DUCK Alco Stores, Inc. (MM)

Duckwall-ALCO Stores, Inc. (Nasdaq:DUCK), 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 ended April 29, 2012.

Net sales from continuing operations for the first quarter of fiscal 2013 increased 3.6% to $117.2 million, compared to the first quarter of fiscal 2012. Same-store sales, excluding fuel center sales, increased 1.7% to $113.0 million for the first quarter of fiscal 2013, compared to a year earlier.

Net loss for the first quarter of fiscal 2013 was $1.3 million, or $0.34 per diluted share, an improvement from a loss of $1.5 million, or $0.40 per diluted share, for the first quarter of fiscal 2012. First quarter results were impacted by store closing expenses of approximately $0.04 cents a share. Adjusting for store closing expenses, loss from continuing operations was $0.30 per diluted share compared to $0.40 per diluted share for the first quarter of fiscal 2012.

Richard Wilson, President and CEO, commented, "Initiatives to build top line sales and profitability continue to improve results. Sales grew by 1.7% on a same store basis, Adjusted SG&A decreased by approximately 20 basis points to 28.4% of sales, gross margin dollars grew by 3.5% and margin rate was flat to last year at 29.5%. We remain focused on four key initiatives designed to improve sales and profitability for fiscal 2013: Improving gross margin rate by executing regional pricing strategies; rationalizing our real estate portfolio by closing unprofitable locations while modestly growing our store base with more productive locations; reducing debt by driving unproductive inventory out of the system; and growing top line sales with powerful marketing, strong value and improved customer service."

Wilson continued; "We are also excited about the initial success of our recently opened stores in Conifer, Colorado and Pinedale, Wyoming. In addition, our expanded ecommerce initiative will launch at the end of June and will include more than 13,000 new products. The team in Ecommerce, headed up by Brent Streit, VP Marketing and Ecommerce, represents an outstanding example of the dedication and strategic execution the entire management team at ALCO is committed to providing ALCO's customers and shareholders."

Investor Conference Call

The Company will host an investor conference call at 10:00 a.m. Central Time on Friday, June 8, 2012, to discuss operating results for the first quarter of fiscal year ended April 29, 2012. The dial-in number for the conference call is 888-254-2831 (international/local participants dial 913-312-0981), and the Conference Code is 1442841. Parties interested in participating in the conference call should dial in approximately five minutes prior to 10:00 a.m. Central Time. A replay of the call will be available after 1:30 p.m. Central Time June 8, 2012 through June 13, 2012, by dialing 888-203-1112 (international/local participants dial 719-457-0820), and the Replay Code is 1442841. 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 SG&A 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 in comparing the Company's financial measures to those of its peers. Adjusted EBITDA differs from the most comparable GAAP financial measure (earnings [loss] from continuing operations) in that it does not include certain items, as does Adjusted SG&A. 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 SG&A and Adjusted EBITDA, management also utilizes GAAP performance measures such as gross margin return on investment, return on equity and cash flow from operating activities.  As a result, Adjusted SG&A 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 broad-line retailer, primarily located in small underserved communities across 23 states. The Company currently has 216 ALCO stores that offer both name brand and private label products of exceptional quality at reasonable prices. We are proud to have continually provided friendly, personal service to our customers for the past 111 years. To learn more about the Company, 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"). Forward-looking statements can be identified by the inclusion of "will," "believe," "intend," "expect," "plan," "project" and similar future-looking terms. You should not rely unduly on these forward-looking statements. These forward-looking statements reflect management's current views and projections regarding economic conditions, retail industry environments, and Company performance. Forward-looking statements inherently involve risks and uncertainties, and, accordingly, actual results may vary materially. 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.
Balance Sheets
(dollars in thousands, except share and per share amounts)
	April 29, 2012 (Unaudited)	January 29, 2012
Assets
Current assets:
Cash	$ 612	$ 2,491
Receivables	9,166	10,334
Inventories	166,357	156,215
Prepaid expenses	3,039	3,603
Deferred income tax assets	6,617	5,607
Property held for sale	568	568
Total current assets	186,359	178,818
Property and equipment, at cost:
Land and land improvements	1,508	1,508
Buildings and building improvements	10,421	10,488
Furniture, fixtures and equipment	71,942	71,518
Transportation equipment	846	861
Leasehold improvements	19,254	19,289
Construction work in progress	1,680	1,177
Total property and equipment	105,651	104,841
Less accumulated depreciation and amortization	78,280	76,563
Net property and equipment	27,371	28,278
Property under capital leases	24,054	24,054
Less accumulated amortization	11,711	11,498
Net property under capital leases	12,343	12,556
Other non-current assets	742	754
Total assets	$ 226,815	$ 220,405
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of capital lease obligations	$ 596	$ 570
Accounts payable	46,866	26,695
Accrued salaries and commissions	4,338	3,984
Accrued taxes other than income	4,939	4,845
Self-insurance claim reserves	3,931	4,112
Income taxes payable	259	—
Other current liabilities	3,915	4,327
Total current liabilities	64,844	44,533
Notes payable under revolving loan	40,000	52,063
Capital lease obligations - less current maturities	12,612	12,804
Deferred gain on leases	3,343	3,439
Deferred income taxes	537	643
Other non-current liabilities	2,493	2,483
Total liabilities	123,829	115,965
Stockholders' equity:
Common stock, $.0001 par value, authorized 20,000,000 shares; 3,808,338 and 3,842,745 shares issued and outstanding, respectively	1	1
Additional paid-in capital	39,945	40,115
Retained earnings	63,040	64,324
Total stockholders' equity	102,986	104,440
Total liabilities and stockholders' equity	$ 226,815	$ 220,405

