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 February 1, 1998

                                      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.

          Yes  [   ]          No  [   ]

     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, 1998,  there were 5,098,761 shares of Common Stock
outstanding, of which 2,458,474 shares were owned by affiliates.

     Documents incorporated by reference:  portions of the Registrant's Proxy
Statement for the 1998 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, 1998, the Company operates 243 retail stores located in
the central United States, consisting of 156 ALCO retail discount stores and
87 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 Street, 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 243 stores in 18 states in the central United States.  The Company's
strategy is to target smaller markets not served by other regional or national
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 156 ALCO discount stores, 112 stores are located in
communities that do not have another full service discounter.  The Company
intends to continue its strategy of opening ALCO stores in markets that do
not have other 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 93% 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, which, based
on the Company's experience, has been a design that maximizes return on
investment for newly-constructed stores ("Class 18 Stores").

     The Company's 87 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 7% 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 service 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 91 ALCO discount stores (with an
    approximate average size 18,300 square feet of selling space) and 73
    Duckwall variety stores.  Except for seven stores, each of the new
    ALCO and Duckwall stores was opened in a primary market in which there was
    no direct competition from a 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 reduce costs, improve customer service, and enhance
    general business planning. The Company's accounting and information
    systems, merchandise planning, and inventory planning systems have
    recently been enhanced and are in the process of being implemented.
    In 1996 the Company  began a $2.3 million project to update the back
    office equipment and software being used at the ALCO stores for sales
    processing. The Company expects this project to extend the life of the
    current point-of-sale equipment, as well as improve efficiencies in
    training and operations. The majority of this project is expected to be
    completed in fiscal 1999. In conjunction with the project, the discount
    stores will receive radio frequency hand held devices to allow for
    additional efficiencies in processing inventory receipts and counts.

  Advertising and Promotion:
    The Company utilizes full-color photography advertising circulars of 8 to
    20 pages distributed by insertion into newspapers or by direct mail where
    newspaper service is inadequate.  These circulars are distributed
    approximately 40 times per year in ALCO markets, with two additional
    circulars for the larger stores.  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.

  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 15 ALCO stores and 20 Duckwall
     stores during fiscal year 1999, and a minimum of 12 ALCO stores and
     15 Duckwall stores during each of the fiscal years 2000 and 2001.

     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 59 ALCO stores with an average selling area of approximately
     18,500 square feet, and 53 Duckwall stores. The following table
     summarizes the Company's growth during the past three fiscal years:

<TABLE>
<CAPTION>
                                                                       Year-to-Date
                     1996              1997              1998              1999       

                 ALCO  DUCKWALL    ALCO  DUCKWALL    ALCO  DUCKWALL    ALCO  DUCKWALL
<S>               <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>
Stores Opened      13         8      15        15      25        15       6        15
Stores Closed       2         1       1         0       0         0       2         1
Net New Stores     11         7      14        15      25        15       4        14

</TABLE>

<PAGE 3>

     The Company intends to utilize the 18,000 square foot store profile for
new ALCO store openings.  Currently, the Company owns 29 ALCO and 3 Duckwall
locations, and leases 127 ALCO and 84 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 16 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 22 merchandise buyers and two assistant
  buyers 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 3% of the Company's total purchases
  in fiscal 1998 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.  Promotions on various
  items are offered approximately 40 times a year through advertising circulars,
  with two additional circulars for the larger stores.  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 156 ALCO discount stores
  and 87 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 1997 the Company  began a $2.3 million project to update
  the back office equipment and software being used at the ALCO stores for
  sales processing. The Company expects this project to extend the life of the
  point-of-sale equipment currently being used, as well as improve
  efficiencies in training and operations.  The majority of this project is
  expected to be completed in fiscal 1999. In conjunction with the project,
  the discount stores will receive radio frequency hand held devices to allow
  for additional efficiencies in processing inventory receipts and counts.

       Approximately 550 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.

<PAGE 5>

Store Locations

       As of May 1, 1998, the Company operated 156 ALCO stores in 17 states
  located in smaller communities in the central United States.  Of the ALCO
  stores, 29 are owned and 127 are operated under real estate leases.  The
  ALCO stores average approximately 21,700 square feet of selling space, with
  an additional 5,000 square feet utilized for merchandise processing,
  temporary storage and administration.  The Company also operates 87
  Duckwall stores in ten states, three of which are owned, and 84 are leased.
  The geographic distribution of the Company's stores is as follows:

  Store Locations (243)

       Duckwall Stores (87)
       <TABLE>

       <CAPTION>
       <C>                  <C>                  <C>                  <C>
       ARKANSAS (1)         KANSAS (continued)   MISSOURI (1)         SOUTH DAKOTA (1)
         Little Rock          Cottonwood Falls     Salisbury            Miller
                              Oberlin
       COLORADO (5)           Plainville         NEBRASKA (7)         TEXAS (19)
         Brush                Sedan                Geneva               Spur
         Walsenburg           Hoisington           Chappel              Stratford
         Las Animas           Johnson              Kimball              Clarendon
         Rocky Ford           LaCrosse             Neligh               Hemphill
         Akron                Osage City           Cambridge            McCamey
                              Clearwater           Oxford               Floydada
       IOWA (3)               Osborne              Imperial             Kingsland
         Manning              Ness City                                 Ozona
         Villisca             Elkhart            NEW MEXICO (1)         Bridgeport
         Belmond              Minneapolis          Clayton              Crane
                              Washington                                Olney
       KANSAS (39)            Meade              OKLAHOMA (10)          Jewett
         Belleville           Sterling             Beaver               Eldorado
         Lincoln              Caldwell             Shattuck             Memphis
         Council Grove        Stafford             Hooker               Iraan
         Wamego               Pleasanton           Seiling              Tahoka
         Marion               Coldwater            Wewoka               Big Lake
         Scott City           Hill City            Enid                 Wills Point
         Horton               Atwood               Okeene               Pittsburg
         Ulysses              Leoti                Canton
         Hugoton              Kinsley              Buffalo
         WaKeeney             Herington            Waynoka
         Greensburg           Smith Center
         St. John             Syracuse

