluate the
suitability and attractiveness of the potential market as part of a screening
process.  The process involves an objective review of selection criteria
including, among other factors, distance and drive time to discount retail
competitors, demographics, retail sales levels, existence and stability of
major employers, location of county government and distance from the Company's
warehouse.  The screening process also involves a visit by officers of the
Company to more subjectively evaluate the potential new site.  There are
currently approximately 150 communities known by the Company to have met the
Company's market selection process.  The Company is in the site selection
and/or procurement process in approximately 14 of those markets, each of
which has been approved by the Company for a new ALCO location.  The Company
performs a similar site selection process with new Duckwall stores.  However,
the process is condensed given the low opening and closing costs of a Duckwall
location.

    The estimated investment to open a new Class 18 Store is approximately
$1.25 million for the land, building, equipment, inventory and pre-opening
costs.


Store Environment and Merchandising

    The Company manages its stores to attractively and conveniently display
a full line of merchandise within the confines of the stores' available square
footage.  Corporate merchandising direction is provided to each ALCO and
Duckwall store to ensure a consistent company-wide store presentation.  To
facilitate long-term merchandising planning, the Company divides its
merchandise into three core categories driven by the Company's customer
profile:  primary, secondary, and convenience.  The primary core receives
management's primary focus, with a wide assortment of merchandise being
placed in the most accessible locations within the stores and receiving
significant promotional consideration.  The secondary core consists of
categories of merchandise for which the Company maintains a strong assortment
that is easily and readily identifiable by its customers.  The convenience
core consists of categories of merchandise for which ALCO will maintain
convenient, but limited, assortments, focusing on key items that are in
keeping with customers' expectations for a discount store.  Secondary and
convenience cores include merchandise that the Company feels is important
to carry as the target customer expects to find them within a discount store
and they ensure a high level of customer traffic.  The Company continually
evaluates and ranks all product lines, shifting product classifications when
necessary to reflect the changing demand for products.


Purchasing

    Procurement and merchandising of products is directed by the Company's
Vice President - Merchandise, who reports to the Company's President.  The
Vice President - Merchandise is supported by a staff of four divisional
merchandise managers who are each responsible for specific product categories.
The Company employs 23 merchandise buyers and one assistant buyer who each
report to a divisional merchandise manager.  Buyers are assisted by a
management information system that provides them with current price and
volume information by SKU, thus allowing them to react quickly with buying
and pricing adjustments dictated by customer buying patterns.

    The Company purchases its merchandise from approximately 2,250 suppliers.
The Company does not utilize long-term supply contracts.  No single supplier
accounted for more than 4% of the Company's total purchases in fiscal 1999
and competing brand name and private label products are available from other
suppliers at competitive prices.  The Company believes that its relationships
with its suppliers are good and that the loss of any one or more of its
suppliers would not have a material adverse effect on the Company.  


Pricing

    Merchandise pricing is done at the corporate level and is essentially
the same for all of the ALCO stores, regardless of the level of local
competition.  This pricing strategy, with its promotional activities, is
designed to bring consistent value to the customer.  In fiscal 2000,
promotions on various items will be offered approximately 33 times through
advertising circulars.   Even though the same general pricing and advertising
activities are carried out for all ALCO stores, the impact of such activities
is significantly different depending upon the level of competition in the
market.

<PAGE 4>


Distribution and Transportation

    The Company operates a 352,000 square foot distribution center in Abilene,
Kansas, from which it services each of the 167 ALCO discount stores and 96
Duckwall variety stores.  This distribution center is responsible for
distributing approximately 80% of the Company's merchandise, with the balance
being delivered directly to the Company's stores by its vendors.  This
distribution center ships to each of the Company's stores once a week
through its wholly owned subsidiary, SPD Truck Line, Inc. (the "Subsidiary")
as well as through irregular route common carriers.  The distribution center
is fully integrated into the Company's management information system, allowing
the Company to utilize such cost cutting efficiencies as perpetual inventories,
safety programs, and employee productivity software.

    The Subsidiary acts as a contract carrier for the Company in transporting
goods to and from its stores.  The Subsidiary leases and uses five tractors
and 24 trailers for such deliveries.


Management Information Systems

    Commencing in fiscal 1989, the Company committed significant resources
to the purchase and application of available computer hardware and software
to its discount retailing operations with the intent to lower costs, improve
customer service and enhance general business planning.

    In general, the Company's merchandising systems are designed to integrate
the key retailing functions of seasonal merchandise planning, purchase order
management, merchandise distribution, sales information and inventory
maintenance and replenishment.  All of the Company's discount stores have
point-of-sale computer terminals that record certain sales data in a format
that can be transmitted nightly to the Company's data processing facility
where it is used to produce daily and weekly management reports.  In fiscal
1999, the Company implemented a new system for merchandise administration and
distribution, and continued the roll-out of new point-of-sale (POS) store
software that has extended the life and capabilities of its POS hardware.
In conjunction with this, the stores are receiving radio frequency hand held
devices to allow for additional operating efficiencies.

    Approximately 800 of the Company's merchandise suppliers currently
participate in the Company's electronic data interchanges ("EDI") system,
which makes it possible for the Company to place purchase orders
electronically.  When fully implemented, EDI will permit these and
additional vendors to transmit advance shipment notices to the Company and
receive sales history from the Company.


Store Locations

    As of May 1, 1999, the Company operated 167 ALCO stores in 19 states
located in smaller communities in the central United States.  Of the ALCO
stores, 24 are owned and 143 are operated under real estate leases.  The
ALCO stores average approximately 21,300 square feet of selling space, with
an additional 5,000 square feet utilized for merchandise processing, temporary
storage and administration.  The Company also operates 96 Duckwall stores in
11 states, two of which are owned, and 94 are leased.  The geographic
distribution of the Company's stores is as follows:

<TABLE>

<CAPTION>

Duckwall Stores (96)
<C>               <C>                  <C>               <C>                  <C>              <C>
Arkansas (1)      Colorado (5)         Iowa (6)          Kansas (40)          Missouri (1)     Nebraska (8)
New Mexico (1)    North Dakota (1)     Oklahoma (10)     South Dakota (2)     Texas (21) 

</TABLE>

<TABLE>

<CAPTION>
					
ALCO Stores (167)					
<C>               <C>                  <C>               <C>                  <C>              <C>                                 
Arizona (4)       Arkansas (6)         Colorado (8)      Idaho (1)            Illinois (8)     Indiana (16)
Iowa (10)         Kansas (24)          Minnesota (6)     Missouri (2)         Nebraska (17)    New Mexico (8)
North Dakota (7)  Oklahoma (8)         Ohio (6)          South Dakota (8)     Texas (23)       Utah (2)
Wyoming (3)					

</TABLE>

<PAGE 5>


Competition

    While the discount retail business in general is highly competitive, the
Company's business strategy is to locate its ALCO discount stores in smaller
markets where there is no direct competition with larger national or regional
full-line discount chains, and where it is believed no such competition is
likely to develop.  Accordingly, the Company's primary method of competing
is to offer its customers a conveniently located store with a wide range of
merchandise at discount prices in a primary trade area population under 16,000
that does not have a large national or regional full-line discount store.
The Company believes that trade area size is a significant deterrent to
larger national and regional full-line discount chains.  Duckwall variety
stores, being located in very small markets, face limited competition and,
like the ALCO stores, emphasize the convenience of location to the primary
customer base.

    In the discount retail business in general, price, merchandise
selection, merchandise quality, advertising and customer service are all
important aspects of competing.  The Company encounters direct competition
with national full-line discount stores in 32 of its ALCO markets, and
another 14 ALCO stores are in direct competition with regional full-line
discount stores.  Of the last 119 ALCO stores opened, only nine are in
direct competition with a national or regional full-line discount retailer.
The competing regional and national full-line discount retailers are
generally larger than the Company and the stores of such competitors in the
Company's markets are substantially larger, have a somewhat wider selection
of merchandise and are very  price competitive in some lines of merchandise.
Where there are no discount retail stores directly competing with the
Company's ALCO stores, the Company's customers nevertheless shop at retail
discount stores and other retailers located in regional trade centers, and to
that extent the Company competes with such discount stores and retailers.
The Company also competes for retail sales with mail order companies,
specialty retailers, mass merchandisers,  manufacturers outlets, and the
internet.  The Company has experienced only one instance of new direct
competition from a national or regional full-line discount retailer in
the 110 Class 18 markets in which it has opened a store. 


Employees

    As of April 1, 1999, the Company employed approximately 5,150 people,
of whom approximately 480 were employed in the general office and
distribution center in Abilene, 4,050 in the ALCO stores and 620 in the
Duckwall stores.  Approximately 3,000 additional employees are hired on a
seasonal basis, most of whom are sales personnel.  No labor organization
is the collective bargaining agent for any of the Company's employees.
The Company considers its relations with its employees to be excellent.




ITEM 2.  PROPERTIES.


    The Company's facilities in Abilene, Kansas consist of a general office
(approximately 35,000 square feet), the Distribution Center (approximately
352,000 square feet) and additional warehouse space adjacent to the general
office.

    The Company owns the general office and leases the Distribution Center
under the terms of a lease that was entered into with the City of Abilene,
Kansas in connection with the issuance of certain industrial revenue bonds
issued by the City.  Rental payments are required under the lease in such
amounts and at such times as are sufficient to pay the principal and interest
becoming due on the bonds.  The Company has an option to purchase the
facility for a nominal amount upon the payment in full of the bonds.  See
Note 3 of Notes to Consolidated Financial Statements.

    Twenty-four of the ALCO stores and two of the Duckwall stores operate
in buildings owned by the Company.  The remainder of the stores operate in
leased properties.  Such ALCO leases expire as follows: approximately 148,992
square feet (3.4%) expire between May 1, 1999 and January 31, 2000;
approximately 410,137 square feet (9.3%) expire between February 1, 2000 and
January 31, 2001; and approximately 490,950 square feet (11.2%) expire
between February 1, 2001 and January 31, 2002.  The remainder expire through
2018.  All Duckwall store leases have terms of six years or less.

<PAGE 6>


ITEM 3.  LEGAL PROCEEDINGS.

    The Company has been a party to various legal proceedings which have been
reported in this Item 3 of Form 10-K for certain prior fiscal years.  The
Company's legal proceedings have been resolved sufficiently to render
outstanding matters immaterial for purposes of disclosure pursuant to this
Item 3.



ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    No matters were submitted to a vote of the stockholders of the Company
during the fourth quarter of the fiscal year ended anuary 31, 1999.

ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY.

    The following table sets forth the names, ages, positions and certain
other information regarding the executive officers of the Company as of May 1,
1999.

         Name                  Age   Position
         ____________________  ___   _____________________________________
         Glen L. Shank          54   Chairman of the Board and President
         James E. Schoenbeck    55   Vice President-Operations
                                       and Advertising
         James R. Fennema       48   Vice President-Merchandise
         Richard A. Mansfield   43   Vice President-Finance and Treasurer
         Charles E. Bogan       63   Vice President, Secretary
                                       and General Counsel
         __________


Except as set forth below, all of the executive officers have been associated
with the Company in their present position or other capacity for more than the
past five years.  There are no family relationships among the executive
officers of the Company.

    Glen L. Shank has served as President of the Company since June 1988 and
as Chairman of the Board since May 1991. Between 1982 and 1988, Mr. Shank
served as Vice President of Merchandising of the Company.  Prior to 1982,
Mr. Shank served as a Buyer and as a Merchandise Manager for the Company.
Mr. Shank has approximately 32 years of experience in the retail industry.

    James E. Schoenbeck has served as Vice President of Store Operations and
Advertising since 1988.  From 1979 to 1988, Mr.Schoenbeck served as the Vice
President of Administration.  Mr. Schoenbeck has approximately 25 years of
experience in the retail industry.

    James R. Fennema has served as Vice President-Merchandise of the Company
since March 1993.  For the four years prior to that he served as Vice
President and a divisional merchandise manager with Caldor, Inc., a chain of
regional discount stores in New England and the mid-Atlantic states of the
United States.  For more than the four years prior to that he served as a
divisional merchandise manager of Fishers Big Wheel, a regional chain
discount retailer.  Mr. Fennema has approximately 26 years of experience in
the retail industry.

