SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a- 6(e) (2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials [ ] Soliciting Material
pursuant to rule 14a-11 or Rule 14a-12

DUCKWALL-ALCO STORES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(I) (4) and 0-11.

1) Title of each class of securities to which
transaction applies:

2) Aggregate number of securities to which
transaction applies:

3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act
Rule 0-11 (Set forth the amount on which the
filling fee is calculated and state how it was determined):

4) Proposed maximum aggregate value of
transaction:

5) Total fee paid:

[ ] Fee paid previously with preliminary materials

[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11 (a) (2) and identify the filing
for which the offset fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.

1) Amount Previously Paid:

2) Form, Schedule or Registration Statement No.:

3) Filing Party:

4) Date Filed:

________________________________________________

DUCKWALL-ALCO STORES, INC.
401 Cottage Street
Abilene, Kansas 67410
(913) 263-3350

May 1, 1997

Dear Stockholder:

You are cordially invited to attend the Annual Meeting
of Stockholders of Duckwall-ALCO Stores, Inc., to be held at
the principal offices of the Company, located at 401 Cottage
Street, Abilene, Kansas on Thursday, May 22, 1997,
commencing at 10:00 a.m., local time. The business to be
conducted at the meeting is described in the attached Notice
of Annual Meeting and Proxy Statement. In addition, there
will be an opportunity to meet with members of senior
management and review the business and operations of the
Company.

Your Board of Directors joins with me in urging you to
attend the meeting. Whether or not you plan to attend the
meeting, however, please sign, date and return the enclosed
proxy card promptly. A prepaid return envelope is provided
for this purpose. You may revoke your proxy at any time
before it is exercised and it will not be used if you attend the
meeting and prefer to vote in person.

Sincerely yours,

/s/ Glen L. Shank

Glen L. Shank
Chairman of the Board

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 1997

NOTICE IS HEREBY GIVEN that the Annual Meeting
of the Stockholders of Duckwall-ALCO Stores, Inc., a
Kansas corporation ("Duckwall" or the "Company"), will be
held at the principal executive offices of Duckwall located at
401 Cottage Street, Abilene, Kansas, on Thursday, May 22,
1997, commencing at 10:00 a.m., local time, and thereafter
as it may from time to time be adjourned, for the following
purposes:

1. To elect five directors to hold office for a one-
year term until the 1998 Annual Meeting of the
Stockholders of Duckwall and until their
respective successors are duly elected and qualified or
until their respective earlier resignation or removal;

2. To consider and act upon a proposal to amend
the Articles of Incorporation of the Company to
provide for the authority to issue ten million
(10,000,000) shares of Preferred Stock, par value one
dollar ($1.00) per share;

3. To consider and act upon a proposal to amend
the Duckwall-ALCO Stores, Inc. 1993 Stock
Option Plan;

4. To consider and act upon ratification and
approval of the selection of the accounting firm of
KPMG Peat Marwick LLP as the independent
auditors of Duckwall for the fiscal year ending February 1,
1998;

5. To consider and act upon any other matters
which may properly come before the Annual
Meeting of the Stockholders or any adjournment
or adjournments thereof.

In accordance with the provisions of the Bylaws of the
Company, the Board of Directors has fixed the close of
business on April 4, 1997 as the record date for determination
of the stockholders entitled to notice of, and to vote at, the Annual
Meeting of the Stockholders and any adjournment or adjournments
thereof.

All stockholders are cordially invited to attend the
meeting. Whether or not you intend to be present at the
meeting, the Board of Directors of Duckwall solicits you to
sign, date and return the enclosed proxy card promptly. A
prepaid return envelope is provided for this purpose. You
may revoke your proxy at any time before it is exercised and
it will not be used if you attend the meeting and prefer to
vote in person. Your vote is important and all stockholders
are urged to be present in person or by proxy.

By Order of the Board of Directors

/s/ Charles E. Bogan

Charles E. Bogan
Vice President, Secretary
and General Counsel

May 1, 1997
Abilene, Kansas

DUCKWALL-ALCO STORES, INC.
401 Cottage Street
Abilene, Kansas, 67410-0129

__________________

PROXY STATEMENT
__________________

ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 1997

__________________

INTRODUCTION

This Proxy Statement is being furnished to the
stockholders of Duckwall-ALCO Stores, Inc., a Kansas
corporation ("Duckwall" or the "Company"), in connection
with the solicitation of proxies by the Board of Directors of
Duckwall for use at the Annual Meeting of Stockholders to
be held on Thursday, May 22, 1997, and at any adjournment
or adjournments thereof (the "Annual Meeting"). The Annual
Meeting will commence at 10:00 a.m., local time, and will be
held at the principal offices of the Company, located at 401
Cottage Street, Abilene, Kansas, 67410- 0129.

This Proxy Statement and the enclosed form of proxy
were first mailed to the Company's stockholders on or about
May 1, 1997.