<PAGE 6>


       ALCO Stores (156)
       <CAPTION>
       <C>                  <C>                  <C>                  <C>
       ARIZONA (3)          IOWA (10)            NEBRASKA (17)        OHIO (4)
         Springerville        Atlantic             Beatrice             New Bremen
         Holbrook             Perry                McCook               Paulding
         Taylor               Estherville          Fremont              Wapakoneta
                              Knoxville            Norfolk              Delphos
       ARKANSAS (5)           Vinton               Alliance
         Russellville         West Union           Sidney             SOUTH DAKOTA (8)
         Hot Springs          Garner               North Platte         Lead
         DeWitt               Clarinda             Nebraska City        Milbank
         Conway               Emmetsburg           Ogallala             Webster 
         Hardy                Waukon               O'Neill              Canton
                                                   Valentine            Sisseton 
       COLORADO (8)         KANSAS (25)            Gordon               Redfield 
         Fort Morgan          Abilene              West Point           Chamberlain 
         Commerce City        Salina               Cozad                Wagner 
         Canon City           Concordia            Gering
         Burlington           Garden City          Ord                TEXAS (22)
         Yuma                 Hays                 Albion               Pampa
         Wray                 Larned                                    Dalhart 
         Monte Vista          Pratt              NEW MEXICO (7)         Perryton
         Springfield          Goodland             Roswell              Monahans 
                              Manhattan            Portales             Andrews
       ILLINOIS (8)           Newton               Grants               Kermit
         Havana               Hutchinson           Belen                Spearman 
         Shelbyville          Junction City        Tucumcari            Vernon 
         Newton               So. Hutchinson       Lovington            Littlefield 
         Gibson City          Medicine Lodge       Bloomfield           Winnsboro 
         Nashville            Kingman                                   Dimmitt 
         Virden               Lyons              NORTH DAKOTA (7)       Cameron 
         Red Bud              Fredonia             Carrington           Alpine 
         Hillsboro            Beloit               Rolla                Tulia 
                              Eureka               Langdon              Muleshoe
       INDIANA (13)           Sabetha              Oakes                Clifton
         Cambridge City       Hillsboro            Lisbon               Coleman
         Brookville           Phillipsburg         Mayville             Slaton
         Hartford City        Ellsworth            Grafton              Canadian 
         Ligonier             Anthony                                   Mt. Vernon 
         Nappanee             Garnett            OKLAHOMA (8)           Hereford
         Knox                                      Fairview             Sonora 
         Tipton             MINNESOTA (6)          Cordell   
         New Castle           Spring Valley        Watonga            UTAH (2) 
         Demotte              Caledonia            Cherokee             Roosevelt 
         Versailles           Paynesville          Pawhuska             Moab 
         Goshen               Olivia               Wilburton
         N. Manchester        Long Prarie          Frederick          WYOMING (3) 
         Winimac              Warroad              Nowata               Lander
                                                                        Rawlins
                                                                        Diamondville 
			

</TABLE>

<PAGE 7>

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 retail discount stores in 32 of its ALCO markets,
  and another 12 ALCO stores are in direct competition with regional full-line
  discount stores.  Of the last 106 ALCO stores opened, only seven are in direct
  competition with a national or regional full-line discount retailer.
  The competing regional and national 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 extremely 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 and manufacturers outlets.  The Company has
  experienced no direct competition from national or regional full-line
  discount retailers in any of the 95 Class 18 markets in which it has opened a
  store.

Employees

       As of April 1, 1998, the Company employed approximately 4,850 people,
  of whom approximately  450 were employed in the general office or
  distribution center in Abilene, 3,800 in the ALCO stores and 600 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-nine of the ALCO stores and three 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
  210,521 square feet (5.1%) expire between May 1, 1998 and January 31, 1999;
  approximately 340,219 square feet (8.2%) expire between February 1, 1999
  and January 31, 2000; and approximately 336,397 square feet (8.2%) expire
  between February 1, 2000 and January 31, 2001.  The remainder expire through
  2014.  All Duckwall store leases have terms of seven years or less.

<PAGE 8>

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 February 1, 1998.


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, 1998. 

   Name                            Age     Position
   Glen L. Shank                    53     Chairman of the Board and President
   James E. Schoenbeck              54     Vice President -
                                           Operations and Advertising
   James R. Fennema                 47     Vice President-Merchandise
   Richard A. Mansfield             42     Vice President-Finance and Treasurer
   Charles E. Bogan                 62     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 31 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 24 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 25 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
 speciality 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 17 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 9>

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 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>
       Fiscal 1995                               High             Low
       -------------------------          -----------      ----------
       <C>                                <C>              <C>
         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

</TABLE>

       As of April 3, 1998, there were approximately 1,369 holders of record
  of the Common Stock of the Company. The Company has not paid cash dividends
  on its Common Stock during the last three fiscal years, and is currently
  prohibited from paying such dividends by the terms of the Second Amended
  and Restated Loan Agreement dated as of October 18, 1995, among the Company,
  BA Business Credit, Inc., and Transamerica Business Credit Corporation.

  <PAGE 10>

  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.  These 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
                                      ---------------------------------------------------------------------------
                                      February 1,     February 2,     January 28,     January 29,     January 30,
                                             1998            1997            1996            1995            1994
                                      -----------     -----------     -----------     -----------     -----------
<S>                                   <C>             <C>             <C>             <C>             <C>
Statements of Operations Data
  Net Sales                              $323,254        $278,819        $256,454        $242,144        $225,903
  Cost of Sales                           212,982         186,531         173,296         163,180         154,217  
  Gross Margin                            110,272          92,288          83,158          78,964          71,686   
  Selling, general
    and administrative
    expenses                               89,661          75,630          69,018          65,477          59,432
  Depreciation and amortization             4,805           3,773           3,093           3,280           3,950
  Income from operations                   15,806          12,885          11,047          10,207           8,304 
  Interest expense                          3,525           3,033           2,958           3,390           4,091 
  Other expense, net                            0               0            (185)            156             823
  Earnings before income taxes             12,281           9,852           8,274           6,661           3,390           
  Income tax expense                        4,790           3,794           3,144           2,531           1,130 
  Net earnings                             $7,491          $6,058          $5,130          $4,130          $2,260     
  Per Share Information: 	
    Earnings per share: (1) 
      Basic                                 $1.47           $1.41           $1.28           $1.56            $.81
      Diluted                                1.46            1.40            1.28            1.54             .81  
    Weighted average shares outstanding: (2) 
      Basic                             5,096,322       4,299,502       3,999,488       2,648,246       2,000,000
      Diluted                           5,148,818       4,339,822       4,014,351       2,680,216       2,002,548