    Richard A. Mansfield has served as Vice President-Finance and Treasurer
of the Company since May 1997.  For the two years prior to that he served as
Chief Financial Officer of Country General Stores, Inc., a regional chain of
specialty farm and ranch stores located in the midwest.  For the three years
prior to that he served as Chief Financial Officer of American Laminates, Inc.
and Relco, Inc.  Mr. Mansfield has approximately 18 years of experience in
the retail industry.

    Charles E. Bogan has been the Secretary of the Company since 1972.  He
has served as Vice President and General Counsel since 1984, and was
Secretary and a member of the Board of Directors during the period from
1972 to 1985.  Prior to becoming Duckwall-ALCO's General Counsel, he served
as a partner in private practice with the law firm of Bogan & Johnson,
beginning in 1970.

<PAGE 7>


PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY
         AND RELATED STOCKHOLDER MATTERS.

    The Common Stock of the Company is quoted on the Nasdaq National Market
under the symbol "DUCK."  The following table sets forth the range of high
and low bid information for the Company's Common Stock for each quarter of
fiscal 1999, 1998, 1997 and 1996 and  for the fourth quarter of fiscal 1995,
(the only full quarter period during that fiscal year for which the Common
Stock was so quoted).


       <TABLE>
                                                 High             Low
       _____________  _______________         _______          ______
       <C>            <C>                     <C>              <C>
       Fiscal 1995    Fourth quarter          $  9.75         $  9.00

       Fiscal 1996    First quarter           $  9.75         $  8.75
                      Second quarter            10.75            8.75
                      Third quarter             11.88           10.38
                      Fourth quarter            11.25            9.50

       Fiscal 1997    First quarter           $ 11.63         $  8.75
                      Second quarter            15.50           12.88
                      Third quarter             14.50           12.25
                      Fourth quarter            16.75           12.25

       Fiscal 1998    First quarter           $ 14.50         $ 13.00
                      Second quarter            13.88           11.50
                      Third quarter             17.50           12.75
                      Fourth quarter            15.88           14.50

       Fiscal 1999    First quarter           $ 18.50         $ 13.25
                      Second quarter            19.38           16.75
                      Third quarter             17.88           10.13
                      Fourth quarter            13.75           11.25
</TABLE>


    As of April 3, 1999, there were approximately 1,339 holders of record of
the Common Stock of the Company. The Company has not paid cash dividends on
its Common Stock during the last four fiscal years, and is currently
prohibited from paying such dividends by the terms of the Third Amended and
Restated Loan Agreement dated as of December 31, 1998, among the Company,
BA Business Credit, Inc., and Transamerica Business Credit Corporation.

<PAGE 8>


ITEM 6.  SELECTED FINANCIAL DATA.          


SELECTED CONSOLIDATED FINANCIAL DATA
(dollars in thousands, except per share and store data)

    The selected consolidated financial data presented below for, and as of
the end of, each of the last five fiscal years under the captions Statements
of Operations Data and Balance Sheet Data have been derived from the audited
consolidated financial statements of the Company.  This data should be read
in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" (Item 7) and the consolidated financial
statements, related notes, and other financial information included herein.


<TABLE>
<CAPTION>
                                                                     Fiscal Year Ended
                                      ---------------------------------------------------------------------------
                                      January 31,     February 1,     February 2,     January 28,     January 29,
                                             1999            1998            1997            1996            1995
                                      -----------     -----------     -----------     -----------     -----------
<S>                                   <C>             <C>             <C>             <C>             <C>
Statements of Operations Data
  Net sales                           $  363,509      $  323,254      $  278,819      $  256,454      $  242,144
  Cost of sales                          239,442         212,982         186,531         173,296         163,180  
  Gross margin                           124,067         110,272          92,288          83,158          78,964  
  Selling, general and administrative 										
    expenses                             102,357          89,661          75,630          69,018          65,477
  Depreciation and amortization            5,974           4,805           3,773           3,093           3,280  
  Income from operations                  15,736          15,806          12,885          11,047          10,207  
  Interest expense                         4,234           3,525           3,033           2,958           3,390  
  Other expense, net                           0               0               0            (185)            156  
  Earnings before income taxes            11,502          12,281           9,852           8,274           6,661  
  Income tax expense                       4,287           4,790           3,794           3,144           2,531  
  Earnings before cumulative effect
    of accounting change                   7,215           7,491           6,058           5,130           4,130
  Cumulative effect of accounting
    change, net of income
    tax benefit of $611(1)                  (956)              0               0               0               0 
  Net earnings                        $    6,259      $    7,491      $    6,058      $    5,130      $    4,130 
  										
  Per Share Information:                                                                          
    Earnings per share - basic:(2)										
      Earnings before cumulative
        effect of accounting change   $     1.41      $     1.47      $     1.41      $     1.28      $     1.56
      Cumulative effect of
        accounting change                  (0.19)           0.00            0.00            0.00            0.00
      Net earnings                    $     1.22      $     1.47      $     1.41      $     1.28      $     1.56  
										
    Earnings per share - diluted:(2)                                                                   
      Earnings before cumulative
        effect of accounting change   $     1.40      $     1.46      $     1.40      $     1.28      $     1.54
      Cumulative effect of accounting
        change                             (0.19)           0.00            0.00            0.00            0.00
      Net earnings                    $     1.21      $     1.46      $     1.40      $     1.28      $     1.54  
										
  Weighted average shares
    outstanding:(2)
      Basic                            5,111,461       5,096,322       4,299,502       3,999,488       2,648,246 
      Diluted                          5,154,860       5,148,818       4,399,822       4,014,351       2,680,216 
										
  Operating Data                                                                   
    Stores open at year-end                  257             225             185             156             138  
  Stores in non-competitive markets
    at year-end (3)                          206             176             137             110              91
  Percentage of total stores in 										
    non-competitive markets (3)            80.20%          78.20%          74.10%          70.50%          65.90% 
  Net sales of stores in
    non-competitive markets (3)       $  259,524      $  224,117      $  177,939      $  151,733      $  132,743
  Percentage of net sales
    from stores in
    non-competitive markets (3)            71.40%          69.30%          63.80%          59.20%          54.80% 
  Comparable store sales
    for all stores (4)                      0.90%           0.60%          -2.90%          -3.20%           1.10%
  Comparable store sales
    for stores in
    non-competitive markets (3)(4)          1.40%           1.60%          -1.30%          -1.00%           2.70% 
										
  Balance Sheet Data                                                                       
    Total assets                      $  172,474      $  158,114      $  132,808      $  107,723      $   92,202 
    Total debt (includes capital
      lease obligation and current
      maturities)                         45,608          39,718          26,285          24,551          16,805
    Stockholders' equity                  86,426          80,394          72,825          53,061          47,100 

</TABLE>


(1)  Effective November 1, 1998, the Company adopted AICPA Statement of
     Position 98-5, Reporting on the Costs of Start up Activities,
     retroactive to the beginning of the year.  Under the new method, the
     Company expenses store preopening costs as incurred rather than over
     the initial 12-months of a store's operation.

<PAGE 9>


(2)  The Company has adopted SFAS No. 128, Earnings Per Share which requires
     a dual presentation of basic earnings per share (based on the weighted
     average number of common shares outstanding) and diluted earnings per
     share which reflects the potential dilution that could occur if
     contracts to issue securities (such as stock options) were exercised.

(3)  "Non-competitive" markets refer to those markets where there is not a
     national or regional full-line discount 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.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS 


EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS MADE
IN THIS REPORT ON FORM 10-K ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES.  THE COMPANY'S ACTUAL RESULTS, FINANCIAL CONDITION OR
BUSINESS COULD DIFFER MATERIALLY FROM ITS HISTORICAL RESULTS, FINANCIAL
CONDITION OR BUSINESS, OR THE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR
BUSINESS CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS.  FACTORS THAT COULD
CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO,
THOSE DISCUSSED BELOW UNDER THE CAPTION "FACTORS THAT MAY AFFECT FUTURE
RESULTS OF OPERATIONS, FINANCIAL CONDITION OR BUSINESS," AS WELL AS THOSE
DISCUSSED ELSEWHERE IN THE COMPANY'S REPORTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.

    Reference is hereby made to the description of the Company's business
appearing in Item 1.

    The Company's fiscal year ends on the Sunday closest to January 31.
Fiscal 1999 and 1998 consisted of 52 weeks, and fiscal 1997 consisted of
53 weeks.

    As used below, the term "competitive market" refers to any market in
which there is one or more national or regional full-line discount stores
located in the primary market served by the Company.  The term "non-
competitive market" refers to any market in which there is no national or
regional full-line discount store located in the primary market served by
the Company. Even in a non-competitive market, the Company faces competition
from a variety of sources.  See Item 1.


Results of Operations

    The following table sets forth, for the fiscal years indicated, the
components of the Company's consolidated statements of operations expressed
as a percentage of net sales:


<TABLE>
<CAPTION>
                                                          Fiscal Year Ended
                                              _______________________________________
                                              January 31,   February 1,   February 2,
                                                     1999          1998          1997
____________________________________________  ___________   ___________   ___________
<S>                                           <C>           <C>           <C>        
  Net sales.................................       100.0%        100.0%        100.0%
  Cost of sales.............................        65.9          65.9          66.9
  Gross margin..............................        34.1          34.1          33.1
  Selling, general and
    administrative expenses.................        28.2          27.7          27.1
  Depreciation and amortization.............         1.6           1.5           1.4
  Total operating expenses..................        29.8          29.2          28.5
  Income from operations....................         4.3           4.9           4.6
  Interest expense..........................         1.1           1.1           1.1
  Earnings before income taxes..............         3.2           3.8           3.5
  Income tax expense........................         1.2           1.5           1.3
  Earnings before cumulative effect
    of accounting change....................         2.0           2.3           2.2
  Cumulative effect of accounting change,
    net of tax..............................          .3            .0            .0
  Net earnings..............................         1.7%          2.3%          2.2%

</TABLE>

<PAGE 10>


Fiscal 1999 Compared to Fiscal 1998

     Net sales for fiscal 1999 increased $40.3 million or 12.5% to $363.5
million compared to $323.3 million for fiscal 1998. During fiscal 1999, the
Company opened 36 stores, 34 of which were in new non-competitive markets.
Four stores were closed, resulting in a year end total of 257 stores.
Substantially all of the increase in net sales was due to new stores opened
over the last two fiscal years. Net sales for all stores open the full year
in both fiscal 1999 and 1998 (comparable stores), increased by $2.5 million
or .9% in fiscal 1999 compared to fiscal 1998.  Sales in non-competitive ALCO
stores increased $2.1 million, or 1.3% and the Duckwall variety stores
produced an increase of $418,000, or 2.3%.

    Gross margin for fiscal 1999 increased $13.8 million or 12.5% to $124.1
million compared to $110.3 million in fiscal 1998.  As a percentage of net
sales, gross margin remained the same at 34.1% in both fiscal years.
Although initial markon on purchases was higher in fiscal 1999, this was
offset by higher markdowns (primarily in the fourth quarter).  The gross
margin percentage was also favorably impacted in fiscal 1999 by a larger
LIFO income than in fiscal 1998.  The Company anticipates that pre-LIFO
gross margin as a percentage of net sales should improve in future periods
as the new stores opened in non-competitive markets contribute an increasing
percentage of total sales. This improvement should occur because stores in
non-competitive markets have a higher gross margin percentage (due to a
lower percentage of net sales at promotional pricing and with a lower
promotional markdown rate), than the average of all stores (including
those stores in competitive markets), and because the Company expects to
continue to focus its store expansion in additional non-competitive markets.
Management does not anticipate LIFO income to be a general trend for future
years, in as much as there is a general expectation for moderate inflation
in the cost of merchandise, a factor that generally yields LIFO expense.

     Selling, general and administrative expenses increased $12.7 million or
14.2% to $102.4 million in fiscal 1999 compared to $89.7 million in fiscal
1998, primarily due to the increase in total stores.  As a percentage of net
sales, selling, general and administrative expenses increased to 28.2% in
fiscal 1999 from 27.7% in fiscal 1998.  The increase in the percentage was
due to operating expenses rising faster than the overall same store sales
growth.  Expense increases included the partial year impact of the minimum
wage increase that went into effect September 1, 1997.

