Duckwall-ALCO Stores Reports Strong Top-Line and Bottom-Line First Quarter Fiscal 2010 Results

• Press Release
• Source: Duckwall-ALCO Stores, Inc.
• On 4:15 pm EDT, Thursday June 11, 2009

ABILENE, Kan., June 11, 2009 (GLOBE NEWSWIRE) -- Duckwall-ALCO Stores, Inc. (Nasdaq:DUCK - News), which specializes in providing a superior selection of essential products for everyday life in small-town America, today announced operating results for its first quarter ending May 3, 2009.

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Net sales from continuing operations, excluding the Company's two fuel centers, increased 11.0% to $114.1 million and same-store sales increased 6.2%.

Net loss for the first quarter was $50,000, or ($0.01) per basic share, compared to net loss of $5.9 million, or ($1.54) per basic share, for the first quarter of the prior fiscal year. Earnings were impacted by a, net after tax, charge of approximately $800,000 for the Company's Store Transformation Project, which will be completed in June 2009.

Quarterly Adjusted EBITDA dollars increased $5.8 million. Adjusted Gross Margin dollars grew $5.5 million, or 16.5%, and 210 basis points, as a percentage of sales. These results were driven by the sales increase, lower markdowns, freight costs and continued shrink improvement.

Larry Zigerelli, President and CEO, commented, "We are very pleased with these strong results, especially in light of the weak economy. All five elements of our turn around program and strategic plan, that began in the Fall of 2008, are on or ahead of schedule and continue to progress. First, completely revamping our merchandising and marketing programs. Second, relentlessly driving out all unnecessary costs. Third, significantly improving our operational excellence through superior in-stock performance and superior in-store service. Fourth, taking full advantage of our first ever significant investment in technology and implementing a new fact-based, accountable culture. Fifth, dramatically upgrading the quality and performance of our organization. I am optimistic that we will continue to successfully transform the Company for sustainable long term growth."

Investor Conference Call

The Company will host an investor conference call at 10:00 a.m. Central Daylight Time on June 12, 2009, to discuss operating results for the quarter ended May 3, 2009. The dial-in number for the conference call is 888-819-8018 (international/local participants dial 913-661-9178), and the Confirmation Code is 3414694. Parties interested in participating in the conference call should dial in approximately five minutes prior to 10:00 a.m. Central Daylight Time. A replay of the call will be available from two hours after completion on June 12 through June 17 by dialing 888-203-1112 or for international/local callers by dialing 719-457-0820. The Replay Passcode is 3414694. A replay of the call will also be available four hours after completion of the call by visiting the Investors page on the Company's website, www.ALCOstores.com.

Supplemental Data

The Company has included certain tables in this press release that are set forth fully in the Company's 10-Q.

Certain Non-GAAP Financial Measures

The Company has included Adjusted Gross Margin and Adjusted EBITDA, non-GAAP performance measures, as part of its disclosure as a means to enhance its communications with stockholders. Certain stockholders have specifically requested this information as a means of comparing the Company to other retailers that disclose similar non-GAAP performance measures. Further, management utilizes these measures in internal evaluation; review of performance and comparison with the Company's financial measures to that of its peers. Adjusted EBITDA differs from the most comparable GAAP financial measure (earnings from continuing operations before discontinued operations) in that it does not include certain items, as does Adjusted Gross Margin. These items are excluded by management to better evaluate normalized operational cash flow and expenses excluding unusual, inconsistent and non-cash charges. To compensate for the limitations of evaluating the Company's performance using Adjusted Gross Margin and Adjusted EBITDA, management also utilizes GAAP performance measures such as gross margin return on investment, return on equity and free cash flow. As a result, Adjusted Gross Margin and Adjusted EBITDA may not reflect important aspects of the results of the Company's operations.

About Duckwall-ALCO Stores, Inc.

Duckwall-ALCO Stores, Inc. is a regional broad line retailer that specializes in meeting the needs of smaller, underserved communities across 23 states, primarily in the central United States. The Company offers an exceptional selection of quality products and recognized brand names at reasonable prices. Its specialty is delivering those products with the friendly, personal service its customers have come to expect. With 258 stores, Duckwall-ALCO Stores is proud to have continually provided excellent products at good value prices to its customers for 108 years. To learn more about Duckwall-ALCO Stores, Inc. visit www.ALCOstores.com.