  Operating Data
  Stores open at year-end                     225             185             156             138             121
  Stores in non-competitive markets
    at year-end (3)                           176             137             110              91              72
  Percentage of total stores in 
    non-competitive markets (3)              78.2%           74.1%           70.5%           65.9%           59.5%
  Net sales of stores
    in non-competitive markets (3)        $224,117        $177,939        $151,733        $132,743        $112,590
  Percentage of net sales
    from stores in
    non-competitive markets (3)              69.3%           63.8%           59.2%           54.8%           49.8%
  Comparable store sales for
    all stores (4)                             .6%           (2.9%)          (3.2%)           1.1%             ---
  Comparable store sales for stores
    in non-competitive markets (3)(4)         1.6%           (1.3%)          (1.0%)           2.7%            4.0%

Balance Sheet Data
  Total assets                            $158,114        $132,808        $107,723         $92,202         $84,282
  Total debt (includes capital
    lease obligation and
    current maturities)                     39,718          26,285          24,551          16,805          30,244
  Redeemable common stock purchase 
     warrant                                     0               0               0               0           2,303
  Stockholders' equity                      80,394          72,825          53,061          47,100          26,553

</TABLE>

  (1)     Earnings per share for fiscal 1994 includes the dilutive effect
          of accretion in the carrying value of a redeemable common stock
          purchase warrant of $645.

  (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.

<PAGE 11>

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 1998 and 1996 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
                                              _______________________________________
                                              February 1,   February 2,   January 28, 
                                                     1998          1997          1996
--------------------------------------------- -----------   -----------   -----------
<S>                                           <C>           <C>           <C>        
Net sales....................................       100.0%        100.0%        100.0%
Cost of sales................................        65.9          66.9          67.6 
Gross margin.................................        34.1          33.1          32.4 
Selling, general and administrative expenses.        27.7          27.1          26.9 
Depreciation and amortization................         1.5           1.4           1.2 
Total operating expenses.....................        29.2          28.5          28.1 
Income from operations.......................         4.9           4.6           4.3 
Interest expense.............................         1.1           1.1           1.2 
Other expense, net...........................          .0            .0           (.1)
Earnings before income taxes.................         3.8           3.5           3.2 
Income tax expense...........................         1.5           1.3           1.2 
Net earnings.................................         2.3%          2.2%          2.0% 

</TABLE>

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.  The Company anticipates that gross margin as a percentage of net sales
should continue to 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.

<PAGE 12>


     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.

     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.


Fiscal 1997 Compared to Fiscal 1996

       Net sales for fiscal 1997 increased $22.3 million or 8.7% to $278.8
  million compared to $256.5 million for fiscal 1996.  During fiscal 1997,
  the Company opened 30 stores, 27 of which were in new non-competitive
  markets, and closed one store (which was in competitive market), resulting
  in a net increase of 29 stores, and a year end total of 185 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 1997 and 1996 (comparable stores), as adjusted to a
  comparable 52 week year, decreased by $6.8 million or 2.9% in fiscal 1997
  compared to fiscal 1996. The bulk of this decrease, $5.1 million, occurred
  in stores in competitive markets, while the prototype Class 18 Stores
  produced a $67,000 decrease, or .1% of sales and the Duckwall variety
  stores produced an decrease of $20,000 or .2% of sales. Net sales for all
  comparable stores in non-competitive markets decreased by $1.7 million or
  1.3%, in fiscal 1997 compared to fiscal 1996.  The elimination of five
  major promotional circulars, as well as the fact that the Christmas selling
  season was one week shorter than the prior year were the major factors in
  the reduction of same store sales.

       Gross margin for fiscal 1997 increased $9.1 million or 11.0% to $92.3
  million compared to $83.2 million in fiscal 1996.  As a percentage of net
  sales, gross margin increased .7% to 33.1% in fiscal 1997 from 32.4% in
  fiscal 1996. The increase was a result of lower promotional markdowns (due
  to the elimination of the five promotional circulars) and higher initial
  markons on purchases in fiscal 1997, compared to fiscal 1996.  The Company
  anticipates that gross margin as a percentage of net sales should continue
  to 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.

       Selling, general and administrative expenses increased $6.6 million or
  9.6% to $75.6 million in fiscal 1997 compared to $69.0 million in fiscal
  1996, primarily due to the increase in total stores.  As a percentage of
  net sales, selling, general and administrative expenses increased to 27.1%
  in fiscal 1997 from 26.9% in fiscal 1996.

       Income from operations increased $1.8 million, or 16.6% to $12.9
  million in fiscal 1997 compared to $11.0 million in fiscal 1996. Income
  from operations as a percentage of net sales increased to 4.6% in fiscal
  1997 from 4.3% in fiscal 1996.

       Interest expense increased $75,000 or 2.5% in fiscal 1997 compared to
  fiscal 1996.  The increase results from higher borrowing levels to fund the
  purchases of merchandise, fixtures, and owned store buildings for the store
  expansion program.

       Other expense, net, was zero in fiscal 1997, compared to a $185,000
  one time gain in fiscal 1996 on termination of a store lease.

       Income taxes were $3.8 million in fiscal 1997 compared to $3.1 million
  in fiscal 1996.  The Company's effective tax rate was 38% in both fiscal
  years.

       Net earnings for fiscal 1997 increased by $928,000 or 18.1% to $6.1
  million compared to $5.1 million in fiscal 1996.

<PAGE 13>

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 1996,
  1997, and 1998.