    Income from operations decreased $70,000, or .4% to $15.7 million in
fiscal 1999 compared to $15.8 million in fiscal 1998. Income from operations
as a percentage of net sales decreased to 4.3% in fiscal 1999 from 4.9% in
fiscal 1998.

    Interest expense increased $709,000 or 20.1% in fiscal 1999 compared to
fiscal 1998.  The increase results from higher borrowing levels to fund the
purchases of merchandise, fixtures, and owned store buildings for the store
expansion program.
     
    Income taxes were $4.3 million in fiscal 1999 compared to $4.8 million
in fiscal 1998.  The Company's effective tax rate was 37.3% in fiscal 1999,
and 39.0% in fiscal 1998.

    Earnings before the cumulative effect of the accounting change for
fiscal 1999 decreased by $276,000 or 3.7% to $7.2 million compared to $7.5
million in fiscal 1998.


Fiscal 1998 Compared to Fiscal 1997

    Net sales for fiscal 1998 increased $44.4 million or 15.9% to $323.3
million compared to $278.8 million for fiscal 1997. During fiscal 1998, the
Company opened 40 stores, 38 of which were in new non-competitive markets,
resulting in a year end total of 225 stores.  Substantially all of the
increase in net sales was due to new stores opened over the last two
fiscal years. Net sales for all stores open the full year in both fiscal
1998 and 1997 (comparable stores), as adjusted to a comparable 52 week year,
increased by $1.6 million or .6% in fiscal 1998 compared to fiscal 1997.
Sales in non-competitive ALCO stores increased $2.2 million, or 1.5%  and
the Duckwall variety stores produced an increase of $538,000, or 3.2%.

    Gross margin for fiscal 1998 increased $18.0 million or 19.5% to $110.3
million compared to $92.3 million in fiscal 1997. As a percentage of net
sales, gross margin increased 1.0% to 34.1% in fiscal 1998 from 33.1% in
fiscal 1997. The increase was a result of higher initial markons on purchases
in fiscal 1998, as well as LIFO income of $1.0 million, compared to fiscal
1997.

    Selling, general and administrative expenses increased $14.0 million or
18.6% to $89.6 million in fiscal 1998 compared to $75.6 million in fiscal
1997, primarily due to the increase in total stores.  As a percentage of
net sales, selling, general and administrative expenses increased to 27.7%
in fiscal 1998 from 27.1% in fiscal 1997.  The increase was due to store
opening costs associated with the 40 stores opened. 

    Income from operations increased $2.9 million, or 22.7% to $15.8 million
in fiscal 1998 compared to $12.9 million in fiscal 1997. Income from
operations as a percentage of net sales increased to 4.9% in fiscal 1998
from 4.6% in fiscal 1997.

<PAGE 11>


    Interest expense increased $492,000 or 16.2% in fiscal 1998 compared to
fiscal 1997.  The increase results from higher borrowing levels to fund the
purchases of merchandise, fixtures, and owned store buildings for the store
expansion program.
     
    Income taxes were $4.8 million in fiscal 1998 compared to $3.8 million
in fiscal 1997.  The Company's effective tax rate was 39% in fiscal 1998, and
38.5% in fiscal 1997.

    Net earnings for fiscal 1998 increased by $1.4 million or 23.7% to $7.5
million compared to $6.1 million in fiscal 1997.

Seasonality and Quarterly Results

    The following table sets forth the Company's net sales, gross margin,
income from operations, and net earnings during each quarter of fiscal 1997,
1998, and 1999.


<TABLE>
                                 First         Second          Third         Fourth
                               Quarter        Quarter        Quarter        Quarter
                                                 (dollars in millions)
<CAPTION>
--------------------------  ----------     ----------     ----------     ----------
<S>                         <C>            <C>            <C>            <C>
Fiscal 1997
  Net Sales                 $    59.3      $    68.4      $    64.9      $    86.2
  Gross Margin                   19.6           22.3           21.7           28.7
  Income from operations          1.8            2.9            2.1            6.1
  Net Earnings                    0.7            1.2            0.7            3.5
								
Fiscal 1998
  Net Sales                 $    69.3      $    80.5      $    76.2      $    97.3
  Gross Margin                   23.7           26.7           26.7           33.2
  Income from operations          2.1            3.3            2.5            7.9
  Net Earnings                    0.9            1.5            0.9            4.2
								
Fiscal 1999
  Net Sales                 $    81.1      $    90.4      $    85.3      $   106.8
  Gross Margin                   28.2           30.6           29.3           36.0
  Income from operations          2.6            3.6            2.9            6.6
  Net Earnings (1)                1.0            1.8            1.1            3.3

</TABLE>

    (1)  Represents earnings before the cumulative effect of accounting change


    The Company's business is subject to seasonal fluctuations.  The Company's
highest sales levels occur in the fourth quarter of its fiscal year which
includes the holiday selling season.  The Company's results of operations
in any one quarter are not necessarily indicative of the results of
operations that can be expected for any other quarter or for the full
fiscal year.

    The Company's results of operations may also fluctuate from quarter to
quarter as a result of the amount and timing of net sales contributed by new
stores and the integration of the new stores into the operations of the
Company, as well as other factors.  The addition of a large number of new
stores can, therefore, significantly affect the quarterly results of
operations.


Inflation

    Management does not believe that its operations have been materially
affected by inflation over the past few years.  The Company will continue to
monitor costs, take advantage of vendor incentive programs, selectively buy
from competitive vendors and adjust merchandise prices based on market
conditions.  In 1996, Congress enacted The Small Business Job Protection
Act of 1996 ("the Act"), raising the hourly minimum wage from $4.25 to $4.75
effective as of October 1, 1996 and to $5.15 effective as of September 1,
1997.  The majority of the Company's store employees were paid hourly wages
below these increased minimum wage rates.  As a result, the Act has increased
the Company's payroll expense.


Liquidity and Capital Resources

    At the end of fiscal 1999, working capital (defined as current assets
less current liabilities) was $90.1 million compared to $76.0 million at the
end of fiscal 1998 and $60.4 million at the end of fiscal 1997.

<PAGE 12>


    The Company's primary sources of funds are cash flow from operations,
borrowings under its revolving loan credit facility, vendor trade credit
financing and lease financing.  In fiscal 1999, the Company completed a
sale-leaseback of ten of its owned stores.  The proceeds from this
transaction amounted to $6.2 million.  The Company sold 1.089 million
shares of its common stock to the public, primarily in the third quarter
of fiscal 1997, generating net proceeds to the Company of $13.1 million.
The purpose of the offering was to fund store expansion. The funds were
used to pay down temporarily the revolving credit facility, pending the
investment of the funds in new stores.

    Cash provided by (used in) operating activities aggregated $6.6 million,
($6.8) million and $4.2 million in fiscal 1999, 1998 and 1997, respectively.
The increase in cash provided in fiscal 1999 relative to fiscal 1998 resulted
primarily from a smaller increase in inventory, due to a smaller number of
stores opened. The decrease in cash provided in fiscal 1998 relative to
fiscal 1997 resulted primarily from an increase in inventory needed to support
the 40 new store openings.

    The Company uses its revolving loan credit facility and vendor trade
credit financing to fund the build up of inventories periodically during the
year for its peak selling periods and to meet other short-term cash
requirements.  The revolving loan credit facility, which provides up to $85
million of financing in the form of notes payable and letters of credit, was
executed in April, 1998 and will expire in April 2001.  The Company had
borrowings available at January 31, 1999 under the revolving loan credit
facility amounting to $41,260.  Short-term trade credit represents a
significant source of financing for inventory to the Company. Trade credit
arises from the willingness of the Company's vendors to grant payment terms
for inventory purchases.
 
    In fiscal 1999, the Company made net cash borrowings against its
revolving credit facility of $5.0 million, incurred $2.8 million of new long
term debt, and made cash payments of $1.9 million to reduce its long-term
debt and capital lease obligations.  In fiscal 1998 and 1997, the Company
made net cash borrowings of $13.4 million and net cash payments of $1.7
million, respectively, to reduce its long-term debt and capital lease
obligations.  The Company executed operating leases for 98 additional stores
during the three year period ending in fiscal 1999.  The Company's long-range
plan assumes growth in the number of stores in smaller markets where there
is less competition, and, in accordance with this plan, 36 new stores were
opened in fiscal 1999 and at least 22 new stores are scheduled to be opened
in fiscal 2000.  The Company believes that with the $85 million line of
credit, sufficient capital is available to fund the Company's planned
expansion.

    Cash used for acquisition of property and equipment in fiscal 1999, 1998
and 1997 totaled $10.3 million, $11.7 million, and $11.6 million,
respectively.  Anticipated cash payments for acquisition of property and
equipment in fiscal 2000, principally for store buildings and fixtures, are
$11.0 million. 

    During fiscal 1999, the Company's Board of Directors approved a plan to
repurchase up to 411,000 shares of the Company's Common Stock (the "Stock
Repurchase Program").  Purchases pursuant to the Stock Repurchase Program
are to be made from time to time in the open market or directly from
stockholders at prevailing market prices.  The Stock Repurchase Program is
anticipated to be funded with internally generated cash and borrowing under
the Credit Facility.  As of January 31, 1999, the Company had purchased
60,000 shares of Common Stock for $669,000.



FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS,
FINANCIAL CONDITION OR BUSINESS


    In order to take advantage of the safe harbor provisions for forward-
looking statements contained in Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
added to those Acts by the Private Securities Litigation Reform Act of 1995,
the Company is hereby identifying important risks and uncertainties that could
affect the Company's actual results of operations, financial condition or
business and could cause the Company's actual results of operations,
financial condition or business to differ materially from its historical
results of operations, financial condition or business, or the results of
operations, financial condition or business contemplated by forward-looking
statements made herein or elsewhere orally or in writing, by, or on behalf
of, the Company.  Factors that could cause or contribute to such differences
include, but are not limited to, those factors described below.


Expansion Plans

    The continued growth of the Company is dependent, in large part, upon
the Company's ability to open and operate new stores on a timely and
profitable basis. The Company plans to open approximately 22 stores in the
current fiscal year and at least 22 stores in both fiscal 2001 and 2002.
While the Company believes that adequate sites are currently available, the
rate of new store openings is subject to various contingencies, many of
which are beyond the Company's control.  These contingencies include the
availability of acceptable communities for store locations, the Company's
ability to secure suitable store sites on a timely basis and on satisfactory
terms, the Company's ability to hire, train and retain qualified personnel,
the availability  of adequate capital resources and the successful
integration of new stores into existing operations.  There can be no
assurance that the Company will be able to continue to successfully identify
and obtain new store sites or that once obtained, the new stores will
achieve satisfactory sales or profitability.

<PAGE 13>


Competition

    The Company's strategy is to locate its ALCO stores in smaller retail
markets where there is no competing full-line discount retail store within
the primary trade area and where the Company believes the opening of a store
would significantly reduce the likelihood of such a competitor entering the
market.  No assurance can be given, however, that competition will not
emerge in such markets which, if developed, could seriously reduce the
prospect of a profitable store in such market.  In those markets in which
the Company has direct competition, it often competes with national or
regional full-line discount stores which often have substantially greater
financial and other resources than the Company.


Government Regulation

    The Company is subject to numerous federal, state and local government
laws and regulations, including those relating to the development,
construction and operation of the Company's stores.  The Company is also
subject to laws governing its relationship with employees, including minimum
wage requirements, laws and regulations relating to overtime, working and
safety conditions, and citizenship requirements.  Material increases in the
cost of compliance with any applicable law or regulation and similar matters
could materially and adversely affect the Company.

    In 1996, Congress enacted The Small Business Job Protection Act of 1996
(the "Act"), raising the hourly minimum wage from $4.25 to $4.75 effective as
of October 1, 1996 and to $5.15 effective as of September 1, 1997.  The
majority of the Company's store employees were paid hourly wages below these
increased minimum wage rates.  As a result, the Act will increase the
Company's payroll expense.  The Company intends to continue to offset this
increase in expense through the implementation of measures, including, but
not limited to, reducing employee hours and increasing gross margins (through
increased prices and reduced costs).  If these measures are not successful,
the higher minimum wage could materially and adversely affect the Company.