The Duckwall-ALCO Stores, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5865

Forward-looking statements

This press release contains forward-looking statements, as referenced in the Private Securities Litigation Reform Act of 1995 ("the Act"). Any forward-looking statements are made by the Company in good faith, pursuant to the safe-harbor provisions of the Act. These forward-looking statements reflect management's current views and projections regarding economic conditions, retail industry environments, and Company performance. Factors which could significantly change results include but are not limited to: sales performance, expense levels, competitive activity, interest rates, changes in the Company's financial condition, and factors affecting the retail category in general. Additional information regarding these and other factors may be included in the Company's 10-Q filings and other public documents, copies of which are available from the Company on request and are available from the United States Securities and Exchange Commission.

             Duckwall-ALCO Stores, Inc. and Subsidiaries
                Consolidated Statements of Operations
      (Dollars in thousands, except share and per share amounts)
                             (Unaudited)

                                                 For the Thirteen Week
                                                    Periods Ended
                                                ----------------------
                                                  May 3,      May 4,
                                                   2009        2008
                                                ----------  ----------
 Net sales                                      $ 115,466   $ 105,688
 Cost of sales                                     76,914      73,952
                                                ----------  ----------
 Gross margin                                      38,552      31,736

 Selling, general and administrative               35,737      36,793
 Depreciation and amortization                      2,377       1,773
                                                ----------  ----------
   Total operating expenses                        38,114      38,566

 Operating income (loss) from continuing
  operations                                          438      (6,830)
 Interest expense, net                                537         605
                                                ----------  ----------

 Loss from continuing operations before income
  taxes                                               (99)     (7,435)
 Income tax benefit                                   (45)     (3,054)
                                                ----------  ----------

 Loss from continuing operations                      (54)     (4,381)

 Earnings (loss) from discontinued operations,
  net of income expense (benefit)                       4      (1,472)
                                                ----------  ----------
 Net loss                                       $     (50)  $  (5,853)
                                                ==========  ==========

 Loss per share

   Continuing operations                        $   (0.01)  $   (1.15)
                                                ----------  ----------
   Net loss per share                           $   (0.01)  $   (1.54)
                                                ----------  ----------

 Weighted-average shares outstanding:
 Basic                                              3,798       3,811
 Diluted                                            3,798       3,811

                                                 For the Thirteen Week
                                                    Periods Ended
                                                ----------------------
                                                  May 3,      May 4,
                                                   2009        2008
                                                ----------  ----------
 Supplemental Data:
 Gross margin as reported                       $ 38,552    $ 31,736
 Inventory review initiative charge                   --       1,345
                                                ----------  ----------
 Adjusted Gross Margin                          $ 38,552    $ 33,081
                                                ==========  ==========

 Same-store gross margin dollar change               9.9%       (0.5)%
 Same-store SG&A dollar change                      (3.0)%       3.8%
 Same-store total customer count change              1.6%       (3.9)%
 Same-store average sale per ticket change           2.9%        2.2%

 Adjusted EBITDA from net earnings (loss) from continuing operations:

                                                              Trailing
                                                               Twelve
                                           For the Thirteen    Periods
                                          Week Periods Ended    Ended
                               ---------  ------------------  --------
                                 Fiscal    May 3,    May 4,    May 3,
                                  2009      2009      2008      2009
                               ---------  --------  --------  --------
 Net earnings (loss) from
  continuing operations(1)     $ (3,021)      (54)   (4,381)    1,306
 Plus:

 Interest                         1,867       537       605     1,799

 Taxes(1)                        (2,090)      (45)   (3,054)      919

 Depreciation and
  amortization(1)                 9,302     2,377     1,773     9,906

 Share-based compensation           186       185      (329)      700

 Preopening store costs(2)        1,846        --       722     1,124

 Inventory review initiative      1,345        --     1,345        --

 Executive and staff severance    1,942        --     1,942        --

 Store transformation project
  costs                           2,220     1,378        --     3,598
                               ---------  --------  --------  --------
 =Adjusted EBITDA(1)(3)(4)(5)    13,597     4,378    (1,377)   19,352
                               =========  ========  ========  ========

 Adjusted EBITDA

 Same-stores                     44,090    11,526     7,132    48,484

 Non same-stores(3)               2,216       294        60     2,450

 Store support center           (23,054)   (5,251)   (6,232)  (22,073)

 Warehouse                       (9,655)   (2,191)   (2,337)   (9,509)
                               ---------  --------  --------  --------
 Reconciled Adjusted
  EBITDA(1)(3)(4)(5)             13,597     4,378    (1,377)   19,352
                               =========  ========  ========  ========


 Cash                             4,744     8,208     4,977     8,208

 Debt                            49,841    60,946    41,080    60,946
                               ---------  --------  --------  --------
 Debt, net of cash             $ 45,097    52,738    36,103    52,738
                               =========  ========  ========  ========

(1) These amounts will not agree with the fiscal 2009 first quarter 10-Q filing due to the one store the Company closed in the third quarter of fiscal 2009. This store is now shown in discontinued operations.