Proxies

You are requested to complete, date and sign the
enclosed form of proxy and return it promptly to the
Company in the enclosed postage prepaid envelope.
Shares represented by properly executed proxies will,
unless such proxies previously have been revoked, be voted
in accordance with the stockholders' instructions indicated in
the proxies. If no instructions are indicated, such shares will
be voted in favor of the election of the nominees for director
named in this Proxy Statement, in favor of the proposal to
amend the Articles of Incorporation to provide for the
authority to issue ten million (10,000,000) shares of
Preferred Stock, par value of one dollar ($1.00) per share,
in favor of the proposal to amend the Duckwall-ALCO
Stores, Inc. 1993 Stock Option Plan, in favor of ratifying the
selection of the accounting firm of KPMG Peat Marwick LLP
as Duckwall's independent auditors for the current fiscal
year, and, as to any other matter that properly may be
brought before the Annual Meeting, in accordance with the
discretion and judgment of the appointed attorneys-in-fact.
A stockholder who has given a proxy may revoke it at any
time before it is exercised at the Annual Meeting by filing
written notice of revocation with the Secretary of the
Company, by executing and delivering to the Secretary of
the Company a proxy bearing a later date, or by appearing
at the Annual Meeting and voting in person.

Voting at the Meeting

For purposes of voting on the proposals described
herein, the presence in person or by proxy of stockholders
holding a majority of the total outstanding shares of the
Company's common stock, par value $0.0001 per share
("Common Stock"), shall constitute a quorum at the Annual
Meeting. Only holders of record of shares of the Company's
Common Stock as of the close of business on April 4, 1997
(the "Record Date"), are entitled to notice of, and to vote at,
the Annual Meeting or any adjournment or adjournments
thereof. As of the Record Date, 5,089,823 shares of the
Company's Common Stock were outstanding and entitled to
be voted at the Annual Meeting. Each share of Common
Stock is entitled to one vote on each matter properly to
come before the Annual Meeting.

Directors are elected by a plurality (a number greater
than those cast for any other candidates) of the votes cast
by the stockholders present in person or represented by
proxy and entitled to vote at the Annual Meeting for that
purpose. The affirmative vote of a majority of the shares of
the Company's Common Stock present in person or
represented by proxy and entitled to vote at the Annual
Meeting, provided a quorum is present, is required to (I)
approve the proposed amendment to provide authority to
issue Preferred Stock, (ii) approve the proposed amendment
to the Duckwall-ALCO Stores, Inc. 1993 Stock Option Plan,
(iii) ratify the selection of KPMG Peat Marwick LLP as the
Company's independent auditors, and (iv) approve such
other matters as properly may come before the Annual
Meeting or any adjournment thereof.

Abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a
quorum for the transaction of business. Abstentions are
counted in tabulations of the votes cast on proposals
presented to stockholders, whereas broker non-votes are
not counted for purposes of determining whether a proposal
has been approved.

Solicitation of Proxies

This solicitation of proxies for the Annual Meeting is
being made by the Company's Board of Directors. The
Company will bear all costs of such solicitation, including the
cost of preparing and mailing this Proxy Statement and the
enclosed form of proxy. After the initial mailing of this Proxy
Statement, proxies may be solicited by mail, telephone,
telegram, facsimile transmission or personally by directors,
officers, employees or agents of the Company. Brokerage
houses and other custodians, nominees and fiduciaries will
be requested to forward soliciting materials to beneficial
owners of shares held of record by them, and their
reasonable out-of-pocket expenses, together with those of
Duckwall's transfer agent, will be paid by Duckwall.

A list of stockholders entitled to vote at the Annual
Meeting will be available for examination at least ten days
prior to the date of the Annual Meeting during normal
business hours at the principal executive offices of Duckwall
located at 401 Cottage Street, Abilene, Kansas. The list
also will be available at the Annual Meeting.

ITEM 1

ELECTION OF DIRECTORS

The Company's Board of Directors currently consists
of five directors. One of the purposes of this Annual Meeting
is to elect five directors to serve for a one-year term expiring
at the Annual Meeting of Stockholders in 1998 and until their
respective successors are duly elected and qualified or until
their respective earlier resignation or removal. The Board of
Directors has designated Glen L. Shank, Dennis A. Mullin,
Robert L. Barcum, William J. Morgan and Robert C. Amenta
as the five nominees proposed for election at the Annual
Meeting. Unless authority to vote for the nominees or a
particular nominee is withheld, it is intended that the shares
represented by properly executed proxies in the form
enclosed will be voted for the election as directors of all
nominees. In the event that one or more of the nominees
should become unavailable for election, it is intended that
the shares represented by the proxies will be voted for the
election of such substitute nominee or nominees as may be
designated by the Board of Directors, unless the authority to
vote for both nominees or for the particular nominee who
has ceased to be a candidate has been withheld. Each of
the nominees has indicated his willingness to serve as a
director if elected, and the Board of Directors has no reason
to believe that any nominee will be unavailable for election.

The Board of Directors recommends that you vote for
the election of Glen L. Shank, Dennis A. Mullin, Robert L.
Barcum, William J. Morgan and Robert C. Amenta as
directors.

Nominees

The following table sets forth certain information with
respect to each person nominated by the Board of Directors
for election as a director at the Annual Meeting.

Present
Position
With Director
Name Age Duckwall Since

NOMINEES

Glen L. Shank 52 Chairman and President 1988
Dennis A. Mullin (1) 49 Director 1991
Robert L. Barcum (2) 48 Director 1991
William J. Morgan (1)(2) 42 Director 1991
Robert C. Amenta (1) (2) 30 Director 1991
_______________

(1) Member of Audit Committee
(2) Member of Compensation Committee

The business experience of each of the directors of
the Company during the last five years is as follows:

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 30 years of experience in the retail industry.