Control by Significant Stockholder

    Kansas Public Employees Retirement System ("KPERS") is a principal
stockholder of the Company, beneficially owning approximately 13% of the
outstanding shares of Common Stock of the Company as of March 19, 1999.


Quarterly Fluctuations

    Quarterly results of operations have historically fluctuated as a result
of retail consumers' purchasing patterns, with the highest quarter in terms
of sales and profitability being the fourth quarter.  Quarterly results of
operations will likely continue to fluctuate significantly as a result of
such patterns and may fluctuate due to the timing of new store openings.


Economic Conditions

    Similar to other retail businesses, the Company's operations may be
affected adversely by general economic conditions and events which result
in reduced consumer spending in the markets served by it stores.  Also,
smaller communities where the Company's stores are located may be dependent
upon a few large employers or may be significantly affected by economic
conditions in the industry upon which the community relies for its economic
viability, such as the agricultural industry.  This may make the Company's
stores more vulnerable to a downturn in a particular segment of the economy
than the Company's competitors, which operate in markets which are larger
metropolitan areas where the local economy is more diverse.


Dependence on Officers

    The development of the Company's business has been largely dependent on
the efforts of its current management team headed by Glen L. Shank and
fourteen other officers.  The loss of the services of one or more of these
officers could have a material adverse effect on the Company.


No Recent Dividend Payments; Restrictions on Payment of Dividends

    The Company has not paid a cash dividend on the Common Stock for more
than five years, and it has no plans to commence paying cash dividends on
the Common Stock.  The Company's current revolving loan credit facility
prohibits the payment of dividends.


The Year 2000 Issue

     The information in this Year 2000 section is a Year 2000 Readiness
Disclosure under the Year 2000 Information Readiness and Disclosure Act.

<PAGE 14>


Internal Considerations

    The Company has been evaluating and adjusting all of its known date-
sensitive systems and equipment for Year 2000 readiness.  The assessment
phase of the Year 2000 project is substantially complete and mission critical
systems have been or are in the process of being remediated or replaced.
The assessment phase of the project included information technology systems
as well as non-information technology equipment.  Over 70% of the required
coding conversions on information technology have occurred to-date.  The
Company anticipates completing all known remaining coding conversions during
the first half of fiscal 2000.  All code conversions dealing with fiscal
2000 (which began on February 1, 1999) have been completed and returned
to production prior to February 1, 1999.  Virtually all of the Company's
remediation efforts have been and will continue to be performed by Company
associates and a limited number of selected software and hardware providers.

    As systems have been replaced or remediated, system testing has been
conducted prior to return to production.  However, upon completion of the
remediation phase, the Company will conduct additional system testing as
deemed necessary.  This testing is anticipated to occur during the second
and third quarters of fiscal 2000.

    Previously reported problems with Store Point-of-Sales systems have been
successfully resolved, and roll-outs have resumed to all ALCO stores.
Completion of this rollout is currently scheduled for the end of June, 1999.
At this point the Company believes the Store systems being rolled out to be
Year 2000 ready, however, significant testing and monitoring will continue
throughout 1999.


Costs Related to Year 2000

    The total estimated cost of the Company's Year 2000 project is $1,000,000.
To-date the Company has spent approximately $346,000 on hardware and
software upgrades, and expects to spend as much as an additional $354,000.
Additionally the Company will incur as much as $300,000 in internal and
external programming costs, with maximum expenditures estimated at $1,000,000.
Internal programming resources have been adequate to provide some enhancements
to proprietary systems, as well as provide Year 2000 ready systems.  The
hardware replacements have also provided quicker, more reliable systems to
the Company.  All expenditures related to the Company's Year 2000 readiness
initiatives have or will be funded by cash flow from operations, borrowing
under the Company's line of credit, or other financing sources, and have or
will be capitalized or expensed depending on the classification of the
expenditure according to generally accepted accounting principles.


External Considerations

    In addition to internal Year 2000 activities, the Company is
communicating with other companies with which our systems interface or rely
upon. Conversion, testing and implementation of Year 2000 ready EDI
transactions are expected to begin in May 1999.  This will include EDI
trading partners and other external dependencies.  Completion of this
testing and conversion is expected to be substantially complete by September
1999.

    There can be no assurance that there will not be adverse effects on the
Company if third parties, such as utility companies or merchandise suppliers,
do not convert their systems in a timely manner and in a way that is
compatible with the Company's systems.  However, management believes that
ongoing communications with and assessment of these third parties will
minimize these risks.

    The Company recognizes the risks and anticipates minimal business
disruption will occur as a result of Year 2000 issues.  Possible consequences
include, but are not limited to, loss of basic utilities within certain
locations, inability to process transactions, send or transmit purchase
orders, or engage in similar normal business activities.  Additionally,
due to the lack of a uniform definition of Year 2000 compliance, the Company
recognizes the potential of an increase in sales returns of merchandise
that contain embedded chips, or hardware or software components.  Due to
the Company's product mix, and the anticipated cooperation from the Company's
suppliers, if returns of merchandise increase, such returns are not expected
to be material to the Company's financial condition.


Contingency Plans

    The contingency planning phase of the Year 2000 project is scheduled to
begin in late April 1999.  To-date initial analysis has begun and where
needed the Company will establish contingency plans based on actual testing
and production experience.  External dependency contingency planning will be
based on ongoing communications with the Company's suppliers and service
providers.  The Company anticipates the majority of its contingency plans
to be in place by the end of September 1999, in addition the Company
intends, during the fourth quarter of 1999 to conduct training with
associates on the execution of contingency plans should the need arise.

Summary

    The Company believes its IT systems will be ready for the Year 2000.
Should incidences of non-compliance occur the Company will dedicate both
internal and external resources to resolve any problems.  Although the
Company is taking the steps it deems reasonable to mitigate external Year
2000 issues, many elements of these risks, and the ability to definitively
mitigate them, are outside the control of the Company.  Given the importance
of certain key vendors and service providers, the inability of these
business partners to provide their goods or services to the Company on a
timely basis could have a material adverse effect on the Company's operations
and financial results.  The cost of the conversions and the completion dates
are based on management's best estimates and may be updated as additional
information becomes available.

<PAGE 15>


Impact of change in Accounting Principle

    Effective November 1, 1998, the Company adopted AICPA Statement of
Position 98-5, Reporting on the Costs of Start up Activities (SOP 98-5),
retroactive to the beginning of the year.  Previously, the Company initially
capitalized and then amortized preopening costs over the initial 12-months
of a store's operation.  Under the new method, the Company expenses such
store preopening costs as incurred.  The effect of adopting the accounting
change on earnings before cumulative effect of accounting change, net
earnings, and net earnings per share for fiscal 1999 is to increase (decrease)
such amounts $529, ($427), and ($0.8), respectively.  The change is
considered a cumulative effect-type accounting change and, accordingly, the
cumulative effect as of February 1, 1998 has been reported in the
accompanying audited financial statements.  Financial statements for fiscal
1998 and prior periods have not been restated but net earnings and earnings
per share computed on a pro forma basis have been reflected in the
accompanying audited financial statements for all periods presented as if
the accounting change had been applied consistently during all periods
affected.
     


ITEM 7A. QUANTITATIVE AND QUALITATIVE
         DISCLOSURES ABOUT MARKET RISK

          The Company does not invest in any market risk sensitive instruments.



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


                                  
         INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
         AND FINANCIAL STATEMENT SCHEDULES

                                                            
                                                            
                                                                          Page
         DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY

           Independent Auditors' Report...............................      17

           Financial Statements:

             Consolidated Balance Sheets --
               January 31, 1999 and February 1, 1998..................      18
   
             Consolidated Statements of Operations--
               Fiscal Years Ended January 31, 1999,
                 February 1, 1998, and February 2, 1997...............      20

             Consolidated Statements of Stockholders'                
               Equity --Fiscal Years Ended January 31, 1999,
                 February 1, 1998, and February 2, 1997...............      22

             Consolidated Statements of Cash Flows --
               Fiscal Years Ended January 31, 1999,
                 February 1, 1998, and February 2, 1997...............      23
     

             Notes to Consolidated Financial Statements...............      25


             Financial Statement Schedules:

               No financial statement schedules are included as they are
               not applicable to the Company.

<PAGE 16>



Independent Auditors' Report


The Board of Directors and Stockholders
Duckwall-ALCO Stores, Inc.:

We have audited the accompanying consolidated balance sheets of Duckwall-ALCO
Stores, Inc. and subsidiaries as of January 31, 1999 and February 1, 1998,
and the related consolidated statements of operations, stockholders' equity,
and cash flows for each of the years in the three-year period ended
January 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Duckwall-ALCO Stores, Inc. and subsidiaries as of January 31, 1999 and
February 1, 1998, and the results of their operations and their cash flows
for each of the years in the three-year period ended January 31, 1999, in
conformity with generally accepted accounting principles.

As discussed in note 1 of notes to consolidated financial statements, the
Company changed its method of accounting for store preopening costs in the
year ended January 31, 1999.
	


/s/KPMG LLP
   KPMG LLP

Wichita, Kansas
March 19, 1999

<PAGE 17>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

<TABLE>
Consolidated Balance Sheets											
<CAPTION>                                                                                 
January 31, 1999 and February 1, 1998											
(Dollars in thousands)											
											

Assets                                                                  1999           1998
                                                                     __________     ___________
<S>                                                                  <C>            <C>
											
  Current assets:
    Cash and cash equivalents                                        $  10,423           2,555
    Receivables (note 3)                                                 3,557           3,158
    Inventories (notes 2 and 3)                                        113,225         103,445
    Prepaid expenses                                                       359           2,131
                                                                                
         Total current assets                                          127,564         111,289
											
  Property and equipment, at cost (note 3):
    Land and land improvements                                           2,847           2,961
    Buildings and building improvements                                 21,130          25,041
    Furniture, fixtures and equipment                                   37,879          34,430
    Transportation equipment                                             2,197           1,731  
    Leasehold improvements                                               8,672           6,115  
    Construction work in progress                                        1,242             496  
											
         Total property and equipment                                   73,967          70,774  
											
    Less accumulated depreciation and amortization                      35,340          30,627
											
         Net property and equipment                                     38,627          40,147  
											
    Property under capital leases (note 5)                              20,407          20,407  
    Less accumulated amortization                                       14,428          13,811  
											
         Net property under capital leases                               5,979           6,596  
											
    Debt financing costs                                                   304              82  
											
											
											
											
                                                                     $ 172,474         158,114

</TABLE>


    See accompanying notes to consolidated financial statements.


