Duckwall-ALCO Stores Reports Operating Results for First Quarter Fiscal 2009


ABILENE, Kan., June 12, 2008 (PRIME NEWSWIRE) -- Duckwall-ALCO Stores, Inc. (Nasdaq:DUCK), which operates 256 retail stores in 22 states, today announced operating results for its first quarter ending May 4, 2008.

Net loss for the first quarter was $5.9 million, or $1.53 per basic share, compared with a net loss of $2.2 million, or $0.59 per basic share, in the first quarter of the prior fiscal year.

Net sales from continuing operations for the first quarter decreased 0.3% to $106.0 million, while same-store sales decreased 8.4%.

Gross margin for the first quarter was 30.0% compared with 30.9% in the first quarter of the prior year. Contributing to the quarter's decrease were the inventory reserve expense of $1.3 million, increased store level markdowns and increased freight.

Operating expenses, including depreciation and amortization, were 36.5% of sales for the quarter compared to 33.0% in the first quarter of the prior year. The increase was due to severance charges of $1.8 million, increased real property rent, and new-store opening expenses, offset by reduced share-based compensation expense of $610,000 and reduced costs for supplies. Excluding severance charges and new-store opening expenses, SG&A expenses were 34.0% and 32.8% respectively for first quarter fiscal 2009 and first quarter fiscal 2008. The Company opened six new stores in the first quarter of fiscal 2009, compared to one new store opened in the first quarter of fiscal 2008.

Donny Johnson, Interim President and CEO commented: "The first quarter of fiscal 2009 was a time for very significant changes for the Company: new members and direction on our Board of Directors, the resignation of our previous President and CEO, reductions in corporate staff, and actions by the Company to exit 14 markets. The Company has positioned itself to show stronger sales and reduced selling, general and administrative expenses for the remainder of fiscal 2009."

Store Operations Update

Since February 3, 2008, the Company has closed ten ALCO stores, four Duckwall stores, and three Duckwall stores where an ALCO store was opened in the same market. The increase in loss from discontinued operations is due to the expenses associated with the 14 stores closed where the Company exited the market.

Investor Conference Call

The Company will host an investor conference call at 10:00 a.m. Central Daylight Time on June 12, 2008, to discuss operating results for the first quarter ended May 4, 2008. The dial-in number for the conference call is 888-219-1420 (international/local participants dial 913-312-1390), and the Confirmation Code is 6945457. 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 27 by dialing 888-203-1112 or for international/local callers by dialing 719-457-0820. The Replay Passcode is 6945457.

About Duckwall-ALCO Stores, Inc.

Duckwall-ALCO Stores, Inc. is a regional retailer that specializes in meeting the needs of smaller, underserved communities throughout the central United States. The Company offers an exceptional selection of fashionable merchandise, 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 256 stores across 22 states, Duckwall-ALCO Stores is proud to have continually provided excellent products at good value prices to its customers for 107 years. To learn more about Duckwall-ALCO Stores, Inc. visit www.ALCOstores.com.

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 per share amounts)
                             (Unaudited)

                                                 For the Thirteen Week
                                                     Periods Ended
                                                 ---------   ---------
                                                   May 4,    April 29,
                                                    2008       2007
                                                 ---------   ---------
 Net sales                                       $ 105,982   $ 106,265
 Cost of sales                                      74,146      73,456
                                                 ---------   ---------
 Gross margin                                       31,836      32,809

 Selling, general and administrative                36,912      33,351
 Depreciation and amortization                       1,774       1,753
                                                 ---------   ---------
   Total operating expenses                         38,686      35,104

 Operating loss from continuing operations          (6,850)     (2,295)
 Interest expense                                      605         758
                                                 ---------   ---------

 Loss from continuing operations before income
  taxes                                             (7,455)     (3,053)
 Income tax benefit                                 (3,063)     (1,206)
                                                 ---------   ---------
 Loss from continuing operations                    (4,392)     (1,847)

 Loss from discontinued operations, net of
  income benefit                                    (1,460)       (385)
                                                 ---------   ---------
 Net loss                                        $  (5,852)  $  (2,232)
                                                 =========   =========

 Loss per diluted share
   Continuing operations                         $   (1.15)  $   (0.49)
                                                 ---------   ---------
   Net earnings                                  $   (1.53)  $   (0.59)
                                                 ---------   ---------

 Weighted-average shares outstanding:
 Basic                                               3,811       3,800
 Diluted                                             3,811       3,800


 Supplemental Data:                               Thirteen Weeks Ended
                                                   May 4,    April 29,
                                                    2008       2007
                                                 ---------   ---------

 Same store sales change                              -8.4%        1.2%
 Total customer count change                          -9.5%       -2.7%
 Average sale per ticket change                        1.3%        3.7%

 Loss from continuing operations                 $  (4,392)  $  (1,847)
 Plus interest                                         605         758
 Plus taxes                                         (3,063)     (1,206)
 Plus depreciation and amortization                  1,774       1,753
 Plus share-based compensation expense                (329)        282
 Plus preopening expenses                              722         100
 Plus inventory review initiative                    1,345          --
 Plus executive and staff severance                  1,942         128
                                                 ---------   ---------
 EBITDA from continuing operations               $  (1,396)  $     (32)
                                                 =========   =========


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

                                                   May 4,    April 29,
                                                    2008       2007
                                                 ---------   ---------
 Assets
 Current assets:
  Cash and cash equivalents                      $   4,977   $   4,986
  Receivables                                        3,898       4,571
  Prepaid expenses                                   3,263       2,957
  Prepaid income taxes                               4,955       1,780
  Inventories                                      145,123     158,820
  Deferred income taxes                              6,835       3,037
                                                 ---------   ---------
   Total current assets                            169,051     176,151
                                                 ---------   ---------

 Property and equipment, at cost                    89,315      88,619
 Less accumulated depreciation                      61,360      65,400
                                                 ---------   ---------
   Net property and equipment                       27,955      23,219
                                                 ---------   ---------

 Property under capital leases, net of
  accumulated amortization                           4,435       6,447

 Other non-current assets                              270          35
 Deferred income taxes                               3,028       5,580
                                                 ---------   ---------

   Total assets                                  $ 204,739   $ 211,432
                                                 =========   =========

 Liabilities and Stockholders' Equity
 Current liabilities:
  Current maturities of long-term debt           $   1,298   $      --
  Current maturities of capital lease
   obligations                                       1,840       2,060
  Accounts payable                                  36,023      39,487
  Accrued salaries and commissions                   5,685       4,012
  Accrued taxes other than income                    3,554       5,173
  Self-insurance claim reserves                      4,693       4,719
  Other current liabilities                          6,344       3,714
                                                 ---------   ---------
   Total current liabilities                        59,437      59,165

 Long-term debt, less current maturities             3,895          --
 Notes payable under revolving loan                 29,671      34,076
 Capital lease obligations - less current
  maturities                                         4,376       6,305
 Deferred gain on leases                             4,888       5,276
 Other noncurrent liabilities                        1,594       2,477
                                                 ---------   ---------
   Total liabilities                               103,861     107,299
                                                 ---------   ---------
 Stockholders' equity:
  Common stock, $.0001 par value, authorized
   20,000,000 shares; issued and outstanding
   3,810,591 shares and 3,804,216 shares,
   respectively                                          1           1
  Additional paid-in capital                        38,324      37,735
  Retained earnings                                 62,553      66,397
                                                 ---------   ---------
   Total stockholders' equity                      100,878     104,133
                                                 ---------   ---------
   Total liabilities and stockholders' equity    $ 204,739   $ 211,432
                                                 =========   =========


            

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