Dennis A. Mullin is the President and Chief Operating
Officer of Steel & Pipe Supply Co., Inc., and has served in
various capacities with that company for more than the last
five years.

Robert L. Barcum has been President of Applied
Intelligence Group, Inc., computer consulting firm, since
1985.

William J. Morgan has been the President of
Pacholder Associates, Inc., since December 1983.
Pacholder oversees private and public investment funds for
institutional investors including certain investments of the
Kansas Public Employees Retirement System. He serves
as a director of the following: ICO, Inc., an oil field related
service company; Kaiser Resources, Inc., a land and
environmental development company; USF&G Pacholder
Fund, Inc., a closed-end mutual fund; PremiumWear, Inc.,
an apparel manufacturer; and Smith Corona Corporation,
which manufactures and markets business equipment.

Robert C. Amenta is a Senior Vice President of
Pacholder Associates, Inc., and has been employed by
Pacholder Associates, Inc. since 1990.

Compensation of Directors

Non-employee directors of the Company receive
compensation of $500 for each meeting of the Board of
Directors attended and an additional $500 for each
committee meeting attended, plus reimbursement for
expenses incurred in connection with attendance at Board of
Directors meetings. Employee directors of the Company
receive no compensation for serving on the Board or any
committee thereof.

On March 18, 1993, the Company entered into an
employment agreement with Glen L. Shank, President of the
Company. The original term of the employment agreement
was to January 31, 1995. The current term of the
employment agreement expires on January 31, 1999,
subject to certain termination provisions provided in the
agreement. The employment agreement provides that Mr.
Shank's minimum base salary shall be $144,000, subject to
increase by the Board of Directors. During the 1997 Fiscal
Year, the employment agreement provided for a base salary
of $162,200. In the event of death or disability, Mr. Shank or
his representative shall be entitled to his salary through the
end of the month in which his death occurs or the last day of
the sixth consecutive month of his disability, as the case
may be.

Meetings of the Board and Committees

During the fiscal year ended February 2, 1997, (the
"1997 Fiscal Year"), the Board of Directors of Duckwall held
four meetings. All directors attended at least 75% of the
meetings of the Board of Directors and the committees of
the Board of Directors on which they served which were held
during the 1997 Fiscal Year.

Pursuant to Duckwall's Bylaws, the Board of Directors
has established Audit and Compensation Committees of the
Board of Directors. There currently is no Nominating
Committee or other committee of the Board of Directors
performing similar functions.

The Audit Committee assists the Board of Directors in
fulfilling its responsibilities with respect to Duckwall's
accounting and financial reporting practices and in
addressing the scope and expense of audit and related
services provided by Duckwall's independent auditors. The
Audit Committee is responsible for recommending the
appointment of Duckwall's independent auditors and
reviewing the terms of their engagement, reviewing
Duckwall's policies and procedures with respect to internal
auditing, accounting and financial controls and reviewing the
scope and results of audits and any auditor
recommendations. The current members of the Audit
Committee are Robert C. Amenta, William J. Morgan and
Dennis A. Mullin. The Audit Committee met twice during the
1997 Fiscal Year.

The Compensation Committee makes recommendations to
the Board of Directors regarding the compensation and benefits
of Duckwall's executive officers. The Compensation Committee
also administers the Company's Incentive Stock Option Plan.
The current members of the Compensation Committee are Robert L.
Barcum, William J. Morgan and Robert C. Amenta. The
Compensation Committee met three times during the 1997
Fiscal Year.

EXECUTIVE COMPENSATION AND OTHER
INFORMATION

Executive Compensation

The following table sets forth for the fiscal years
ending February 2, 1997, January 28, 1996 and January 29,
1995, respectively, the compensation of the Company's
chief executive officer and of each of the Company's four
other most highly compensated executive officers whose
remuneration for the 1997 Fiscal Year was in excess of
$100,000 for services to the Company in all capacities:

Summary Compensation Table

Long Term Compensation
Annual Compensation Awards Payouts
------------------------------------- ------------ --------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Under- All
Annual Restricted lying Other
Name and Fiscal Compen- Stock Options/ LTIP Compen-
Principal Position Year Salary Bonus(1) sation(2) Award(s) SARs Payouts sation
- --------------------------- ------ ------------ ----------- ---------- ------------ ------------- ----------- ----------

Glen L. Shank 1997 162,650 75,000 -- -- 4,000 -- 5,110(3)
Chairman and President 1996 157,925 49,250 -- -- 4,750 -- 5,890(4)
1995 151,737 77,000 -- -- 9,750 -- 4,547(5)

James E. Schoenbeck 1997 130,100 46,500 -- -- 3,000 -- 5,301(3)
Vice President-Operations 1996 126,276 39,000 -- -- 3,300 -- 6,081(4)
and Advertising 1995 122,667 63,000 -- -- 7,000 -- 4,586(5)

Bryan M. DeCordova (6) 1997 124,675 37,500 -- -- 2,800 -- 4,725(3)
Vice President-Finance 1996 121,172 37,500 -- -- 3,000 -- 5,505(4)
and Treasurer 1995 117,450 55,000 -- -- 6,250 -- 3,869(5)

James R. Fennema 1997 124,625 44,000 -- -- 2,800 -- 5,144(3)
Vice President- 1996 120,900 37,500 -- -- 3,000 -- 5,924(4)
Merchandise 1995 117,360 55,000 -- -- 5,000 -- 5,061(5)

Charles E. Bogan 1997 117,250 28,000 -- -- 1,800 -- 6,912(3)
Vice President, Secretary 1996 114,850 24,000 -- -- 2,300 -- 7,938(4)
and General Counsel 1995 112,425 34,000 -- -- 5,250 -- 6,094(5)

_______________________
(1) Reflects bonus earned for the fiscal years ending
February 2, 1997, January 28, 1996 and January 29,
1995, respectively.

