Duckwall-ALCO Stores Reports $5.6 Million Improvement in Net Earnings for First Half of Fiscal 2010

Results Benefit From Increased Margins

• Press Release
• Source: Duckwall-ALCO Stores, Inc.
• On 5:00 pm EDT, Thursday September 10, 2009

ABILENE, Kan., Sept. 10, 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 second quarter ending August 2, 2009.

Related Quotes

Symbol	Price	Change
DUCK	15.70	-0.30

{"s" : "duck","k" : "c10,l10,p20,t10","o" : "","j" : ""}

Net sales from continuing operations for the second quarter decreased 1.6% to $123.4 million and same-store sales decreased 3.0%. Net sales from continuing operations year-to-date increased 4.1% to $237.6 million and same-store sales increased 1.2%.

Net earnings for the second quarter were $3.0 million, or $0.78 per diluted share, compared to net earnings of $3.3 million, or $0.85 per diluted share, for the second quarter of the prior fiscal year. Net earnings in the current year were impacted by a charge of $435,000, net after taxes, or $0.11 per diluted share, for the Company's store transformation project, which was completed as planned in June 2009.

Net earnings for year-to-date were $3.0 million, or $0.77 per diluted share, compared to a net loss of $2.6 million, or ($0.68) per basic share, for year-to-date of the prior fiscal year. This $5.6 million improvement in net earnings is attributable primarily to a $4.6 million increase, or 6.0%, in Adjusted Gross Margin dollars. Adjusted Gross Margin as a percentage of sales has increased 110 basis points for the fiscal year-to-date compared to the prior fiscal year-to-date. Year-to-date earnings from continuing operations, before income taxes, have increased $6.5 million compared to the prior fiscal year-to-date. This improvement is attributable to a total gross margin dollar improvement of $5.9 million.

Larry Zigerelli, President and CEO, commented, "Strong fiscal year-to-date earnings reflect progress in both top and bottom line performance. Continued gross margin improvement is especially encouraging in the face of a weakened economy. All elements of our strategic transformation plan that began last fall remain on or ahead of schedule. We expect continued progress near term."

Investor Conference Call

The Company will host an investor conference call at 10:00 a.m. Central Daylight Time on September 15, 2009, to discuss operating results for the second quarter ended August 2, 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 5278547. 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 September 15 through September 20 by dialing 888-203-1112 or for international/local callers by dialing 719-457-0820. The Replay Passcode is 5278547. 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 to assist them in 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 those 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 257 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   For the Twenty-Six
                                Week Periods Ended  Week Periods Ended
                                ------------------  ------------------
                                August 2, August 3, August 2, August 3,
                                  2009      2008      2009      2008
                                --------  --------  --------  --------
 Net sales                      $125,291   129,186   240,695   234,813
 Cost of sales                    82,880    85,868   159,748   159,771
                                --------  --------  --------  --------
 Gross margin                     42,411    43,318    80,947    75,042

 Selling, general and
  administrative                  34,614    35,055    70,325    71,821
 Depreciation and
  amortization                     2,268     1,904     4,646     3,676
                                --------  --------  --------  --------
  Total operating expenses        36,882    36,959    74,971    75,497

 Operating income (loss)
  from continuing operations       5,529     6,359     5,976     (455)
 Interest expense, net               521       551     1,057     1,156
                                --------  --------  --------  --------

 Earnings (loss) from
  continuing operations
  before income taxes              5,008     5,808     4,919   (1,611)
 Income tax expense (benefit)      1,977     2,364     1,936     (685)
                                --------  --------  --------  --------
 Earnings (loss) from
  continuing operations            3,031     3,444     2,983     (926)

 Loss from discontinued
  operations, net of income
  tax benefit                         --     (188)       (2)   (1,670)
                                --------  --------  --------  --------
 Net earnings (loss)            $  3,031     3,256     2,981   (2,596)
                                ========  ========  ========  ========


 Earnings (loss) per diluted
  share
  Continuing operations         $   0.78      0.90      0.77    (0.24)
                                --------  --------  --------  --------

  Net earnings (loss)           $   0.78      0.85      0.77    (0.68)
                                --------  --------  --------  --------

   Weighted-average shares
    outstanding:

 Basic                             3,798     3,814     3,798     3,812

 Diluted                           3,902     3,825     3,857     3,812


 Supplemental Data:
                                 For the Thirteen   For the Twenty-Six
                                Week Periods Ended  Week Periods Ended
                                ------------------  ------------------
                                August 2, August 3, August 2, August 3,
                                  2009      2008      2009      2008
                                --------  --------  --------  --------

 Gross margin as reported       $ 42,411    43,318    80,947    75,042

 Inventory review initiative          --        --        --     1,345
                                --------  --------  --------  --------
 Adjusted Gross Margin          $ 42,411    43,318    80,947    76,387
                                ========  ========  ========  ========

 Same-store gross margin
  dollar change                    3.9 %     2.6 %     6.7 %     1.2 %
 Same-store SG&A dollar change    (3.8)%     5.0 %    (3.4)%     4.4 %
 Same-store total customer
  count change                    (2.3)%    (2.7)%    (0.5)%    (3.3)%
 Same-store average sale per
  ticket change                   (2.3)%     6.8 %     0.1 %     4.6 %