<TABLE>
                                 First         Second          Third         Fourth
                               Quarter        Quarter        Quarter        Quarter
                                                 (dollars in millions)
<CAPTION>
--------------------------  ----------     ----------     ----------     ----------
<S>                         <C>            <C>            <C>            <C>
                             
                                
Fiscal 1996
  Net sales                      $55.0          $62.6          $60.8          $78.1
  Gross margin                    18.2           20.2           19.7           25.1
  Income from operations           1.6            2.4            1.8            5.2
  Net earnings                      .6            1.0             .6            2.9
                               
                                  
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                      .7            1.2             .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                      .9            1.5             .9            4.2                    
 

</TABLE>
                                                                    
       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 include 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 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.


Liquidity and Capital Resources
                                                                    
       At the end of fiscal 1998, working capital (defined as current assets
  less current liabilities) was $76.0 million compared to $60.4 million at
  the end of fiscal 1997 and $47.4 million at the end of fiscal 1996.
                                                                    
       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.  Additionally, 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 (used) by operating activities aggregated ($6.8) million,
  $4.2 million, and $.9 million in fiscal 1998, 1997 and 1996, respectively.
  The decrease in cash provided in fiscal 1998 relative to fiscal 1997
  resulted primarily  from an increase in inventory needed to support the forty
  new store openings.  The increase in cash provided in fiscal 1997 relative to
  fiscal 1996 resulted primarily from an increase in income taxes payable, as
  well as additional depreciation and LIFO expense.   
                                                                    
<PAGE 14>

       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
  $85.0 million of financing in the form of notes payable and letters of
  credit, was executed in April 1998 and will expire in April 2001.
  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 1998, the Company made net cash borrowings against its
  revolving credit facility of $13.5 million, incurred $1.9 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 1997 and 1996, the Company
  has made net cash payments of $1.7 million and net cash borrowings of
  $8.3 million, respectively.  The fiscal 1997 cash payments included the
  temporary use of the proceeds from the public offering. The Company
  executed operating leases for 80 additional stores during the three year
  period ending in fiscal 1998.  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, 40 new stores were opened
  in fiscal 1998 and least 35 new stores are scheduled to be opened in
  fiscal 1999.  The Company believe that with the new $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 1998,
  1997 and 1996 totaled $11.7 million, $11.6 million and $8.8 million,
  respectively.  Anticipated cash payments for acquisition of property and
  equipment in fiscal 1999, principally for store buildings and fixtures are
  $13.3 million.
                                                                    
                                                                    
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 35 stores in the
  current fiscal year and at least 27 stores in both fiscal 2000 and 2001.  
  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.
                                                                    

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

<PAGE 15>

  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 19% of the
  outstanding shares of Common Stock of the Company as of March 16, 1998.  


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 Company is aware of the issues associated with the programming code
  in existing computer systems as the year 2000 approaches.  In 1998, the
  Company will commence, for all of its systems, a year 2000 date conversion
  project to address all necessary code changes, testing and implementation.
  The "Year 2000" problem is the result of computer programs being written using
  two digits rather than four to define the applicable year.  Any of the 
  Company's programs that have time-sensitive software may recognize a date
  using "00" as the year 1900 rather than the year 2000.  This could result 
  in a major system failure or miscalculations.  The Company presently
  believes that, with modifications to existing software and converting to
  new software, the year 2000 problem will not pose significant operational
  problems for the Company's computer systems as so modified and converted.
  However, if such modifications and conversions are not completed timely,
  the year 2000 problem may have a material impact on the operations of the
  Company.  Until the Company has undertaken this year 2000 project, the
  Company will not know the total cost of the conversion and whether it will
  be material to the future financial results or financial condition of the
  Company.
                                                                    
                                                                    
Impact of new Accounting Pronouncement
                                                                    
       In April 1997, the American Institute of Certified Public Accountants
  issued a proposed Statement of Position (SOP) REPORTING ON THE COSTS OF
  START-UP ACTIVITIES.  The proposed SOP requires that entities expense costs
  of start-up activities as they are incurred.  The proposed SOP, if approved,
  would be effective for financial statements for fiscal years beginning after
  December 15, 1998, with earlier application encouraged.  The initial
  application of the SOP is to be reported as a cumulative effect of a change
  in accounting principle.  The Company currently capitalizes store pre-opening
  costs and amortizes such costs over the initial twelve months of a store's
  operations.  Pre-opening costs capitalized, net of accumulated amortization,
  at February 1, 1998, are $1,567.  While the one-time recording of the
  cumulative effect of the change in accounting principle could be material,
  the ongoing effect of the proposed new accounting principle would be dependent
  upon the number and timing of new stores opened.  Generally, pre-opening
  costs would be recognized during the two months prior to a store commencing
  operation under the proposed new accounting principle versus over the twelve
  months subsequent to commencing operation under the existing principle.

<PAGE 16>

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 ............................           18

  Financial Statements:

       Consolidated Balance Sheets --
            February 1, 1998 and February 2, 1997 .........           19

       Consolidated Statements of Operations --
            Fiscal Years Ended February 1, 1998,
            February 2, 1997, and January 28, 1996 ........           21

       Consolidated Statements of Stockholders'                         
            Equity --
                 Fiscal Years Ended February 1, 1998,
                 February 2, 1997, and January 28, 1996 ...           22

       Consolidated Statements of Cash Flows --                         
            Fiscal Years
                 Ended February 1, 1998, February 2, 1997,
                 and January 28, 1996 .....................           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 17>


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 subsidiary as of February 1, 1998 and February
  2, 1997, and the related consolidated statements of operations,
  stockholders' equity and cash flows for each of the years in the three-year
  period ended February 1, 1998.  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 subsidiary as of February 1, 1998 and February
  2, 1997, and the results of their operations and their cash flows
  for each of the years in the three-year period ended February 1, 1998, in
  conformity with generally accepted accounting principles.