(2) Excludes perquisites and other benefits, unless the
aggregate amount of such compensation is the lesser
of either $50,000 or 10% of the total of annual salary and
bonus reported for the named executive officer.

(3) Includes contributions made by the Company for
fiscal 1997 to the named Trust (the "Profit Sharing Plan")
(together with forfeitures) in the amounts of $4,209
each for Mr. Shank, Mr. Schoenbeck, Mr. DeCordova, and
Mr. Fennema, and $3,963 for Mr. Bogan. Also includes
premiums paid by the Company with respect to whole
life insurance for each of the named individuals for fiscal
1997 in the amounts of $901 for Mr. Shank, $1,092 for Mr.
Schoenbeck, $516 for Mr. DeCordova, $935 for Mr.
Fennema and $2,949 for Mr. Bogan.

(4) Includes contributions made by the Company for
fiscal 1996 to the named individual's account in the
Duckwall-ALCO Stores, Inc. Profit Sharing Plan and
Trust (the "Profit Sharing Plan") (together with forfeitures) in
the amounts of $4,989 each for Mr. Shank, Mr.
Schoenbeck, Mr. DeCordova, Mr. Fennema and Mr.
Bogan. Also includes premiums paid by the Company
with respect to whole life insurance for each of the named
individuals for fiscal 1996 in the amounts of $901 for
Mr. Shank, $1,092 for Mr. Schoenbeck, $516 for Mr.
DeCordova, $935 for Mr. Fennema and $2,949 for
Mr. Bogan.

(5) Includes contributions made by the Company for
fiscal 1995 to the named individual's account in the Profit
Sharing Plan (together with forfeitures) in the amounts
of $3,646 for Mr. Shank, $3,494 for Mr. Schoenbeck, $3,353
for Mr. DeCordova, $3,646 for Mr. Fennema and
$3,144 for Mr. Bogan. Also includes premiums paid by
the Company with respect to whole life insurance for each
of the named individuals for fiscal 1995 in the amounts
of $901 for Mr. Shank, $1,092 for Mr. Schoenbeck,
$516 for Mr. DeCordova, $935 for Mr. Fennema and $2,949
for Mr. Bogan. Mr. Fennema's balance includes $480
which is associated with the Company's expenses
associated with his relocation.

(6) Mr. DeCordova resigned as an executive officer of the
Company effective March 21, 1997.

Option Grants, Exercises and Holdings

The following table provides further information
concerning grants of stock options pursuant to the Duckwall-
ALCO Stores, Inc., Incentive Stock Option Plan during the
1997 Fiscal Year to the named executive officers:

Option Grants in Last Fiscal Year

% of
Number of Total
Securities Options/
Underlying Granted to Excerise
Options Employees or Base
Granted in Fiscal Price Expiration
(#) Year ($/Sh) Date 5%($) 10%($)
Name
------------------------- --------- -------------- ----------- ------------ ---------- ----------

Glen L. Shank 4,000 10.77% 12.875 May 24, 2001 14,229 31,441
James E. Schoenbeck 3,000 8.08% 12.875 May 24, 2001 10,671 23,581
Bryan M. DeCordova (2) 2,800 7.54% 12.875 May 24, 2001 0 0
James R. Fennema 2,800 7.54% 12.875 May 24, 2001 9,960 22,009
Charles E. Bogan 1,800 4.85% 12.875 May 24, 2001 6,403 14,149

___________________

(1) The options were granted with an exercise price
equal to the fair market value of the Company's Common
Stock on May 24, 1996. Except in the event of death, if an
optionee ceases to be employed by the Company, his or
her option shall terminate on the earlier of (I) the expiration
of the option, or (ii) the thirtieth day following such
termination of employment. In the event of death of
optionee, the option may be exercised by his or her
legal representatives on the earlier of (I) the expiration of the
option, or (ii) within twelve months of the date of death. Upon
a merger, consolidation, reorganization or liquidation of
the Company, the option may, in the discretion of the
Compensation Committee, become immediately
exercisable until the day immediately prior to the date the
contemplated transaction is consummated. The
options granted were granted on May 24, 1996 and
expire on May 24, 2001. The options become exercisable
in equal amounts over a four year period beginning one
year subsequent to their grant date.

(2) Mr. DeCordova resigned his employment effective
March 21, 1997. Accordingly, he has forfeited the shares
under option granted to him on May 24, 1996.

No options were exercised by any of the named
executive officers during the 1997 Fiscal Year. The
following table provides information with respect to the
named executive officers concerning unexercised options
held as of the end of the 1997 Fiscal Year.