<PAGE 18>


											
DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES											

<TABLE>
Consolidated Balance Sheets											
<CAPTION>                                                                                 
January 31, 1999 and February 1, 1998											
(Dollars in thousands)											


Liabilities and Stockholders Equity                                    1999           1998
                                                                     __________     ___________
<S>                                                                  <C>            <C>
Current liabilities:											
  Current maturities of long-term debt (note 3)                      $   1,556           1,333  
  Current maturities of capital lease obligations (note 5)                 540             518  
  Accounts payable                                                      20,488          19,009  
  Income taxes payable                                                   1,780           2,272  
  Accrued salaries and commissions                                       4,705           4,884  
  Accrued taxes other than income                                        3,520           3,159  
  Other current liabilities                                              2,643           1,804  
  Deferred income taxes (note 6)                                         2,256           2,324  
											
       Total current liabilities                                        37,488          35,303  
											
  Notes payable under revolving loan credit facility (note 3)           30,598          25,591  
  Long-term debt, less current maturities (note 3)                       4,825           3,646
  Capital lease obligations, less current maturities (note 5)            8,089           8,630
  Other noncurrent liabilities                                           1,484             782
  Deferred revenue                                                       1,075           1,272
  Deferred income taxes (note 6)                                         2,489           2,496

       Total liabilities                                                86,048          77,720
											

Stockholders equity (notes 4, 7 and 8):
  Common stock, $.0001 par value, authorized 20,000,000 shares in                                                                  
    1999 and 1998; issued and outstanding 5,092,324 and 5,098,761                                                            
    shares in 1999 and 1998, respectively                                    1               1  
  Additional paid-in capital                                            54,247          54,474  
  Retained earnings since June 2, 1991                                  32,178          25,919  
                                                                                
       Total stockholders equity                                        86,426          80,394  
											
Commitments (note 5)
											
                                                                     $ 172,474         158,114  

</TABLE>

<PAGE 19>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES													

<TABLE>
Consolidated Statements of Operations													
<CAPTION>                                                                                                 
Fiscal years ended January 31, 1999, February 1, 1998, and February 2, 1997													
(Dollars in thousands, except per share amounts)													




                                                                        1999           1998           1997
                                                                     __________     ___________    ___________
<S>                                                                  <C>            <C>            <C>
Net sales                                                            $ 363,509         323,254        278,819
Cost of sales                                                          239,442         212,982        186,531  
													
     Gross margin                                                      124,067         110,272         92,288  
													
Selling, general and administrative (notes 4 and 5)                    102,357         89,661         75,630  
Depreciation and amortization                                            5,974           4,805          3,773  
													
     Total operating expenses                                          108,331          94,466         79,403  
													
     Income from operations                                             15,736          15,806         12,885  
                                                                                                
Interest expense (notes 3 and 5)                                         4,234           3,525          3,033  
													
     Earnings before income taxes and cumulative                                                      
       effect of accounting change                                      11,502          12,281          9,852  
													
Income tax expense (note 6)                                              4,287           4,790          3,794  
													
     Earnings before cumulative effect of accounting                                                  
       change                                                            7,215           7,491          6,058  
													
Cumulative effect of accounting change, net of income													
  tax benefit of $611 (note 1)                                            (956)            ---            ---
                                                                                              
          Net earnings                                               $   6,259           7,491          6,058  
													
Earnings per share - basic (note 9):													
  Earnings before cumulative effect of accounting change             $    1.41            1.47           1.41  
  Cumulative effect of accounting change                                 (0.19)            ---            ---
													
          Net earnings                                               $    1.22            1.47           1.41  
													
Earnings per share - diluted (note 9):                                                    
  Earnings before cumulative effect of accounting change             $    1.40            1.46           1.40  
  Cumulative effect of accounting change                                 (0.19)            ---            ---
													
          Net earnings                                               $    1.21            1.46           1.40  
													


(Continued) 

<PAGE 20>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES


</TABLE>
<TABLE>
Consolidated Statements of Operations
<CAPTION>                                                                                                 
Fiscal years ended January 31, 1999, February 1, 1998, and February 2, 1997													
(Dollars in thousands, except per share amounts)													
                                                                                                




                                                                        1999           1998           1997
                                                                     __________     ___________    ___________
<S>                                                                  <C>            <C>            <C>
Pro forma amounts for effect of change in accounting													
  principle:                                                                                       
													
          Net earnings                                               $   7,215           7,190          5,935  
													
          Basic earnings per share                                   $    1.41            1.41           1.38 
													
          Diluted earnings per share                                 $    1.40            1.40           1.37 
													
</TABLE>

 See accompanying notes to consolidated financial statements.

<PAGE 21>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES															

<TABLE>
Consolidated Statements of Stockholders' Equity
<CAPTION>
Fiscal years ended January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands)															
                                                                                                

                                                                                                      Retained                 
                                                                                                      earnings          Total 
                                                                                     Additional          since         stock- 
                                                                       Common           paid-in        June 2,       holders' 
                                                                        stock           capital           1991         equity 
                                                                     __________     ___________    ___________    ___________
<S>                                                                  <C>            <C>            <C>            <C>

Balance, January 28, 1996                                            $       1          40,690         12,370         53,061  
                                                                     
Net earnings for the year ended February 2, 1997                           ---             ---          6,058          6,058  
Tax benefit from net operating loss carry-															
        forward (note 6)                                                   ---             626            ---            626  
Issuance of 1,089,000 common shares in															
        secondary public offering (note 8)                                 ---          13,068            ---         13,068  
Exercise of outstanding options to pur-															
        chase 1,313 common shares                                          ---              12            ---             12  


Balance, February 2, 1997                                                    1          54,396         18,428         72,825  
															
Net earnings for the year ended February 1, 1998                           ---             ---          7,491          7,491  
Exercise of outstanding options to purchase															
        8,938 common shares                                                ---              78            ---             78  
															
Balance, February 1, 1998                                                    1          54,474         25,919         80,394  
															
Net earnings for the year ended January 31, 1999                           ---             ---          6,259          6,259  
Exercise of outstanding options to purchase															
        53,563 common shares                                               ---             442            ---            442  
Repurchase of 60,000 common shares                                         ---            (669)           ---           (669) 
															
Balance, January 31, 1999                                            $       1          54,247         32,178         86,426  
															
															
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE 22>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES													

<TABLE>
Consolidated Statements of Cash Flows													
<CAPTION>
Fiscal years ended January 31, 1999, February 1, 1998, and February 2, 1997													
(Dollars in thousands)													




                                                                        1999           1998           1997
                                                                     __________     ___________    ___________
<S>                                                                  <C>            <C>            <C>
Cash flows from operating activities:
  Net earnings                                                       $   6,259           7,491          6,058  
  Adjustments to reconcile net earnings to net cash
    provided by operating activities:
      Cumulative effect of accounting change, net of
        income tax benefit                                                 956             ---            ---  
      Depreciation and amortization                                      5,974           4,805          3,773  
      Amortization of debt financing costs                                 137              43             40  
      Deferred income taxes                                                (75)           (138)           162  
      Loss (gain) on sale or disposition of property                                                                   
        and equipment                                                      680             ---            (37) 
      LIFO expense (income)                                             (2,449)           (950)            55  
      Decrease (increase) in receivables                                  (399)              2           (615) 
      Increase in inventories                                           (7,331)        (22,136)        (8,779) 
      Decrease (increase) in prepaid expenses                              205            (346)          (537) 
      Increase in accounts payable                                       1,479           1,882            792  
      Increase (decrease) in income taxes payable                          119             (73)         2,151  
      Increase (decrease) in accrued salaries and commissions             (179)          1,008            262  
      Increase in accrued taxes other than income                          361             230            726  
      Increase in other liabilities                                      1,052             123            120  
      Increase (decrease) in deferred revenue                             (197)          1,272            ---
													
           Net cash provided by (used in) operating activities           6,592          (6,787)         4,171  
													
  Cash flows from investing activities:                                                                                            
    Proceeds from sale of property and equipment                         6,232             ---             48  
    Acquisition of:                                                                                  
      Buildings                                                         (1,616)         (4,112)        (4,124) 
      Fixtures, equipment, and leasehold improvements                   (8,644)         (7,550)        (7,538) 
													
           Net cash used in investing activities                        (4,028)        (11,662)       (11,614) 
													
</TABLE>

(Continued)
                        

<PAGE 23>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

<TABLE>
Consolidated Statements of Cash Flows, Continued													
<CAPTION>
Fiscal years ended January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands)




                                                                        1999           1998           1997
                                                                     __________     ___________    ___________
<S>                                                                  <C>            <C>            <C>
Cash flows from financing activities:
  Increase in notes payable under revolving loan credit facility     $   5,007          13,496             80
  Proceeds from stock issuance                                             ---             ---         13,068
  Proceeds from exercise of outstanding stock options                      442              78             12  
  Repurchase of stock                                                     (669)            ---            ---  
  Proceeds from issuance of long-term debt                               2,760           1,870          3,110  
  Principal payments on long-term debt                                  (1,358)         (1,326)          (819) 
  Principal payments under capital lease obligations                      (519)           (607)          (637) 
  Debt financing costs                                                    (359)            (45)           (10) 

       Net cash provided by financing activities                         5,304          13,466         14,804  
													
       Net increase (decrease) in cash and cash equivalents              7,868          (4,983)         7,361  

Cash and cash equivalents at beginning of year                           2,555           7,538            177

Cash and cash equivalents at end of year                             $  10,423           2,555          7,538  
													
</TABLE>

See accompanying notes to consolidated financial statements.													
													
<PAGE 24>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


(1)  Summary of Significant Accounting Policies
     (a)  Nature of Business

          Duckwall-ALCO Stores, Inc. and subsidiaries (the Company) is engaged
          in the business of retailing general merchandise throughout the
          midwestern and south central regions of the United States through
          discount department and variety store outlets. Merchandise is
          purchased for resale from many vendors, and transactions with
          individual vendors and customers do not represent a significant
          portion of total purchases and sales.

     (b)  Principles of Consolidation

          The consolidated financial statements include the accounts of the
          Company and its wholly-owned subsidiaries. All significant
          intercompany account balances have been eliminated in consolidation.

     (c)  Basis of Presentation

          The Company's fiscal year ends on the Sunday nearest to January 31.
          Fiscal 1999 and 1998 consist of 52 weeks, 1997 consists of 53 weeks.

     (d)  Inventories

          Store inventories are stated at the lower of cost or net realizable
          value as estimated by the retail inventory method. Warehouse
          inventories are stated at the lower of cost or net realizable value.
          The Company utilizes the last-in, first-out (LIFO) method of
          determining cost of store and warehouse inventories.

     (e)  Property and Equipment

          Depreciation is computed on a straight-line basis over the estimated
          useful lives of the assets. Amortization of capital leases is
          computed on a straight-line basis over the terms of the lease
          agreements. Leasehold improvements are amortized on a straight-line
          basis over the lesser of the remaining lease term, or ten years.
          Estimated useful lives are as follows:

                Buildings                             25 years
                Building improvements                 10 years
                Furniture, fixtures and equipment    3-7 years 
                Transportation equipment               3 years 
                Leasehold improvements              5-10 years 
		
          Major improvements are capitalized while maintenance and repairs,
          which do not extend the useful life of the asset, are charged to
          expense as incurred.

(Continued)

<PAGE 25>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


     (f)  Income Taxes

          The Company accounts for income taxes under the asset and liability
          method. Deferred tax assets and liabilities are recognized for the
          future tax consequences attributable to differences between the
          financial statement carrying amounts of existing assets and
          liabilities and their respective tax bases and operating loss and
          tax credit carryforwards. Deferred tax assets and liabilities are
          measured using enacted tax rates expected to apply to taxable
          income in the years in which those temporary differences are
          expected to be recovered or settled. The effect on deferred tax
          assets and liabilities of a change in tax rates is recognized in
          income in the period that includes the enactment date.

     (g)  Net Sales

          Sales are recorded in the period of sale. Sales returns, which are
          not material, are recorded in the period of return as a reduction
          of sales.

     (h)  Change in Accounting Principle

          Effective November 1, 1998, the Company adopted AICPA Statement of
          Position 98-5, Reporting on the Costs of Start up Activities
          (SOP 98-5), retroactive to the beginning of the year. Previously,
          the Company initially capitalized and then amortized preopening costs
          over the initial 12-months of a store's operation. Under the new
          method, the Company expenses such store preopening costs as incurred.
          The effect of adopting the accounting change on earnings before
          cumulative effect of accounting change, net earnings, and net
          earnings per share for fiscal 1999 is to increase (decrease) such
          amounts $529, ($427), and ($.08), respectively. The change is
          considered a cumulative effect-type accounting change and,
          accordingly, the cumulative effect as of February 1, 1998 has been
          reported in the accompanying financial statements. Financial
          statements for fiscal 1998 and prior periods have not been restated
          but net earnings and earnings per share computed on a pro forma basis
          have been reflected in the accompanying financial statements for all
          periods presented as if the accounting change had been applied
          consistently during all periods affected.

     (i)  Net Earnings Per Share

          Basic net earnings per share is computed by dividing net earnings
          by the weighted average number of shares outstanding. Diluted net
          earnings per share reflects the potential dilution that could occur
          if contracts to issue securities (such as stock options) were
          exercised. See note 9.

(Continued)


<PAGE 26>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


     (j)  Consolidated Statements of Cash Flows

          For purposes of the consolidated statements of cash flows, the
          Company considers cash and cash equivalents to include currency on
          hand and money market funds.