         /s/KPMG Peat Marwick LLP


            Wichita, Kansas
            March 20, 1998

<PAGE 18>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY
<TABLE>
Consolidated Balance Sheets
(Dollars in Thousands)

February 1, 1998 and February 2, 1997
<CAPTION>

                                            February              February
Assets                                       1, 1998               2, 1997
<S>                                        <C>                 <C>
Current assets:
  Cash and cash equivalents                $   2,555                7,538
  Receivables (note 3)                         3,158                3,160
  Inventories (notes 2 and 3)                103,445               80,359
  Prepaid expenses                             2,131                1,785

    Total current assets                     111,289               92,842

Property and equipment, at cost (note 3)
    Land                                       2,961                2,658
    Buildings and building improvements       25,041               20,991
    Furniture, fixtures and equipment         34,430               26,215
    Transportation equipment                   1,731                1,688
    Leasehold improvements                     6,115                4,623
    Construction work in progress                496                2,931
      Total property and equipment            70,774               59,106
     Less accumulated
      depreciation and amortization           30,627               26,527

        Net property and equipment            40,147               32,579

  Property under capital leases (note 5)      20,407               20,407
      Less accumulated amortization           13,811               13,100

        Net property under capital leases      6,596                7,307

  Debt financing costs                            82                   80

                                           $ 158,114              132,808

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE 19>

DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY
<TABLE>
Consolidated Balance Sheets, Continued
(Dollars in Thousands)

February 1, 1998 and February 2, 1997
<CAPTION>


                                            February              February
Liabilities and Stockholders' Equity         1, 1998               2, 1997
<S>                                        <C>                 <C> 
Current liabilities:
  Current maturities of
    long-term debt (note 3)                $   1,333                1,242
  Current maturities of
    capital lease obligations (note 5)           518                  607
  Accounts payable                            19,009               17,127
  Income taxes payable                         2,272                2,345
  Accrued salaries and commissions             4,884                3,876
  Accrued taxes other than income              3,159                2,929
  Other current liabilities                    1,804                1,670
  Deferred income taxes (note 6)               2,324                2,612

    Total current liabilities                 35,303               32,408

  Notes payable under revolving loan
    credit facility (note 3)                  25,591               12,095
  Long-term debt, less
    current maturities (note 3)                3,646                3,193
  Capital lease obligations,
    less current maturities (note 5)           8,630                9,148
  Other noncurrent liabilities                   782                  793
  Deferred revenue                             1,272                    0
  Deferred income taxes (note 6)               2,496                2,346

      Total liabilities                       77,720               59,983


Stockholders' equity (notes 4, 7 and 8):

  Common stock, $.0001 par value,
    authorized 20,000,000 shares in
    1998 and 1997; issued and outstanding
    5,098,761 and 5,089,823 shares
    in 1998 and 1997, respectively                 1                    1

  Additional paid-in capital                  54,474               54,396
  Retained earnings since June 2, 1991        25,919               18,428

      Total stockholders' equity              80,394               72,825

Commitments (note 5)					

                                           $ 158,114              132,808

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE 20>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY
<TABLE>
Consolidated Statements of Operations
(Dollars in Thousands Except Per Share Amounts)

Fiscal Years Ended February 1, 1998, February 2, 1997, and January 28, 1996
<CAPTION>

                                            February            February            January
                                             1, 1998             2, 1997            28, 1996
--------------------------------------    ----------           ----------           ----------     
<S>                                       <C>                  <C>                  <C>
Net sales                                 $  323,254              278,819              256,454
Cost of sales                                212,982              186,531              173,296

    Gross margin                             110,272               92,288               83,158

Selling, general
  and administrative (notes 4 and 5)          89,661               75,630               69,018
Depreciation and amortization                  4,805                3,773                3,093

    Total operating expenses                  94,466               79,403               72,111

    Income from operations                    15,806               12,885               11,047

Interest expense (notes 3 and 5)               3,525                3,033                2,958
Other income                                       -                    -                 (185)

    Earnings before income taxes (note 2)     12,281                9,852                8,274

Income tax expense (note 6)                    4,790                3,794                3,144

            Net earnings                       7,491                6,058                5,130

Earnings per share (note 9)
  Basic                                   $     1.47                 1.41                 1.28

  Diluted                                 $     1.46                 1.40                 1.28

</TABLE>


See accompanying notes to consolidated financial statements.

<PAGE 21>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY
<TABLE>
Consolidated Statements of Stockholders' Equity
(Dollars in Thousands)

Fiscal Years Ended February 1, 1998, February 2, 1997, and January 28, 1996 
<CAPTION>

                                                        Retained
                                                        Earnings
                                          Additional       Since         Total
                                  Common     Paid-In     June 2,  Stockholders'
                                   Stock     Capital        1991        Equity
----------------------------  ----------  ----------  ----------  ------------
<S>                           <C>         <C>         <C>         <C>

Balance, January 29, 1995     $        1      39,859       7,240        47,100
  Net earnings for the year 
    ended January 28, 1996             -           -       5,130         5,130

  Tax benefit from net 
    operating loss
    carryforward (note 6)              -         831           -           831

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
    carryforward (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 purchase
    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

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE 22>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY

<TABLE>
Consolidated Statements of Cash Flows
(Dollars in Thousands)
Fiscal Years Ended February 1, 1998, February 2, 1997, and January 28, 1996 
<CAPTION>

                                            February            February             January
                                             1, 1998             2, 1997             28, 1996
--------------------------------------    ----------           ----------           ----------
<S>                                       <C>                  <C>                  <C>
Cash flows from operating activities:

  Net earnings                            $    7,491                6,058                5,130

    Adjustments to reconcile net
    earnings to net cash provided by
    operating activities:

      Depreciation and amortization            4,805                3,773                3,093
      Amortization of debt
        financing costs                           43                   40                  180
      Deferred income taxes                     (138)                 162                  267
      Gain on sale or
        disposition of property
        and equipment                              -                  (37)                  (1)
      Gain on termination of store
        capital leases                             -                    -                 (185)
      LIFO expense (income)                     (950)                  55                 (378)
      Decrease (increase) in receivables           2                 (615)                (624)
      Increase in inventories                (22,136)              (8,779)              (8,830)
      Increase in prepaid expenses              (346)                (537)                (216)
      Increase in accounts payable             1,882                  792                2,420
      Increase (decrease)in income taxes
        payable                                  (73)               2,151                  163
      Increase in accrued
        salaries and commissions               1,008                  262                  502
      Increase in accrued taxes
        other than income                        230                  726                  264
      Increase (decrease) in
        other liabilities                        123                  120                 (895)
      Increase in deferred revenue             1,272                    -                    -
          Net cash provided by (used in)
          operating activities                (6,787)               4,171                  890