Option Grants in Last Fiscal Year

% of
Number of Total
Securities Options/
Underlying Granted to Excerise
Options Employees or Base
Granted in Fiscal Price Expiration
(#) Year ($/Sh) Date 5%($) 10%($)
Name
- ------------------------- --------- -------------- ----------- ------------ ---------- ----------

___________________

(2) Mr. DeCordova resigned his employment effective
March 21, 1997. Accordingly, he has forfeited the shares
under option granted to him on May 24, 1996.

Last Fiscal Year End Option Values

Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at FY-End(#) FY-End ($)(1)

Name Exercisable/Unexercisable Exercisable/Unexercisable

Glen L. Shank 12,812/11,438 56,325/25,325
James E. Schoenbeck 9,356/8,319 39,280/20,642
Bryan M. DeCordova (2) 7,156/0 33,018/0
James R. Fennema 6,375/6,925 27,141/13,247
Charles E. Bogan 7,137/5,713 31,227/14,592

________________
(1) Assumes a fair market values of $7.20 per share on
date of grant and $13.125 per share as of February 2,
1997 for the options to purchase 5,750, 4,375, 4,375, 2,500 and 3,500
shares of Common Stock granted to Glen L. Shank, James
E. Schoenbeck, Bryan M. DeCordova, James R. Fennema
and Charles E. Bogan, respectively, on June 4, 1993.
Assumes a fair market value of $9.20 per share on
date of grant and $13.125 per share as of February 2,
1997, for the options to purchase 9,750, 7,000, 6,250,
5,000 and 5,250 shares of Common Stock granted to
Glen L. Shank, James E. Schoenbeck, Bryan
DeCordova, James R. Fennema and Charles E. Bogan,
respectively, on April 28, 1994. Assumes a fair market
value of $11.375 per share on date of grant and $13.125 per share as
of February 2, 1997, for the options to
purchase 4,750, 3,300, 3,000, 3,000 and 2,300 shares of
Common Stock granted to Glen L. Shank, James E.
Schoenbeck, Bryan M. DeCordova, James R. Fennema
and Charles E. Bogan, respectively on August 29, 1995.
Also assumes a fair market value of $12.875 per share on
date of grant and $13.125 per share as of February 2,
1997, for the options to purchase 4,000, 3,000, 2,800,
2,800 and 2,000 shares of Common Stock granted to
Glen L. Shank, James E. Schoenbeck, Bryan M.
DeCordova, James R. Fennema and Charles E. Bogan,
respectively on May 24, 1996.

(2) Mr. DeCordova resigned his employment effective
March 21, 1997. Accordingly, he has forfeited all shares
under option that were not vested to him on that date.

Employee Stock Option Plan

In May 1993, the Company adopted the Duckwall-
ALCO Stores, Inc. Incentive Stock Option Plan (the "Plan")
to encourage key employees of the Company to participate
in the ownership of the Company and promote the success
of the business of the Company. Presently, 200,000 shares
of Common Stock are authorized for issuance upon exercise
of options under the Plan. The number of shares and option
price covered by outstanding options may be adjusted in the
event of any stock dividend, stock split, reorganization,
merger, consolidation, liquidation or any combination or
exchange of shares of Common Stock. The Plan is
administered by the Compensation Committee consisting of
not less than two nor more than five members of the Board
of Directors who are appointed by the Board. The price of
each option shall be its fair market value as determined by
the Compensation Committee if the Common Stock is not
traded on a public market. Employees of the Company
eligible to receive options are those selected by the
Compensation Committee in its sole discretion on the basis
that such employees have made material contributions to
the successful performance of the Company in the past, or
are expected to make material contributions in the future.

Of the 200,000 shares of Common Stock available
under the Plan, an aggregate of 187,525 shares were
subject to options as of April 4, 1997.

Compensation Committee Report

This report has been prepared by the Compensation
Committee of the Board of Directors, which has general
responsibility for the establishment, direction and
administration of all aspects of the compensation policies
and programs for the Company's executive officers. During
Fiscal 1997, the Compensation Committee was composed
of three independent outside directors, none of whom is an
officer or employee of the Company. The Chief Executive
Officer of the Company, and certain other executive officers
of the Company, may attend meetings of the Compensation
Committee, but are not present during discussions or
deliberations regarding their own compensation. The
Compensation Committee meets at least annually or more
frequently as the Company's Board of Directors may
request.

Compensation Policy. The Company's executive
compensation policy is premised upon three basic goals: (1)
to attract and retain qualified individuals who provide the
skills and leadership necessary to enable the Company to
achieve both its short and long-term earnings growth and
return on investment objectives; (2) to create incentives to
achieve Company and individual performance objectives
through the use of performance-based compensation
programs; and (3) to link executive pay to corporate
performance, including share price, recognizing that there is
not always a direct and short-term correlation between
executive performance and share price.

In determining the structure and levels of each of the
components of executive compensation needed to achieve
these goals, the Compensation Committee considers all
elements of the compensation package in total, as well as
the individual components thereof. As more fully described
below, the determination of such levels of executive
compensation is a subjective process in which the
Compensation Committee considers many factors including
the Company's performance (as measured by earnings
growth and return on investment, among other factors) and
the individual executive's specific responsibilities, historical
and anticipated personal contribution to the Company's
business, and length of service with the Company. In
addition, the Compensation Committee considers publicly
available executive compensation data for comparable
positions in companies believed to be most comparable for
purposes of executive compensation. The levels of
compensation paid by the Company to its executive officers
were matched to comparable positions of executives at
comparable companies and a competitive level for the total
compensation package and relevant individual components
was determined.