Duckwall-ALCO Stores, Inc.
Statements of Operations
(dollars in thousands, except share and per share amounts)
(Unaudited)
	Thirteen Week Periods Ended
	April 29, 2012	May 1, 2011*
Net sales	$ 117,205	$ 113,187
Cost of sales	82,627	79,790
Gross margin	34,578	33,397
Selling, general and administrative	33,645	32,495
Depreciation and amortization expenses	2,111	2,171
Total operating expenses	35,756	34,666
Operating loss from continuing operations	(1,178)	(1,269)
Interest expense	744	1,069
Loss from continuing operations before income taxes	(1,922)	(2,338)
Income tax benefit	(788)	(805)
Loss from continuing operations	(1,134)	(1,533)
Earnings (loss) from discontinued operations, net of income tax expense (benefit) of $(92) in 2013 and $7 in 2012	(150)	11
Net loss	$ (1,284)	$ (1,522)
Earnings (loss) per share
Basic
Continuing operations	$ (0.30)	$ (0.40)
Discontinued operations	(0.04)	0.00
Net loss per share	$ (0.34)	$ (0.40)
Earnings (loss) per share
Diluted
Continuing operations	$ (0.30)	$ (0.40)
Discontinued operations	(0.04)	0.00
Net loss per share	$ (0.34)	$ (0.40)
*Fiscal year 2012 amounts have been revised to reflect the change in accounting for inventory.
Weighted-average shares outstanding:
Basic	3,822,006	3,841,895
Diluted	3,822,006	3,841,895

Duckwall-ALCO Stores, Inc.
Schedule of Adjusted SG&A
(dollars in thousands)
(unaudited)
	Thirteen Week Periods Ended
(dollars in thousands, except square footage ratios)	April 29, 2012	May 1, 2011
SG&A Expenses Breakout
Store support center (1)	$ 5,284	$ 5,363
Distribution center	1,788	1,915
Same-store SG&A (2)	25,442	25,117
Non same-store SG&A (3)	1,001	—
Share-based compensation	130	100
SG&A as reported	33,645	32,495
Less:
Share-based compensation	(130)	(100)
Preopening store costs (3)	(74)	—
Executive and staff severance (1)	(222)	(76)
Gain on sale of assets	92	23
Adjusted SG&A	$ 33,311	$ 32,342
Adjusted SG&A % of sales	28.4%	28.6%
(1) Store support center includes severance
(2) These amounts may not agree with 10-Qs and 10-Ks of previous quarters due to stores that had reached their fourteenth period of operation. In addition, these amounts may not agree with 10-Qs and 10-Ks of previous quarters due to subsequent store closures. These closed stores are now included in discontinued operations.
(3) Non same-stores are those stores which have not reached their fourteenth period of operation

Duckwall-ALCO Stores, Inc.
Schedule of Adjusted EBITDA
(dollars in thousands)
(unaudited)
	52 Weeks	Thirteen Week Periods Ended		Trailing 52 Weeks Ended
(dollars in thousands)	Fiscal 2012	April 29, 2012	May 1, 2011	April 29, 2012
Net earnings (loss) from continuing operations (1)	$ 1,680	(1,134)	(1,533)	2,079
Plus:
Interest	4,207	744	1,069	3,882
Tax expense (benefit) (1)	924	(788)	(805)	941
Depreciation and amortization (1)	8,585	2,111	2,171	8,525
Share-based compensation	257	130	100	287
Preopening store costs (2)	557	74	—	631
Executive and staff severance (3)	143	222	76	289
Gain (loss) on sale of assets	252	(92)	(23)	183
Insurance proceeds (4)	(2,270)	—	—	(2,270)
=Adjusted EBITDA	14,335	1,267	1,055	14,547
Cash	2,491	612	5,720	612
Debt	65,437	53,208	64,815	53,208
Debt, net of cash	$ 62,946	52,596	59,095	52,596
(1) These amounts may not agree with 10-Qs and 10-Ks of previous quarters due to subsequent store closures. These closed stores are now included in discontinued operations.
(2) These costs are not consistent quarter to quarter as the Company does not open the same number of stores in each quarter of each fiscal year.  These costs are directly associated with the number of stores that have been or will be opened and are incurred prior to the grand opening of each store.
(3) During fiscal years 2013 and 2012, the Company made departmental restructuring changes resulting in severance for various individuals.
(4) On September 9, 2011, the Company received a $2.3 million settlement from Factory Mutual Insurance Company for damage sustained during the second quarter of fiscal 2012, due to wind and hail.

CONTACT: Wayne S. Peterson
         Senior Vice President - Chief Financial Officer
         785-263-3350 X164
         email: wpeterson@alcostores.com
         or
         Debbie Hagen
         Hagen and Partners
         913-642-6363
         email: dhagen@hagenandpartners.com