Cash flows from investing activities:
  Proceeds from sale of
    property and equipment                         -                   48                   67

  Acquisition of:
    Buildings                                 (4,112)              (4,124)              (4,403)
    Fixtures, equipment and
      leasehold improvements                  (7,550)              (7,538)              (4,502)

          Net cash used in
          investing activities               (11,662)             (11,614)              (8,838)

</TABLE>
(Continued)

<PAGE 23>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows, Continued
(Dollars in Thousands)
<TABLE>
Fiscal Years Ended February 1, 1998, February 2, 1997, and January 28, 1996<CAPTION>

                                            February              February              January
                                             1, 1998               2, 1997              28, 1996
--------------------------------------    ----------           ----------           ----------
<S>                                       <C>                  <C>                  <C>

Cash flows from financing activities:
  Increase in notes
    payable under revolving
    loan credit facility                  $   13,496                   80               11,777
  Proceeds from stock issuance                     -               13,068                    -
  Proceeds from exercise of
    outstanding stock options                     78                   12                    -
  Proceeds from issuance of
    long-term debt                             1,870                3,110                    -
  Principal payments on
    long-term debt                            (1,326)                (819)              (2,849)
  Principal payments under
    capital lease obligations                   (607)                (637)                (617)
  Decrease in
    bank overdrafts                                -                    -                 (76)
  Debt financing costs                           (45)                 (10)                (110)

        Net cash provided by
        financing activities                  13,466               14,804                8,125

Net increase (decrease) in cash
  and cash equivalents                        (4,983)                7,361                  177
Cash and cash equivalents, at
  beginning of year                            7,538                  177                    -

Cash and cash equivalents,
  at end of year                          $    2,555                7,538                  177
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE 24>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements
(Dollars in Thousands Except Per Share Amounts)

Fiscal Years Ended February 1, 1998, February 2, 1997, and January 28, 1996 


(1)  Summary of Significant Accounting Policies

     (a)     Nature of Business
               Duckwall-ALCO Stores, Inc. and subsidiary (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 subsidiary.  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 1998 and 1996 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.

     (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.

<PAGE 25>

DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued
(Dollars in Thousands Except Per Share Amounts)

(1)  Summary of Significant Accounting Policies, Continued

     (g)  Store Opening Costs
            Direct incremental costs of opening new stores are deferred and
            amortized on a straight-line basis over a 12-month period from
            the date the store is opened.

     (h)  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.

     (i)  Net Earnings Per Share
            In 1997, the Financial Accounting Standards Board issued 
            SFAS No. 128, Earnings Per Share (Statement 128) which replaces 
            the prior accounting standard regarding computation and presentation
            of earnings per share.  Statement 128 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.  The
            Company adopted Statement 128 as of February 1, 1998 and,
            accordingly, earnings per share data for all periods presented in
            the accompanying consolidated financial statements and notes thereto
            has been computed in accordance with Statement 128.

           
     (j)  Consolidated Statements of Cash Flows
            During fiscal 1998, 1997 and 1996, the following amounts were
            paid for interest and income taxes:

                                                  1998       1997       1996

            Interest, excluding interest on
              capital lease obligations and
              amortization of debt financing
              costs (net of capitalized
              interest of $72 in fiscal
              1998 and $269 in fiscal 1997
              and $107 in fiscal 1996)         $ 2,431      2,083      2,061

            Income taxes                         5,001      1,481      2,714


            Noncash financing and investing activities for fiscal 1998, 1997
            and 1996 consisted of:

              Tax benefit from net operating loss carryforward of $626 and $831
              which increases additional paid-in capital in fiscal
              1997 and 1996, respectively (note 6).

              A capital lease was terminated in fiscal 1996 resulting in
              elimination of capital lease assets of $380 and capital lease
              obligations of $565.


<PAGE 26>

DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued
(Dollars in Thousands Except Per Share Amounts)


(1)  Summary of Significant Accounting Policies, Continued



     (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.  The Company has
            determined that a provision for impairment loss does not need to be
            recognized for fiscal 1998, 1997 and 1996. 

     (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.

<PAGE 27>

DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued
(Dollars in Thousands Except Per Share Amounts)


(2)  Inventories
       Inventories at February 1, 1998 and February 2, 1997 are stated at the
       lower of cost or net realizable value as determined under the LIFO
       method of accounting.  The Company utilizes the LIFO method of valuing
       its inventories because, in the opinion of management, the LIFO method
       more nearly matches current costs with current revenue during periods
       of rising prices for financial reporting and income tax purposes.
       Inventories at February 1, 1998 and February 2, 1997 are summarized as
       follows:

                                                         1998            1997

          FIFO cost                                $  106,489          84,353
          Less LIFO reserve                            (3,044)         (3,994)

                  LIFO cost                        $  103,445          80,359

       Earnings before income taxes for fiscal 1998, 1997 and 1996 would
       have been decreased by $950, increased by $55 and decreased by $387,
       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 $45,000 of long-term financing.  The 
       amount advanced (through a note or letters of credit) to the Company 
       bears interest at the prime rate plus .5% on the Revolving Rate Loan 
       and LIBOR plus 2.25% on the LIBOR Rate Loan and is generally limited 
       to 55% 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, the number of stores 
       that may be opened in a fiscal year, sales of assets, and capital 
       expenditures and financial covenants related to earnings, the ratio 
       of earnings to fixed charges, working capital and tangible net worth, 
       all as defined.  The loan agreement prohibits the payment of dividends.
       The loan agreement expires in February 1999 and automatically renews 
       for successive one-year terms thereafter unless terminated by the 
       lenders or the Company.

	   Notes payable outstanding at February 1, 1998 and February 2, 1997 
       under the revolving loan credit facility aggregated $25,591 and 
       $12,095, respectively.  The lender had also issued letters of credit 
       aggregating $2,692 and $2,237, respectively, at such dates on behalf 
       of the Company.  The interest rate on outstanding borrowings at 
       February 1, 1998 was 7.875% on the LIBOR Rate Loan and 9.0% on the 
       Revolving Rate Loan payable monthly.  The Company had additional 
       borrowings available at that date under the revolving loan credit 
       facility amounting to $16,717.