Compensation Components. The Company's
compensation program is reviewed annually to ensure that
compensation levels and incentive opportunities are
competitive and reflect the performance of the Company and
the individual executive officer. The principal components of
the compensation program for executive officers are base
salary, annual incentive bonuses, and employee stock
options. Management has been granted options in the past
to provide linkage between executive pay and corporate
performance and to provide incentive to continue
employment with the Company. The Compensation
Committee believes that the total compensation package
awarded to top management

is fair based upon the total compensation packages
awarded to top management at comparable companies.

Base Salary. The Compensation Committee reviews
each executive officer's base salary from the previous year
and, in determining whether to adjust base salary levels,
takes into account the Chief Executive Officer's
recommendations and assessments of each executive's
growth and effectiveness in the performance of his or her
duties and the Company's performance. For Fiscal 1997,
base salary levels for the executive officers were increased
by approximately two to three percent from Fiscal 1996
levels. These salaries were based upon the Compensation
Committee's analysis of the Company's performance,
including a review of the Company's revenues, earnings,
return on investment and new store openings for the prior
year. An analysis of the role played by each individual
executive in generating the Company's performance
included a consideration of the executive's specific
responsibilities, contributions to the Company's business,
and length of service. The Compensation Committee also
considered publicly available executive compensation data
for comparable positions in comparable companies. Base
pay levels for the executive officers are competitive within a
range that is considered in the Compensation Committee's
judgment, to be reasonable and necessary.

Annual Incentive Bonus. The Company's executive
officers and certain other employees of the Company who,
in the discretion of the Chief Executive Officer, are
considered to be in a position to significantly influence the
Company's results or operations and level of profits are
eligible to receive annual incentive bonus awards under the
Company's incentive bonus program. Annual bonus
opportunities allow the Company to communicate specific
goals that are of primary importance during the coming year
and motivate executives to achieve these goals. The
selection of the persons eligible to participate in the
incentive bonus program is necessarily subjective in nature
and is made after taking into account management's
assessment of each person's level of responsibility. The
incentive program establishes a bonus pool at the beginning
of each year which is included in the Company's operating
budget for that year. Each of the participants in the
incentive program is evaluated based upon a number of
criteria related to management skills and personal
characteristics. In addition, each participant is evaluated
based upon his or her accomplishments for the year
compared to the goals that were established at the end of
the previous year. The size of the bonus pools, the persons
who are eligible to receive bonuses, the targets established
for bonus participants and the amount of bonus payments
can vary from year to year and are subject to the discretion
of the Compensation Committee and management.

Stock Options. Since the Company's policy is to
retain qualified individuals to enable the Company to
achieve both short- and long-term earnings growth, it is
important that there be a long-term component of the
compensation policy. The Company's Incentive Stock
Option Plan which was approved by the Stockholders in
1993, provides the vehicle for addressing long-term rewards.
The Compensation Committee administrates the Stock
Option Plan. The Chief Executive Officer provides
recommendations to the Compensation Committee who may
grant the options at any time. The options permit the holder
to purchase shares of the Company's stock at a price equal
to the fair market value of the Stock at the time of the grant.
Thus, the options gain value only to the extent the stock
price exceeds the option price. To date, all of the options
that have been granted become exercisable in equal
amounts over a four-year period beginning one year
subsequent to the grant date. The Compensation
Committee has recommended to the Board of Directors and
the Board has adopted a resolution to submit to the
Stockholders at this meeting an amendment to the Stock
Option Plan to increase the number of shares in the plan
(see Item 3).

Compensation Committee:

Robert C. Amenta
Robert L. Barcum
William J. Morgan

Compensation Committee Interlocks

Robert C. Amenta, Robert L. Barcum and William J.
Morgan each served on the Compensation Committee of the
Board of Directors during the 1997 Fiscal Year.

Robert C. Amenta and William J. Morgan, directors of
the Company, are employees of Pacholder Associates, Inc.,
an investment advisor to the Kansas Public Employees
Retirement System ("KPERS"). As of March 14, 1997,
KPERS owned 1,017,134 shares of Common Stock.

Insider Participation

Dennis A. Mullin is President and Chief Operating
Officer of Steel & Pipe Supply Co., Inc. Mr. Mullin is also a
partner in or stockholder or officer of five partnerships or
corporations which own stores leased to the Company.
During the 1997 Fiscal Year, the Company paid fixed rentals
aggregating approximately $585,066 and percentage rentals
aggregating approximately $140 to these entities. The
Company also pays the taxes, insurance and maintenance
on the stores leased from these entities. Each of the store
leases has a remaining term of more than one year.

Robert L. Barcum is President of Applied Intelligence
Group, Inc. ("AIG"), a computer consulting firm. During the
1996 Fiscal Year, the Company entered into contracts with
AIG totaling $982,000 for the purchase of software and
services related to upgrading the Company's point-of-sale
systems. At year-end, the Company had paid AIG $952,856
toward the contracts and $3,675 in associated expenses.
The Company has used AIG as a source for point-of sale
software and related services since 1987.