(2) These costs are not consistent quarter to quarter as the Company does not open the same number of stores in each quarter of each fiscal year. These costs are directly associated with the number of stores that have or will be opened and are incurred prior to the grand opening of each store.

(3) For the trailing twelve periods ended May 3, 2009 the average open weeks for the Company's 11 non same-stores is 46 weeks. (4) During fiscal year 2009, the Company made a change in its Executive Management team and Board of Directors resulting in several initiatives to reduce certain SG&A expenses. For the trailing twelve periods ended May 3, 2009, these initiatives resulted in approximately $8.5 million reduced SG&A expenses when compared to the same prior year trailing twelve periods. The initiatives include, but are not limited to, executive and staff reduction, reduced ALCO same-store hourly wages, advertising expenses, net of coop offset and floor care services along with reduced total Company insurance and travel expenses.

(5) In addition to continued efforts regarding the fiscal 2009 SG&A initiatives, the Company has new initiatives for fiscal year 2010. The fiscal 2010 initiatives include, but are not limited to, reduced point-of-sale hardware lease expense, energy expense and accident reduction programs. These initiatives achieved approximately $734 in reduced SG&A savings for the first quarter of fiscal 2010 when compared to the prior year same period.

             Duckwall-ALCO Stores, Inc. and Subsidiaries
                     Consolidated Balance Sheets
             (dollars in thousands, except share amounts)
                             (Unaudited)

                                                     May 3,    May 4,
                                                      2009      2008
                                                    --------  --------
 Assets

 Current assets:
   Cash and cash equivalents                        $  8,208  $  4,977
   Receivables                                         5,104     3,898
   Prepaid income taxes                                5,710     4,955
   Inventories                                       159,994   145,123
   Prepaid expenses                                    3,445     3,263
   Deferred income taxes                               5,345     6,835
   Assets held for sale                                1,539        --
                                                    --------  --------
     Total current assets                            189,345   169,051
                                                    --------  --------

 Property and equipment, at cost                      98,375    89,315
 Less accumulated depreciation                        67,442    61,360
                                                    --------  --------
     Net property and equipment                       30,933    27,955
                                                    --------  --------

 Property under capital leases, net of accumulated
  amortization                                         2,601     4,435

 Other non-current assets                                185       270
 Deferred income taxes                                    --     3,028
                                                    --------  --------

     Total assets                                   $223,064  $204,739
                                                    ========  ========

 Liabilities and Stockholders' Equity

 Current liabilities:
   Current maturities of long-term debt             $  1,384  $  1,298
   Current maturities of capital lease obligations     1,878     1,840
   Accounts payable                                   35,128    36,023
   Accrued salaries and commissions                    5,408     5,685
   Accrued taxes other than income                     4,235     3,554
   Self-insurance claim reserves                       5,266     4,693
   Other current liabilities                           3,661     6,344
                                                    --------  --------
     Total current liabilities                        56,960    59,437

 Long-term debt, less current maturities               2,511     3,895
 Notes payable under revolving loan                   52,634    29,671
 Capital lease obligations - less current maturities   2,539     4,376
 Deferred gain on leases                               4,502     4,888
 Deferred income taxes                                   160        --
 Other noncurrent liabilities                          1,642     1,594
                                                    --------  --------
     Total liabilities                               120,948   103,861
                                                    --------  --------
 Stockholders' equity:
   Common stock, $.0001 par value, authorized
    20,000,000 shares; issued and outstanding
    3,797,947 shares and 3,810,591 shares,
    respectively                                           1         1
   Additional paid-in capital                         38,741    38,324
   Retained earnings                                  63,374    62,553
                                                    --------  --------
     Total stockholders' equity                      102,116   100,878
                                                    --------  --------
     Total liabilities and stockholders' equity     $223,064  $204,739
                                                    ========  ========

Duckwall-ALCO Stores, Inc.
Donny R. Johnson, Executive Vice President - Chief Financial
Officer
785-263-3350 X164
djohnson@ALCOstores.com

Hagen and Partners
Debbie Hagen
913-652-6547
dhagen@hagenandpartners.com