<PAGE 28>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued
(Dollars in Thousands Except Per Share Amounts)

(3)  Credit Arrangements, Notes Payable and Long-Term Debt, Continued
       Long-term debt, exclusive of notes payable under the revolving loan
       credit facility as described above, at February 1, 1998 and
       February 2, 1997 consisted of the following:

                                                        1998            1997

       7.15% to 9.5% obligations for Industrial
         Revenue Bonds, interest payable
         semi-annually with principal payments
         due annually until final maturity
         in 1999                                     $   600           1,000

       9.875% mortgage note payable due in
         monthly installments, including
         interest, through September 2001                408             498

       8.41% note payable due in monthly
         installments, including interest,
         through March 2001, secured
         by airplane                                     681             861

       8.77% note payable due in monthly
         installments, including interest,
         through December 2000, secured by
         certain equipment                              1,503          1,976
       
        9.3% note payable due in monthly 
          installments, including interest,
          through March 2009, secured by
          buildings                                     1,787              -

      10% notes payable, due quarterly                      -            100
                                                        4,979          4,435
      Less current maturities                           1,333          1,242

      Long-term debt, less current maturities        $  3,646          3,193


      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 1998,
      1997 and 1996 aggregated $2,418, $1,853 and $1,706, respectively.

       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 February 1, 1998 are as follows:

         Fiscal Year:

           1999                                                     $ 1,333
           2000                                                      26,758
           2001                                                         893
           2002                                                         254
           2003                                                         143
           Thereafter                                                 1,189
                                                                    $30,570


<PAGE 29>

DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued
(Dollars in Thousands Except Per Share Amounts)



(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 Profit
       Sharing 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 1998, 1997 and 1996 of $800, $700 and
       $630, respectively.

       At February 1, 1998 and February 2, 1997, the Plan owned 81,553 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 February 1, 1998 and
       February 2, 1997 are as follows:

                                                1998            1997

        Buildings                           $ 16,624          16,624
        Fixtures                               3,783           3,783

                                              20,407          20,407

        Less accumulated amortization         13,811          13,100

            Net property under
            capital leases                  $  6,596           7,307

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

	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 February 1, 1998 are as follows:

          Fiscal Year:                            Capital           Operating

            1999                                 $  1,560            $  8,981
            2000                                    1,521               8,329
            2001                                    1,521               7,559
            2002                                    1,521               6,561
            2003                                    1,457               5,660
            Later years                             9,225              23,041

              Total minimum lease payments       $ 16,805            $ 60,131

          Less amount representing interest         7,657
          Present value of net minimum lease
            payments                                9,148
          Less current maturities                     518

          Capital lease obligations,
            less current maturities              $  8,630

<PAGE 30>

DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued
(Dollars in Thousands Except Per Share Amounts)

(5)  Leases, Continued
       Minimum payments have not been reduced by minimum sublease rentals of
       $152 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 $59, $39 and $51 for fiscal 1998, 1997 and
       1996, respectively.

       Interest on capital lease obligations in fiscal 1998, 1997 and 1996
       aggregated $1,107, $1,180 and $1,252, respectively.

       The following schedule presents the composition of total rent expense
       for all operating leases for fiscal 1998, 1997 and 1996:

                                             1998         1997         1996

         Minimum rentals                 $  7,545        5,221        6,049
         Contingent rentals                   316          361          353
         Less sublease rentals               (104)        (124)        (111)

                                         $  7,757        5,458        6,291

(6)  Income Taxes
       Total income tax expense (benefit) for fiscal 1998, 1997 and 1996 was
       allocated as follows:

                                             1998         1997         1996

         Operations                      $  4,790        3,794        3,144
         Additional paid-in capital
           for the tax benefit from
           utilization of net operating
           loss carryforwards                   -        (626)        (831)

         Total income tax expense        $  4,790        3,168        2,313

         Income tax expense (benefit) attributable to operations for fiscal
         1998, 1997 and 1996 consists of:

                                          Current     Deferred        Total
         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

         1996:
              Federal                    $  2,417          224        2,641
              State                           460           43          503

                                         $  2,877          267        3,144


<PAGE 31>

DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued
(Dollars in Thousands Except Per Share Amounts)


(6)  Income Taxes, Continued
	

	The significant components of deferred income tax expense (benefit)
        attributable to operations for fiscal 1998, 1997 and 1996 are as
        follows:

                                             1998         1997         1996
	Deferred tax expense
          (exclusive of the effects
          of the following item)         $   (138)         788        1,098
	Decrease in beginning of the
          year balance of the
          valuation allowance for
          deferred tax assets                   -        (626)        (831)

                                         $   (138)        162          267


       Income tax expense attributable to operations was $4,790, $3,794 and
       $3,144 for fiscal 1998, 1997 and 1996, respectively, and differs from
       the amounts computed by applying the Federal income tax rate of 35% in 
       1998 and 34% in 1997 and 1996 as a result of the following:

                                             1998         1997         1996
       Computed "expected" tax expense   $  4,298        3,350        2,814

       Reduction in income taxes
         resulting from:
           State income taxes, net of the
             Federal income tax benefit       483          394          332

             Other, net                         9           50           (2)


                                         $  4,790        3,794        3,144


       The tax effects of temporary differences that give rise to significant
       portions of deferred tax assets and liabilities at February 1, 1998
       and February 2, 1997 are presented below:

                                                          1998         1997
       Deferred tax assets:
         Capital leases                                $   969          930
         Other assets                                       38            -
         Other liabilities                                 579          323
         Net operating loss and
           tax credit carryforwards                         85           97

             Total gross deferred tax assets             1,671        1,350
             Less - valuation allowance                    (85)         (97)

                        Net deferred tax assets          1,586        1,253

	Deferred tax liabilities:
          Inventories, principally due to
            differences in the LIFO
            reserve arising from a prior business
            combination accounted for as a
            purchase                                     2,998        3,096
          Property and equipment, due to differences
            in depreciation and a prior business
            combination accounted for as a purchase      3,408        3,115

              Total gross deferred tax liabilities       6,406        6,211

              Net deferred tax liability               $ 4,820        4,958

<PAGE 32>

DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued
(Dollars in Thousands Except Per Share Amounts)

(6)  Income Taxes, Continued
       At February 1, 1998, the Company has net operating loss carryforwards
       for state income tax purposes in various states aggregating $2,364
       which are available to offset future state taxable income in those
       states, if any, expiring at various dates through fiscal 2005.  The
       Company also has an alternative minimum tax credit carryforwards of
       $19 which are available to reduce future Federal regular income taxes,
       if any, over an indefinite period.