Glen L. Shank, James E. Schoenbeck, Charles E.
Bogan and Bryan M. DeCordova were four of the six
members of the administrative committee of the Duckwall-
ALCO Stores, Inc. Profit Sharing Plan and Trust (the "Profit
Sharing Plan"). Mr. DeCordova resigned as a member of
the committee effective on March 21, 1997. On May 29,
1991, the Plan purchased 327,350 shares of Common Stock
from the Company for $1,300,000 in cash. On March 14,
1997, the plan owned 81,553 shares of Common Stock. See
"Ownership of Duckwall Common Stock."

Company Performance

The following graph compares the cumulative total
return of the Company, the Nasdaq Stock Market Index, and
the Nasdaq Retail Trade Stocks Index (dividends
reinvested). The graph assumes $100 was invested on
October 27, 1994 in Duckwall-ALCO Stores, Inc., Common
Stock, the Nasdaq Stock Market Index, and the Nasdaq
Retail Trade Stocks Index (the "Peer Group").

Comparative Total Stock Returns

10/24/94 01/29/95 01/28/96 02/02/97

Duckwall-ALCO Stores, Inc. 100 102.778 108.333 145.833
Nasdaq Composite Index 100 97.497 137.789 180.642
Nasdaq Retail Stock Index 100 90.123 101.859 125.271

Based upon the data reflected in the table, a $100
investment in the Company's stock would have returned a
total return value of $145.83 at year-end, as compared to
$180.64 for the Composite Nasdaq Index and $125.27 for
the Nasdaq Retail Stock Index.

There can be no assurances that the Company's
stock performance will continue into the future with the same
or similar trends depicted in the graph above. The Company
does not make or endorse any predictions as to the future
stock performance.

OWNERSHIP OF DUCKWALL COMMON STOCK

The following table sets forth certain information as of
March 14, 1997 (as of December 31, 1996 for Heartland
Advisors, Inc., Wellington Management Company LLP, and
Putnam Investments, Inc.) regarding the beneficial
ownership of Duckwall Common Stock by each person
known to the Board of Directors to own beneficially 5% or
more of the Company's Common Stock, by each director of
the Company, by each executive officer named in the
Summary Compensation Table under "Executive
Compensation and Other Information--Executive
Compensation" and by all directors and officers of the
Company as a group. All information with respect to
beneficial ownership has been furnished by the respective
directors, officers or 5% or more stockholders, as the case
may be, or by documents filed with the Securities and
Exchange Commission.

Amount and Nature of Percentage of
Name Beneficial Ownership(1) Shares Outstanding

Glen L. Shank(1)(2)(3) 16,212 *
James E. Schoenbeck (1)(2)(4) 11,856 *
Bryan M. DeCordova (1)(2)(5) 8,456 *
James R. Fennema (1)(6) 8,275 *
Charles E. Bogan (1)(2)(7) 8,787 *
Dennis A. Mullin (8) 123,177 2.42
Robert L. Barcum (9) 0 *
William J. Morgan (10) 0 *
Robert C. Amenta (10) 0 *
KDF, a Kansas Nominee (10) 1,017,134 19.98
Boatmen's Trust Company, as Trustee for
Duckwall-ALCO Profit Sharing Plan & Trust (2) 81,553 1.60
Heartland Advisors, Inc.(11) 330,000 6.48
Wellington Management Company LLP (12) 329,000 6.46
Putnam Investments, Inc. (13) 253,750 4.99
All directors and officers as a group ( 9 in group) 176,763 3.47

____________________________
* Less than one percent.

(1) The address for this person is 401 Cottage Street,
Abilene, Kansas 67410-6129.

(2) Glen L. Shank, Chairman of the Board and President
of the Company, James E. Schoenbeck, a Vice President
of the Company, Charles E. Bogan, a Vice President of
the Company and Bryan M. DeCordova, a Vice
President of the Company, were four of the six members of
the administrative committee of the Duckwall-ALCO
Stores, Inc. Profit Sharing Plan and Trust (the "Profit
Sharing Plan"), however each has disclaimed beneficial
ownership of any shares of Common Stock owned by the
Profit Sharing Plan. Further, Mr. DeCordova resigned as a
member of the committee effective on March 21, 1997.
The address of the Profit Sharing Plan is Boatmen's
Trust Company, Trustee, 10th and Baltimore, P.O. Box
419038, Kansas City, Missouri 64183.

(3) Mr. Shank owns options to purchase 24,250 shares
of Common Stock. Of those options, 10,375 are
currently exercisable and 2,437 more become exercisable
on April 28, 1997.

(4) Mr. Schoenbeck owns options to purchase 17,675
shares of Common Stock. Of those options, 7,606
are currently exercisable and 1,750 more become
exercisable on April 28, 1997.

(5) Mr. DeCordova owned options to purchase 16,425
shares of Common Stock. Of those options, 7,156
were exercisable on March 21, 1997, the date of his
resignation.

(6) Mr. Fennema owns options to purchase 13,300
shares of Common Stock. Of those options, 5,125
are currently exercisable and 1,250 more become exercisable on
April 28, 1997.

(7) Mr. Bogan owns options to purchase 12,850 shares
of Common Stock. Of those options, 5,825 are
currently exercisable and 1,312 more become exercisable
on April 28, 1997.