 Reconciliation of Adjusted EBITDA to net earnings (loss) from
 continuing operations:

                                                              Trailing
                                                               Twelve
                                         For the Thirteen Week Periods
                                             Periods Ended      Ended
                                        ------------------------------
                                 Fiscal    May 3,    May 4,    May 3,
                                  2009      2009      2008      2009
                                --------------------------------------
 Net earnings (loss) from
  continuing operations (1)     $(2,996)      (43)   (4,367)     1,328
 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)    13,622     4,389   (1,363)    19,374
                                ======================================


 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
                                ======================================

                                                              Trailing
                                                               Twelve
                                         For the Thirteen Week Periods
                                             Periods Ended     Ended
                                          ----------------------------
                                          August 2, August 3, August 2,
                                            2009      2008      2009
                                          ----------------------------
 Net earnings (loss) from
  continuing operations (1)               $  3,031     3,444       915
 Plus:

 Interest                                      521       551     1,769

 Taxes (1)                                   1,977     2,364       532

 Depreciation and amortization (1)           2,268     1,904    10,270

 Share-based compensation                      261       194       767

 Preopening store costs (2)                     --       773       351

 Inventory review initiative                    --        --        --

 Executive and staff severance                  --        --        --
 Store transformation project costs            718        --     4,316
                                          ----------------------------
 =Adjusted EBITDA (1)(3)(4)(5)               8,776     9,230    18,920
                                          ============================


 Cash                                        5,446     4,653     5,446

 Debt                                       48,802    36,964    48,802
                                          ----------------------------
 Debt, net of cash
                                          $ 43,356    32,311    43,356
                                          ============================

 (1) These amounts will not agree with the fiscal 2009 first quarter
 10-Q filing due to the one store the Company closed in the third
 quarter of fiscal 2009. These amounts will not agree with the fiscal
 year end 2009 or fiscal 2010 first quarter 10-Q filing due to the one
 store the Company closed in the second quarter of fiscal 2010. These
 stores are now shown in discontinued operations.

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

 (3) For the trailing twelve periods ended August 2, 2009 the average
 open weeks for the Company's three non same-stores is 49 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 August 2, 2009, these initiatives resulted in
 approximately $5.9 million reduced SG&A expenses when compared to the
 same prior year trailing twelve periods. The initiatives include, but
 are not limited to, executive and staff reduction, reduced ALCO
 same-store hourly wages, advertising expenses, net of coop offset and
 floor care services along with reduced total Company insurance and
 travel expenses.

 (5) In addition to continued efforts regarding the fiscal 2009 cost
 reduction initiatives, the Company has also implemented new
 initiatives for fiscal year 2010. The fiscal 2010 initiatives include,
 but are not limited to, reduced point-of-sale hardware lease expense,
 energy expense and accident reduction programs. These initiatives
 achieved approximately $1.4 million in reduced SG&A savings for the
 twenty-six weeks 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)

                                                    August 2, August 3,
                                                      2009      2008
                                                    --------  --------
 Assets
 Current assets:
   Cash and cash equivalents                        $  5,446  $  4,653
   Receivables                                         5,656     3,743
   Prepaid income taxes                                  423     2,423
   Inventories                                       148,499   145,658
   Prepaid expenses                                    4,067     4,106
   Deferred income taxes                               5,345     6,835
  Assets held for sale                                 1,539        --
                                                    --------  --------
    Total current assets                             170,975   167,418
                                                    --------  --------

 Property and equipment, at cost                     100,761    91,907
 Less accumulated depreciation                        69,230    62,682
                                                    --------  --------
    Net property and equipment                        31,531    29,225
                                                    --------  --------


 Property under capital leases, net of accumulated
  amortization                                         2,231     3,972


 Other non-current assets                                164       249
 Deferred income taxes                                    31     3,078
                                                    --------  --------

    Total assets                                    $204,932  $203,942
                                                    ========  ========

 Liabilities and Stockholders' Equity
 Current liabilities:
   Current maturities of long-term debt             $  1,406  $  1,319
   Current maturities of capital lease obligations     1,903     1,828
   Accounts payable                                   25,682    35,879
   Accrued salaries and commissions                    4,632     5,092
   Accrued taxes other than income                     4,792     4,338
   Self-insurance claim reserves                       4,841     4,205
   Other current liabilities                           4,548     6,815
                                                    --------  --------
    Total current liabilities                         47,804    59,476


 Long-term debt, less current maturities               2,151     3,557
 Notes payable under revolving loan                   41,308    26,257
 Capital lease obligations - less current maturities   2,034     4,002
 Deferred gain on leases                               4,405     4,792
 Deferred income taxes                                   160        --
 Other noncurrent liabilities                          1,662     1,457
                                                    --------  --------
    Total liabilities                                 99,524    99,541
                                                    --------  --------
 Stockholders' equity:
   Common stock, $.0001 par value, authorized
    20,000,000 shares; issued and outstanding
    3,797,947 shares and 3,820,591 shares,
    respectively                                           1         1
   Additional paid-in capital                         39,002    38,590
   Retained earnings                                  66,405    65,810
                                                    --------  --------
    Total stockholders' equity                       105,408   104,401
                                                    --------  --------
    Total liabilities and stockholders' equity      $204,932  $203,942
                                                    ========  ========

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