       The valuation allowance at February 1, 1998 relates to the net
       operating loss (NOL) and tax credit carryforwards.  Income tax
       benefits in fiscal 1997 and 1996 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.

 
(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 February 1, 1998, February 2, 1997, and January 28, 1996
       is presented below:

                                                                  Weighted-
                                                                    Average
                                                     Number of     Exercise
                                                        Shares        Price
             
        Options outstanding, January 29, 1995          117,000        $8.67
        Issued                                          44,525      $11.375
        Canceled                                        (3,200)       $9.51

        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

        

<PAGE 33>



DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued
(Dollars in Thousands Except Per Share Amounts)


(7)  Stock Option Plan, Continued
       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:

	
                                                          1998         1997
         Net earnings, as reported                   $   7,491        6,058
         Net earnings, pro forma                         7,412        6,017
         Net earnings per share, as reported:
           Basic                                          1.47         1.41
           Diluted                                        1.46         1.40
         Net earnings per share, proforma:
           Basic                                          1.45         1.40
           Diluted                                        1.44         1.39 

	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:

                                                          1998         1997
        Expected dividend yield                              0%           0%
        Expected stock price volatility                   33.0%        33.5%
        Risk-free interest rate                            6.5%         6.5%
        Expected life of options                        5 years      5 years

        The weighted-average grant date fair value of options granted during
        1998 and 1997 is $5.19 and $5.28 per share, respectively.

<TABLE>
<CAPTION>
                                   Options Outstanding                 Options Exercisable
                      -----------------------------------------    --------------------------
                                       Weighted-
Range                      Number        Average      Weighted-         Number      Weighted-
of                    Outstanding      Remaining        Average    Exercisable        Average
Exercise              at February    Contractual       Exercise    at February       Exercise
Price                     1, 1998           Life          Price        1, 1998          Price
--------------------- -----------    -----------    -----------    -----------    -----------
<S>                   <C>            <C>            <C>            <C>            <C>
$7.20 to $9.20             95,750            .93          $8.64         78,531          $8.52
$11.375 to $12.875        151,325           3.69         $12.44         26,738         $11.83

$7.20 to $12.875          247,075                                      105,269

</TABLE>

<PAGE 34>


DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued
(Dollars in Thousands Except Per Share Amounts)


(8)  Stockholders' Equity
       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 are being 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:

                                               1998          1997          1996
	Outstanding shares:
            Weighted-average
              shares outstanding (basic)  5,096,322     4,299,502     3,999,488
            Effect of dilutive
              options to purchase
              common stock                   52,496        40,320        14,863

        As adjusted for
          diluted calculation             5,148,818     4,339,822     4,014,351

        Net earnings -
          basic and diluted               $   7,491         6,058         5,130

	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.

(10)  Quarterly Financial Information (Unaudited)
      Financial results by quarter are as follows:

<TABLE>
<CAPTION>
                                  First       Second        Third       Fourth
                                Quarter      Quarter      Quarter      Quarter
                             ----------   ----------   ----------   ----------
<S>                          <C>          <C>          <C>          <C>
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 (b):
       Basic                        .17          .30          .18          .82
       Diluted                      .17          .30          .18          .81

1997:
  Net sales                  $   59,348       68,426       64,857       86,188
  Gross margin (a)               19,642       22,320       21,656       28,670
  Net earnings                      703        1,224          701        3,430
  Net earnings per share:
    Basic                           .18          .31          .17          .68
    Diluted                         .18          .30          .17          .67

</TABLE>


<PAGE 35>

DUCKWALL-ALCO STORES, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements, Continued
(Dollars in Thousands Except Per Share Amounts)

(10) Quarterly Financial Information (Unaudited), Continued

  (a)  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.

       The pretax LIFO inventory provision for the fiscal year ended
       February 2, 1997 was estimated to be expense of $-0-, $90 and $90
       in each of the first three quarters, respectively.  The annual
       provision was a $55 expense resulting in a credit of $125 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 1997 does not equal the total computed for the year 
       due to the public offering of common stock which occurred during the 
       third quarter of fiscal 1997.

(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 February 1, 1998 and
         February 2, 1997.  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, 
         $585 and $650 in fiscal 1998, 1997 and 1996, respectively.

         During fiscal 1997, the Company paid a computer consulting firm,
         whose president is a director of the Company, $957 under a contract
         for point-of-sale software.


<PAGE 36>


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 21, 1998, 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 21, 1998, 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 21, 1998, 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 21, 1998, 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 21, 1998, 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 37>

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).


<PAGE 38>


9(b)       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(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.)

<PAGE 39>


10(j)      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 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 February 1, 1998.

     (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 40>

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: May 1, 1998

       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                                       May 1, 1998  
       Glen L. Shank     
         Chairman of the Board
         and President
         (Principal Executive Officer)


  /s/  Richard A. Mansfield                                May 1, 1998
       Richard A. Mansfield
         Vice President - Finance and Treasurer
         (Principal Financial and Accounting Officer)


  /s/  Dennis A. Mullin                                    May 1, 1998       
       Dennis A. Mullin
         Director


  /s/   William J. Morgan                                  May 1, 1998
        William J. Morgan
          Director


  /s/   Robert C. Amenta                                   May 1, 1998
        Robert C. Amenta
          Director


  /s/   Robert L. Barcum                                   May 1, 1998
        Robert L. Barcum
          Director

  /s/   Lolan C. Mackey                                    May 1, 1998
        Lolan C. Mackey  
          Director
     
<PAGE 41>
</PAGE>