          During fiscal 1999, 1998, and 1997, the following amounts were
          paid for interest and income taxes:


                                           1999         1998         1997
							
             Interest, excluding
               interest on capital
               lease obligations and
               amortization of debt
               financing costs
               (net of capitalized
               interest of $46 in
               fiscal 1999, $72 in
               fiscal 1998, and $269
               in fiscal 1997)          $ 3,116        2,431        2,083
             Income taxes                 4,383        5,001        1,481 
							

             Noncash financing and investing activities for fiscal 1999,
             1998, and 1997 consisted of:

               Tax benefit from net operating loss carryforward of $626 which
               increases additional paid-in capital in fiscal 1997 (note 6).

     (k)  Use of Estimates

          Management of the Company has made certain estimates and
          assumptions in the reporting of assets and liabilities to prepare
          these financial statements in conformity with generally accepted
          accounting principles. Actual results could differ from those
          estimates.

     (l)  Long-lived Assets

          Long-lived assets and certain identifiable intangibles are reviewed
          for impairment whenever events or changes in circumstances indicate
          that the carrying amount of an asset may not be recoverable.
          Recoverability of assets to be held and used is measured by a
          comparison of the carrying amount of an asset to estimated future
          net cash flows expected to be generated by the asset. If such
          assets are considered to be impaired, the impairment to be
          recognized is measured by the amount by which the carrying amount of
          the assets exceed the fair value of the assets. For purposes of 
          determining impairment, the Company groups assets at the store 
          level. Assets to be disposed of are reported at the lower of the 
          carrying amount or fair value less costs to sell.

(Continued)

<PAGE 27>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


     (m)  Stock-based Compensation

          The Company accounts for its stock options in accordance with the
          provisions of Accounting Principles Board (APB) Opinion No. 25,
          Accounting for Stock Issued to Employees. As such, compensation
          expense would be recorded on the date of grant only if the current
          market price of the underlying stock exceeded the exercise price.
          In addition, SFAS No. 123, Accounting for Stock-Based Compensation,
          requires that pro forma net earnings and pro forma earnings per
          share disclosures be provided for employee stock option grants made
          in fiscal year 1996 and subsequent years as if the fair value-based
          cost measurement method defined in SFAS No. 123 had been applied.

     (2)  Inventories

          Inventories at January 31, 1999 and February 1, 1998 are stated at
          the lower of cost or net realizable value as determined under the
          LIFO method of accounting. Inventories at January 31, 1999 and
          February 1, 1998 are summarized as follows:

                                                       1999            1998
					
                              FIFO cost         $   113,820         106,489 
                              Less LIFO reserve        (595)         (3,044)

                                LIFO cost       $   113,225         103,445
					

          Earnings before income taxes for fiscal 1999, 1998, and 1997 would
          have decreased by $2,449 and $950, and increased by $55,
          respectively, if the FIFO method of valuing inventories had been
          utilized.

     (3)  Credit Arrangements, Notes Payable and Long-term Debt

          The Company's loan agreement with its lenders provides a revolving
          loan credit facility of up to $85,000 of long-term financing. The
          amount advanced (through a note or letters of credit) to the
          Company bears interest at the prime rate on the Revolving Rate Loan
          and LIBOR plus 1.50% on the LIBOR Rate Loan and is generally
          limited to 65% of eligible inventory, as defined. Advances are
          secured by a security interest in the Company's inventory, accounts
          receivable and intangible assets. The loan agreement contains
          various restrictions including limitations on additional
          indebtedness, sales of assets, and financial covenants related to
          the ratio of earnings to fixed charges and tangible net worth, all
          as defined. The loan agreement prohibits the payment of dividends.
          The loan agreement expires in April 2001 and automatically renews
          for successive one-year terms thereafter unless terminated by the
          lenders or the Company.

          Under this agreement, the Company converted $30,000 from the
          Revolving Rate Loan to a 7.23% Fixed Rate Loan on April 15, 1998
          which is due in April 2001.

(Continued)

<PAGE 28>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


Notes payable outstanding at January 31, 1999 and February 1, 1998 under the
revolving loan credit facility aggregated $30,598 and $25,591, respectively.
The lender had also issued letters of credit aggregating $2,261 and $2,692,
respectively, at such dates on behalf of the Company. The interest rate on
outstanding borrowings at January 31, 1999 was 7.75% on the Revolving Rate
Loan payable monthly. There were no borrowings outstanding under the LIBOR
Rate Loan at January 31, 1999 or February 1, 1998. The Company had additional
borrowings available at January 31, 1999 under the revolving loan credit
facility amounting to $41,260.

Long-term debt, exclusive of notes payable under the revolving loan credit
facility as described above, at January 31, 1999 and February 1, 1998
consisted of the following:

                                                            1999          1998
					
     7.15% obligations for Industrial Revenue Bonds,
       interest payable semiannually with principal
       payments due annually until final
       maturity in 1999                              $       175           600
     9.875% mortgage note payable due in monthly
       installments, including interest, through
       September 2001                                        310           408
     8.41% note payable due in monthly installments,
       including interest, through March 2001,
       secured by airplane                                   468           681
     8.77% note payable due in monthly installments,
       including interest, through September 2000,
       secured by certain equipment                          839         1,287
     8.27% note payable due in monthly installments,
       including interest, through December 2000,
       secured by certain equipment                          148           216
     9.2% note payable due in monthly installments,
       including interest, through March 2009, secured
       by buildings                                        1,700         1,787
     6.4% note payable due in monthly installments,
       including interest, through January 2005,
       secured by equipment                                2,741           ---

					
                                                           6,381         4,979 
					
     Less current maturities                               1,556         1,333 
					
     Long-term debt, less current maturities         $     4,825         3,646


The Industrial Revenue Bonds were issued by a municipality to finance
warehouse facilities of the Company. The facilities are leased by the Company
and the Company has the option to purchase the facilities for a nominal sum
at the expiration of the leases.

Interest expense on notes payable and long-term debt in fiscal 1999, 1998,
and 1997 aggregated $3,193, $2,418, and $1,853, respectively.

(Continued)

<PAGE 29>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


Maturities of long-term debt, including the notes payable under the revolving
loan credit facility, in each of the next five years and thereafter in the
aggregate as of January 31, 1999 are as follows:

                                     Fiscal year              
			
                                            2000         $     1,556 
                                            2001              31,904 
                                            2002                 676 
                                            2003                 611 
                                            2004                 656 
                                      Thereafter               1,576 
			
                                                         $    36,979 
			

     (4)  Employee Benefits

          The Company has a trusteed Profit Sharing Plan (Plan) for the
          benefit of eligible employees. The Plan provides for an annual
          contribution of not more than 20% of earnings for the year before
          the profit sharing contribution and Federal and state income taxes,
          limited to 15% of the annual compensation of the participants in
          the Plan. Contributions by the Company vest with the participants
          over a seven-year period. The Company reserves the right to
          discontinue its contributions at any time. The Company made profit
          sharing contributions for fiscal 1999, 1998, and 1997 of $775, $800,
          and $700, respectively.

          At January 31, 1999 and February 1, 1998, the Plan owned 79,053
          shares of the Company's common stock.

     (5)  Leases

          The Company is lessee under long-term capital leases expiring at
          various dates. The components of property under capital leases in
          the accompanying consolidated balance sheets at January 31, 1999
          and February 1, 1998 are as follows:

                                                       1999            1998
					
               Buildings                          $  16,624          16,624 
               Fixtures                               3,783           3,783 
					
                                                     20,407          20,407 
					
               Less accumulated amortization         14,428          13,811 
					
               Net property under capital leases  $   5,979           6,596 
					

The Company also has noncancelable operating leases, primarily for buildings
and transportation equipment, that expire at various dates.

(Continued)

<PAGE 30>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


Future minimum lease payments under all noncancelable leases together with
the present value of the net minimum lease payments pursuant to capital
leases as of January 31, 1999 are as follows:

           Fiscal Year:            Capital         Operating
					
           2000               $      1,521             7,612
           2001                      1,521             7,222 
           2002                      1,521             6,135 
           2003                      1,457             5,262 
           2004                      1,384             4,929 
           Later years               7,972            27,977 
					
               Total minimum
               lease payments       15,376         $  59,137
					
           Less amount
             representing
             interest                6,747
					
           Present value of
             net minimum
             lease payments          8,629
					
           Less current
             maturities                540
					
           Capital lease
             obligations,
             less current
             maturities       $      8,089
					

Minimum payments have not been reduced by minimum sublease rentals of $120
under operating leases due in the future under noncancelable subleases. They
also do not include contingent rentals which may be paid under certain store
leases on the basis of percentage of sales in excess of stipulated amounts.
Contingent rentals applicable to capital leases amounted to $53, $59, and
$39 for fiscal 1999, 1998, and 1997, respectively.

Interest on capital lease obligations in fiscal 1999, 1998, and 1997
aggregated $1,041, $1,107, and $1,180, respectively.

The following schedule presents the composition of total rent expense for
all operating leases for fiscal 1999, 1998, and 1997:

                                          1999            1998            1997
            Minimum rentals       $      8,216           7,545           5,221 
            Contingent rentals             415             316             361 
            Less sublease rentals         (109)           (104)           (124) 
							
                                  $      8,522           7,757           5,458 
							
(Continued)

<PAGE 31>

DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


          Sale-Leaseback Transaction

          The Company entered into an agreement to sell and leaseback ten
          stores (land and buildings) in December 1998. The proceeds from the
          sale-leaseback transaction amounted to $6.2 million and the
          leaseback term is 20 years.  As a result of the sale-leaseback
          transaction, the Company incurred a gain of $489 which has been
          deferred for financial reporting purposes and is included within
          other noncurrent liabilities and is being amortized over the term
          of the related leases. The Company will use the proceeds to fund
          the Company's continued store development.

     (6)  Income Taxes

          Total income tax expense (benefit) for fiscal 1999, 1998, and 1997
          was allocated as follows:

                                          1999            1998            1997 
							
            Operations               $   4,287           4,790           3,794 
            Additional paid-in
              capital for the tax
              benefit from
              utilization of net
              operating loss
              carryforwards                ---             ---            (626)
							
                 Total income
                   tax expense       $   4,287           4,790           3,168

							
          Income tax expense (benefit) attributable to operations for fiscal
          1999, 1998, and 1997 consists of:

                                 Current         Deferred            Total 
							
            1999:                                            
              Federal          $  3,669              (63)            3,606 
              State                 693              (12)              681 
							
                               $  4,362              (75)            4,287 
							
            1998:                                            
              Federal          $  4,163             (116)            4,047 
              State                 765              (22)              743 
							
                               $  4,928             (138)            4,790 
							
            1997:                                            
              Federal          $  3,061              136             3,197 
              State                 571               26               597 
							
                               $  3,632              162             3,794 
							
(Continued)

<PAGE 32>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


          The significant components of deferred income tax expense (benefit)
          attributable to operations for fiscal 1999, 1998, and 1997 are as
          follows:
                                          1999            1998             1997 
							
            Deferred tax expense
              (exclusive of the
              effects of the
              following item)         $    (75)           (138)            788
            Decrease in beginning
              of the year balance
              of the valuation
              allowance for
              deferred tax assets          ---             ---            (626)
							
                                      $    (75)           (138)            162 
							

          Income tax expense attributable to operations was $4,287, $4,790,
          and $3,794 for fiscal 1999, 1998, and 1997, respectively, and
          differs from the amounts computed by applying the Federal income
          tax rate of 35% in 1999 and 1998, and 34% in 1997 as a result of
          the following:

                                          1999            1998            1997
							
            Computed "expected"
              tax expense             $  4,026           4,298           3,350
            Reduction in income
              taxes resulting from:
                State income taxes,
                  net of the Federal
                  income tax benefit       501             483             394
            Other, net                    (240)              9              50 
							
                                      $  4,287           4,790           3,794 
							
(Continued)

<PAGE 33>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


          The tax effects of temporary differences that give rise to
          significant portions of deferred tax assets and liabilities at
          January 31, 1999 and February 1, 1998 are presented below:
 
                                                        1999            1998
					
            Deferred tax assets:                             
              Capital leases                     $     1,018             969 
              Other assets                               244              38 
              Other liabilities                          920             579 
              Net operating loss and
                tax credit carryforwards                  43              85
					
                   Total gross deferred
                     tax assets                        2,225           1,671
					
            Less - valuation allowance                   (43)            (85) 
					
                   Net deferred tax assets             2,182           1,586 
					

            Deferred tax liabilities:
              Inventories, principally
                due to differences in
                the LIFO reserve arising
                from a prior business
                combination accounted for
                as a purchase                          2,911           2,998
              Property and equipment, due
                to differences in deprecia-
                tion and a prior business
                combination accounted for
                as a purchase                          4,016           3,408 
					
                   Total gross deferred
                     tax liabilities                   6,927           6,406
					
                   Net deferred tax
                     liability                   $     4,745           4,820
					

          At January 31, 1999, the Company has net operating loss carryforwards
          for state income tax purposes in various states aggregating $1,657
          which are available to offset future state taxable income in those
          states, if any, expiring at various dates through fiscal 2005.

          The valuation allowance relates to the net operating loss (NOL) and
          tax credit carryforwards. Income tax benefits in fiscal 1997 from
          the utilization of NOL carryforwards have been recorded as an
          increase to additional paid-in capital because such income tax
          benefits are attributable to the loss periods prior to the
          reorganization in June 1991.


(Continued)

<PAGE 34>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


     (7)  Stock Option Plan

          During fiscal 1994, the Company adopted a stock option plan under
          which options to purchase 125,000 shares of common stock may be
          granted to key employees. The stock option plan was amended in
          June 1994 to increase the number of options which may be granted
          under the plan to 200,000, and was further amended in March 1997
          to increase to 450,000. The plan provides that the option price
          shall not be less than the fair market value of the shares on the
          date of grant and that unexercised options expire five years from
          that date. The options become exercisable in equal amounts over a
          four-year period from the grant date. Information regarding
          options which were outstanding at January 31, 1999, February 1,
          1998, and February 2, 1997 is presented below:

<TABLE>
<CAPTION>

                                                                                    Weighted
                                                                                     average
                                                            Number of               exercise
                                                               shares                  price
            <S>                                            <C>                  <C>
            Options outstanding, January 28, 1996            158,325            $      9.41 
            Issued                                            37,150            $    12.875 
            Exercised                                         (1,313)           $      9.41 
            Canceled                                          (6,637)           $     10.49 
				
            Options outstanding, February 2, 1997            187,525            $     10.06 
            Issued                                            82,750            $     12.75 
            Exercised                                         (8,938)           $      8.73 
            Canceled                                         (14,262)           $     10.79 
                          
            Options outstanding, February 1, 1998            247,075            $     10.97 
            Issued                                            45,250            $     18.50 
            Exercised                                        (53,563)           $      8.25 
            Canceled                                          (3,200)           $     12.84 

            Options outstanding, January 31, 1999            235,562            $     13.00

</TABLE>

(Continued)

<PAGE 35>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


          The Company has chosen to account for stock-based compensation
          using the intrinsic value method prescribed in APB 25 and related
          interpretations. Accordingly, compensation cost for stock options
          is measured as the excess, if any, of the quoted market price of
          the Company's stock at the date of the grant over the amount an
          employee must pay to acquire the stock. If the Company had elected
          to recognize compensation cost based on the fair value of the
          options granted at grant date as prescribed by Statement 123, net
          earnings and net earnings per share would have been decreased to
          the pro forma amounts indicated in the table below:
                                                     1999            1998 
					
            Net earnings, as reported       $       7,215           7,491 
            Net earnings, pro forma                 7,087           7,412 
            Net earnings per share,
              as reported:
                Basic                                1.41            1.47 
                Diluted                              1.40            1.46 
            Net earnings per share,
              pro forma:
                Basic                                1.39            1.45 
                Diluted                              1.38            1.44 
					

          The fair value of each option grant is estimated on the date of
          grant using the Black-Scholes option-pricing model with the
          following assumptions:

                                                     1999            1998
				
            Expected dividend yield                    0%              0% 
            Expected stock price volatility         34.6%           33.0% 
            Risk-free interest rate                  5.6%            6.5% 
            Expected life of options              5 years         5 years 
				

          The weighted average grant date fair value of options granted
          during 1999 and 1998 is $7.42 and $5.19 per share, respectively.

<TABLE>
<CAPTION>
                                           Options outstanding             Options exercisable
                               ________________________________________  ________________________
                                    Number      Weighted                      Number
            Range              outstanding       average       Weighted  exercisable     Weighted 
            of                          at     remaining        average           at      average 
            exercise           January 31,   contractual       exercise  January 31,     exercise 
            price                     1999          life          price         1999        price 
            _________________  ____________  ____________  ____________  ____________  ___________
            <S>                <C>           <C>           <C>           <C>           <C>
             $9.20 to $12.75       190,462          2.12       $ 11.71       105,806     $ 10.97
                 $18.50             45,100          4.33       $ 18.50           ---     $   --- 
											
             $9.20 to $18.50       235,562                                   105,806          

</TABLE>

(Continued)

<PAGE 36>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


     (8)  Stockholders' Equity

          During 1998, the Company's Board of Directors approved a plan to
          repurchase up to 411,000 shares of the Company's Common Stock (the
          "Stock Repurchase Program"). Purchases pursuant to the Stock
          Repurchase Program are to be made from time to time in the open
          market or directly from stockholders at prevailing market prices.
          The Stock Repurchase Program is anticipated to be funded with
          internally generated cash and borrowings under the Credit Facility.
          As of January 31, 1999, the Company had purchased 60,000 shares of
          Common Stock for $669.

          The Company completed a secondary public offering of 900,000 shares
          of its common stock on October 15, 1996 and the Company's
          underwriters exercised their option to purchase an additional
          189,000 common shares on November 15, 1996. The Company received
          net proceeds from the sale of its common stock (after deducting
          issuance costs) of $13,068. The net proceeds of the offering were
          used to fund the opening of new stores. Pending such use, the net
          proceeds were used to repay outstanding balances under the Company's
          revolving loan credit facility.

          The Company has accounted for the confirmation of its plan of
          reorganization under Chapter 11 of the Federal bankruptcy laws which
          was confirmed by the Bankruptcy Court on May 17, 1991 as a
          quasi-reorganization. Accordingly, the accumulated deficit at June 2,
          1991 was charged to additional paid-in capital and a new retained
          earnings account was established effective the same date. No
          adjustment was made to the carrying values of the Company's assets
          and liabilities because such amounts were not in excess of estimated
          fair values.


     (9)  Earnings Per Share

          The following is a reconciliation of the outstanding shares
          utilized in the computation of earnings per share:

                                           1999           1998          1997

            Outstanding shares:
              Weighted average shares
                outstanding (basic)    5,111,461     5,096,322     4,299,502
              Effect of dilutive
                options to purchase
                common stock              43,399        52,496        40,320 
							
                  As adjusted for
                    diluted
                    calculation        5,154,860     5,148,818     4,339,822
							
            Net earnings -
              basic and diluted       $    7,215         7,491         6,058
							

          Earnings per share amounts have been computed on the absolute amount
          of net earnings whereas the above net earnings amounts have been
          rounded to the nearest thousand.


(Continued)

<PAGE 37>



DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


     (10) Quarterly Financial Information (Unaudited)

<TABLE>
          Financial results by quarter are as follows:
<CAPTION>

                                                 First       Second        Third       Fourth
                                               quarter      quarter      quarter      quarter 
            _____________________________  ___________  ___________  ___________  ___________
            <S>                            <C>          <C>          <C>          <C>
            1999:
              Net sales                    $   81,052       90,360       85,308      106,789 
              Gross margin (a)                 28,150       30,610       29,290       36,017 
              Earnings before cumulative
                effect of accounting
                change (d)                        954        1,833        1,119        3,309
              Cumulative effect of
                accounting change (d)            (956)         ---          ---          ---
              Net earnings (d)                     (2)       1,833        1,119        3,309 
              Net earnings per share
                before cumulative effect of
                accounting change (b), (c)
                and (d):
                  Basic                           .19          .36          .22          .65
                  Diluted                         .18          .35          .22          .65 
									
            1998:                                                            
              Net sales                    $   69,272       80,463       76,163       97,356 
              Gross margin (a)                 23,735       26,668       26,714       33,155 
              Net earnings                        849        1,535          903        4,204 
              Net earnings per share:
                Basic                             .17          .30          .18          .82 
                Diluted                           .17          .30          .18          .81 

</TABLE>

            (a)  The pretax LIFO inventory provision for the fiscal year ended
                 January 31, 1999 was estimated to be expense of $-0- in each
                 of the first three quarters. The annual provision amounted to
                 $2,449 income resulting in a credit of $2,449 in the fourth
                 quarter.

                 The pretax LIFO inventory provision for the fiscal year ended
                 February 1, 1998 was estimated to be expense of $0, $110 and
                 $60 in each of the first three quarters, respectively. The
                 annual provision amounted to $950 income resulting in a credit
                 of $1,120 in the fourth quarter.

            (b)  Earnings per share amounts are computed independently for
                 each of the quarters presented. Therefore, the sum of the
                 quarterly earnings per share in fiscal 1999 does not equal
                 the total computed for the year.

            (c)  The cumulative effect of adopting the accounting change for
                 store preopening costs was (.19) in the first quarter of
                 fiscal 1999.

(Continued)

<PAGE 38>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


            (d)  Amounts for the first and second quarter of fiscal 1999 have
                 been restated to reflect adoption of the accounting change
                 for store preopening cost discussed in note 1(h). The
                 effect of the restatement was to increase (decrease) the
                 amounts originally reported in the Company's quarterly
                 reports for such quarters as follows:
                                                         First          Second 
                                                       quarter         quarter
                                                   ___________     ___________
                   Earnings before cumulative
                     effect of accounting
                     change                        $      (52)            244
                   Cumulative effect of
                     accounting change                   (956)            ---
                   Net earnings                        (1,008)            244 
                   Net earnings per share:                          
                     basic and diluted                   (.20)            .05 
					

     (11) Fair Value of Financial Instruments

          The Company has determined the fair value of its financial
          instruments in accordance with Statement of Financial Accounting
          Standards No. 107, Disclosures About Fair Value of Financial
          Instruments. For long-term debt, the fair value is estimated by
          discounting the future cash flows at rates currently available for
          similar types of debt instruments. Such fair value approximated the
          carrying value of long-term debt at January 31, 1999 and February 1,
          1998. For notes payable under revolving loan credit facility, fair
          value approximates the carrying value due to the variable interest
          rate.

          For all other financial instruments including cash, receivables,
          accounts payable, and accrued expenses, the carrying amounts
          approximate fair value due to the short maturity of those
          instruments.

     (12) Related Party Transactions

          Lease payments to related parties amounted to approximately $585 in
          fiscal 1999, 1998, and 1997.

          During fiscal 1999 and 1997, the Company paid a computer consulting
          firm, whose president or chairman is a director of the Company,
          $260 and $957, respectively, for point-of-sale software and related
          services.

     (13) Business Operations and Segment Information

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

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

(Continued)

<PAGE 39>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)

<TABLE>
Segment Information
<CAPTION> 
                                              1999           1998           1997
                                         __________     ___________    ___________
<S>                                      <C>            <C>            <C>
     Net Sales:                          
       ALCO Discount Stores              $ 330,705         302,040        261,710
       All Other:
         External                           32,804          21,214         17,109
         Intercompany                      200,465         189,330        155,067

                                         $ 563,974         512,584        433,886

     Depreciation and Amortization:       
       ALCO Discount Stores              $   3,300           2,554          1,785
       All Other                             2,674           2,251          1,988

                                         $   5,974           4,805          3,773  


     Income (expense) from Operations:
       ALCO Discount Stores              $  29,241          28,086         26,195
       All Other                           (16,771)        (14,037)       (13,806)

                                         $  12,470          14,049         12,389

     Capital Expenditures:
       ALCO Discount Stores              $   8,203          10,081         10,531
       All Other                             2,057           1,581          1,131

                                         $  10,260          11,662         11,662

     Identifiable Assets:
       ALCO Discount Stores              $ 128,078         122,263         98,326
       All Other                            43,733          33,638         32,617

                                         $ 171,811         155,901        130,943

</TABLE>

(Continued)

<PAGE 40>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


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

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

       Intercompany Expense Allocations

         General and administrative expenses incurred at the general office
         have not been allocated to the ALCO Discount Stores for purposes of
         determining income from operations for the segment information.

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

       Inventories

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

       Property Costs

         For ALCO stores for which the Company owns the store building, rent
         expense is charged to, and the applicable depreciation expense is
         excluded from, income from operations for purposes of determining
         the segment information for the ALCO Discount Stores.

       Leases

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


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

(Continued)

<PAGE 41>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 31, 1999, February 1, 1998, and February 2, 1997
(Dollars in thousands, except per share amounts)


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

<TABLE>
<CAPTION>


                                                      1999         1998         1997
       _______________________________________  ___________  ___________  ___________
       <S>                                      <C>          <C>          <C>
       Net sales per above segment information  $  563,974      512,584      433,886
       Intercompany elimination                   (200,465)    (189,330)    (155,067)

            Net sales per consolidated
              statements of operations          $  363,509      323,254      278,819

       Income from operations per above
         segment information                    $   12,470       14,049       12,389 
       Inventory method                              2,449          950          (55)
       Property costs                                  916          911          744 
       Leases                                          (99)        (104)        (193)
												
            Income from operations per  
              consolidated statements of
              operations                        $   15,736       15,806       12,885

</TABLE>

<PAGE 42>



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

         None


PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The Registrant's Proxy Statement to be used in connection with
         the Annual Meeting of Stockholders to be held on May 27, 1999,
         contains under the caption "Election of Directors" certain
         information required by Item 10 of Form 10-K, and such information
         is incorporated herein by this reference. The information required
         by Item 10 of Form 10-K as to executive officers is set forth in
         Item 4A of Part I hereof.

         The Registrant's Proxy Statement to be used in connection with
         the Annual Meeting of Stockholders to be held on May 27, 1999,
         contains under the caption "Compliance with Section 16(a) of the
         Securities Exchange Act of 1934" certain information required by
         Item 10 of Form 10-K, and such information is incorporated herein
         by this reference.


ITEM 11. EXECUTIVE COMPENSATION.

         The Registrant's Proxy Statement to be used in connection with the
         Annual Meeting of Stockholders to be held on May 27, 1999, contains
         under the caption "Executive Compensation and Other Information"
         the information required by Item 11 of Form 10-K, and such
         information is incorporated herein by this reference (except that
         the information set forth under the following subcaptions is
         expressly excluded from such incorporation: "Compensation Committee
         Report" and "Company Performance").


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The Registrant's Proxy Statement to be used in connection with the
         Annual Meeting of Stockholders to be held on May 27, 1999, contains
         under the caption "Ownership of Duckwall Common Stock" the
         information required by Item 12 of Form 10-K and such information
         is incorporated herein by this reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The Registrant's Proxy Statement to be used in connection with the
         Annual Meeting of Stockholders to be held on May 27, 1999, contains
         under the caption "Insider Participation" the information required
         by Item 13 of Form 10-K and such information is incorporated herein
         by this reference.


<PAGE 43>


PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
         AND REPORTS ON FORM 8-K.

         (a)  Financial Statements, Financial Statement Schedules, and Exhibits

              (1)  Consolidated Financial Statements

                   The financial statements are listed in the index for Item 8
                   of this Form 10-K.

              (2)  Financial Statement Schedules

                   No financial statement  schedules are included  as they are
                   not applicable to the Company.

              (3)  Exhibits

                   The exhibits filed with or incorporated by reference in this
                   report are listed below:



     Number     Description
     ______     _________________________________________________________
       3(a)     Amended and Restated Articles of Incorporation (filed
                as Exhibit 3(a) to Registrant's Registration Statement
                on Form 10 and hereby incorporated herein by reference).

       3(b)     Certificate of Amendment to the Articles of Incorporation
                (filed as Exhibit 3(b) to Registrant's Annual Report on
                Form 10-K for the fiscal year ended January 29, 1995, and
                incorporated herein by reference) (filed as Exhibit 3(b)
                to Registrant's Annual Report on Form 10-K for the fiscal
                year ended January 29, 1995, and incorporated herein by
                reference).

       3(c)     Bylaws (filed as Exhibit 3(b) to Registrant's Registration
                Statement on Form 10 and hereby incorporated herein by
                reference).

       4(a)     Specimen Common Stock Certificates (filed as Exhibit 4.1
                to Registrant's Registration Statement on Form S-1 and
                incorporated herein by reference).

       4(b)     Reference is made to the Amended and Restated Articles
                of Incorporation and Bylaws described above under 3(a)
                and 3(c), respectively (filed as Exhibit 4(a) to
                Registrant's Registration Statement on Form 10 and
                hereby incorporated herein by reference).

       4(c)     Reference is made to the Certificate of Amendment to the
                Articles of Incorporation described above under 3(b)
                (filed as Exhibit 3(b) to Registrant's Annual Report on
                Form 10-K for the fiscal year ended January 29, 1995,
                and incorporated herein by reference).

       4(d)     Form of 10% Subordinated Notes (filed as Exhibit 4(c)
                to Registrant's Registration Statement on Form 10 and
                hereby incorporated herein by reference).

       9(a)     Voting Agreement and Irrevocable Proxy, dated as of
                May 29, 1991, among General Electric Capital Corporation,
                certain stockholders of the Registrant and the Registrant
                (filed as Exhibit 9 to Registrant's Registration
                Statement on Form 10 and hereby incorporated herein
                by reference).

       9(b)     Assignment, dated as of February 11, 1993, among General


<PAGE 44>



                Electric Credit Corporation, BA Business Credit, Inc. and
                Transamerica Business Credit Corporation (filed as Exhibit
                9(b) to Registrant's Annual Report on Form 10-K for the
                fiscal year ended January 31, 1993 and hereby incorporated
                herein by reference).


       10(a)    Assignment, dated as of February 11, 1993, among General
                Electric Credit Corporation, BA Business Credit, Inc. and
                Transamerica Business Credit Corporation (filed as Exhibit
                9(b) to Registrant's Annual Report on Form 10-K for the
                fiscal year ended January 31, 1993 and hereby incorporated
                herein by reference).

       10(b)    Amended and Restated Loan Agreement, dated as of
                February 11, 1993 among the Registrant, BA Business Credit,
                Inc. and Transamerica Business Credit Corporation (filed as
                Exhibit 10(e) to Registrant's Annual Report on Form 10-K
                for the fiscal year ended January 31, 1993 and hereby
                incorporated herein by reference.)

       10(c)    First Amendment to Security Agreement, dated as of
                February 11, 1993 among the Registrant, BA Business Credit,
                Inc. and Transamerica Business Credit Corporation (filed as
                Exhibit 10(f) to Registrant's Annual Report on Form 10-K
                for the fiscal year ended January 31, 1993 and hereby
                incorporated herein by reference.)

       10(d)    Amendment No. 1, dated as of June 10, 1994, to the Amended
                and Restated Loan Agreement, dated as of February 11, 1993,
                among the Registrant, BA Business Credit, Inc. and
                Transamerica Business Credit Corporation.

       10(e)    Stock Pledge Agreement, dated as of February 11, 1993 among
                the Registrant, BA Business Credit, Inc. and Transamerica
                Business Credit Corporation (filed as Exhibit 10(g) to
                Registrant's Annual Report on Form 10-K for the fiscal
                year ended January 31, 1993 and hereby incorporated herein
                by reference.)

       10(f)    Mortgage, Security Agreement, and Assignment of Leases and
                Rents, dated as of February 11, 1993 among the Registrant,
                BA Business Credit, Inc. and Transamerica Business Credit
                Corporation (filed as Exhibit 10(h) to Registrant's Annual
                Report on Form 10-K for the fiscal year ended January 31,
                1993 and hereby incorporated herein by reference.)

       10(g)    Mortgage, Security Agreement, and Assignment of Leases and
                Rents, dated as of February 11, 1993 among the Registrant,
                BA Business Credit, Inc. and Transamerica Business Credit
                Corporation (filed as Exhibit 10(i) to Registrant's Annual
                Report on Form 10-K for the fiscal year ended January 31,
                1993 and hereby incorporated herein by reference.)

       10(h)    Mortgage, Security Agreement, and Assignment of Leases and
                Rents, dated as of February 11, 1993 among the Registrant,
                BA Business Credit, Inc. and Transamerica Business Credit
                Corporation (filed as Exhibit 10(j) to Registrant's Annual
                Report on Form 10-K for the fiscal year ended January 31,
                1993 and hereby incorporated herein by reference.)

       10(i)    Deed of Trust, Security Agreement, and Assignment of
                Leases and Rents, dated as of February 11, 1993 by the
                Registrant in favor of The Public Trustee for Morgan
                County, Colorado (filed as Exhibit 10(k) to Registrant's
                Annual Report on Form 10-K for the fiscal year ended
                January 31, 1993 and hereby incorporated herein by
                reference.)

       10(j)    Deed of Trust, Security Agreement, and Assignment of


<PAGE 45>


                Leases and Rents, dated as of February 11, 1993 by the
                Registrant in favor of The Public Trustee for Fremont
                County, Colorado (filed as Exhibit 10(l) to Registrant's
                Annual Report on Form 10-K for the fiscal year ended
                January 31, 1993 and hereby incorporated herein by
                reference.)

       10(k)    Lease dated July 1, 1979 between the Registrant and the
                City of Abilene (filed as Exhibit 10(d) to Registrant's
                Registration Statement on Form 10 and hereby incorporated
                herein by reference). 

       10(l)    Lease dated July 1, 1979 between the Registrant and the
                City of Abilene (filed as Exhibit 10(e) to Registrant's
                Registration Statement on Form 10 and hereby incorporated
                herein by reference).

       10(m)    Lease dated July 1, 1979 between the Registrant and the
                City of Abilene (filed as Exhibit 10(f) to Registrant's
                Registration Statement on Form 10 and hereby incorporated
                herein by reference).

       10(n)    Employment Agreement, dated March 18, 1993 between the
                Registrant and Glen L. Shank (filed as Exhibit 10(o) to
                Registrant's Annual Report on Form 10-K for the fiscal
                year ended January 31, 1993 and hereby incorporated
                herein by reference.).*

       10(o)    Second Amended and Restated Loan Agreement, dated as of
                October 18, 1995, by and among the Registrant, BankAmerica
                Business Credit, Inc. and Transamerica Business Credit
                Corporation.

       11       Computation of Company's Earnings Per Share

       22       Subsidiaries of the Registrant.

       23       Consent of Independent Auditors

       27       Financial Data Schedule

       ______________________

        *  Management contracts or compensation plans or arrangements
           required to be identified by Item 14(a)(3).


       (b)      Reports on Form 8-K.

                No reports on Form 8-K were filed by Registrant during the
                fourth quarter of the fiscal year ended January 31, 1999.

       (c)      Exhibits

                The exhibits filed with this report are identified above
                under Item 14(a)(3)

       (d)      Financial Statement Schedules.

                No financial statement  schedules are included  as they are
                not applicable to the Company.

<PAGE 46>


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

DUCKWALL-ALCO STORES, INC.

by /s/ Glen L. Shank                                
       Glen L. Shank
       Chairman of the Board
       and President



Dated: April 30, 1999

    Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:


         Signature and Title                                 Date           
         ______________________________________________      _______________


         /s/ Glen L. Shank                                    April 30, 1999
             Glen L. Shank
             Chairman of the Board
             and President
             (Principal Executive Officer)


         /s/ Richard A. Mansfield                             April 30, 1999
             Richard A. Mansfield
             Vice President - Finance and Treasurer
             (Principal Financial and Accounting Officer)


         /s/ Dennis A. Mullin                                 April 30, 1999
             Dennis A. Mullin
             Director


         /s/ Robert L. Barcum                                 April 30, 1999
             Robert L. Barcum
             Director


         /s/ Lolan C. Mackey                                  April 30, 1999
             Lolan C. Mackey
             Director


         /s/ Jeffrey Macke                                    April 30, 1999
             Jeffrey Macke
             Director

     
         /s/ Robert L. Woodard                                April 30, 1999
             Robert L. Woodard
             Director


</PAGE 47>