(8) Dennis A. Mullin owns 4,000 shares of Common
Stock and is the President and Chief Operating Officer of
Steel & Pipe Supply Co., Inc., which owns 112,497
shares of Common Stock. The address of Steel & Pipe
Supply Co., Inc., is 555 Poyntz, Manhattan, Kansas 66502.
Mr. Mullin is also an executive officer of Manhattan
Buildings, Inc. and Business Buildings, Inc. each of which
own 840 shares of Common Stock. Mr. Mullin is also an
executive officer of MBI, Inc., which owns 5,000 shares of Common
Stock.

(9) The address for Mr. Barcum is Applied Intelligence
Group, Inc., 13800 Benson Road, Edmond, Oklahoma
73013.

(10) KDF is the nominee holder of shares of Common
Stock on behalf of the Kansas Public Employees
Retirement System ("KPERS"). KPERS, Pacholder
Associates, Inc. ("Pacholder") and Portfolio Advisers, Inc.
("PAI"), share investment and voting power with
regard to these shares. Pacholder and PAI are
investment advisors to KPERS. In the event KPERS
terminated either such arrangement, the terminated advisor
would no longer have any such power with respect to
these shares. William J. Morgan and Robert C. Amenta
are the President and Senior Vice President,
respectively, of Pacholder. Each of these individuals has
disclaimed beneficial ownership of all shares of
Common Stock beneficially owned by Pacholder, KDF
and KPERS. The address of KPERS is c/o Pacholder
Associates, Inc., Bank One Towers, 8044 Montgomery
Road, Suite 382, Cincinnati, Ohio 45236. The address of
PAI is 9 Old Kings Highway South, P.O. Box 1224,
Darien, Connecticut 06820-1224.

(11) The address of Heartland Advisors, Inc. is 790 North
Milwaukee Street, Milwaukee, Wisconsin 53202.

(12) The address of Wellington Management Company
LLP is 75 State Street, Boston, Massachusetts 02109.

(13) The address of Putnam Investments, Inc. is One Post
Office Square, Boston, Massachusetts 02109.

ITEM 2

PROPOSED AMENDMENT TO THE ARTICLES OF
INCORPORATION OF THE COMPANY

The Company currently has no class of Preferred
Stock authorized. Under the proposed amendment, a new
class of Preferred Stock, consisting of ten million
(10,000,000) shares of the par value of one dollar ($1.00)
per share (the "Preferred Stock"), would be issuable in such
series as the Board of Directors may by resolution authorize,
with such rights, preferences and privileges (including voting
rights) as the Board may determine. The Preferred Stock
may be issued without further stockholder approval by the
Board of Directors, which would be empowered to fix the
terms of each series of Preferred Stock authorized for
issuance by it, including:

(i) the distinctive series designation and number
of shares which shall constitute such series;

(ii) the dividend rate and payment dates for such
series;

(iii) the redemption provisions and price or prices,
if any, for such series;

(iv) the obligation, if any, of the Company to retire
shares of such series;

(v) the terms and conditions, if any, on which
shares of such series shall be convertible into, or
exchangeable for, shares of stock or any other
securities, including the price or prices, or the rates of
exchange (including adjustments) thereof;

(vi) the amounts payable to holders of such series
in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Company;

(vii) the voting rights, if any, including, among other
possibilities, (a) the right to elect, as a series
or class, one or more directors, or (b) one or
multiple votes per share on all matters; and

(viii) any other powers, preferences, privileges and
qualifications, limitations or restrictions of such
series.

The purpose of authorizing a class of Preferred Stock
is to provide additional authorized capital stock which may
be issued for such corporate purposes as the Board of
Directors may determine to be desirable, including, without
limitation, future financings, investment opportunities,
acquisitions, the declaration of stock splits, stock dividends
or other distributions or for other corporate purposes.

Authorization for such additional shares will enable
the Company, as the need arises, to take timely advantage
of market conditions and the availability of favorable
opportunities without the delay and expense associated with
the holding of a special meeting of its stockholders. Unless
required by law, no further authorization by vote of
stockholders will be sought for any such share issuance.

The authorized but unissued shares of Preferred
Stock could be used by the Board of Directors to make more
difficult a change in control of the Company. Under certain
circumstances, such shares could be used to create voting
impediments or to frustrate persons seeking to effect a
takeover or otherwise gain control of the Company. Such
shares could be privately placed with purchasers who might
side with the Board in opposing a hostile takeover bid. In
addition, the Board could authorize holders of a series of
Preferred Stock to cast more than one vote per share or to
vote as a class, either separately or with the holders of
Common Stock, on any merger, sale or exchange of assets
by the Company or any other extraordinary corporate
transaction.

Furthermore, the amendment might be considered as
having the effect of discouraging an attempt by another
person or entity, through the acquisition of a substantial
number of shares of the Company's Common Stock, to
acquire control of the Company with a view to imposing a
merger, sale of all or any part of the company's assets or a
similar transaction that may not be in the best interest of all
of the stockholders, since the issuance of new shares could
be used to dilute the stock ownership of a person or entity
seeking to obtain control of the Company. In this respect,
certain companies have recently issued preferred stock as a
dividend to the holders of their Common Stock having terms
designed to protect against the adverse consequences to
stockholders of partial takeovers and front-end loaded, two-
step takeovers and freeze-outs. Partial takeovers involve
the acquisition of a majority, but less than all, of the
outstanding voting shares; front-end loaded, two-step
takeovers involve the payments of higher per share
consideration for a majority of the voting shares acquired in
the first-step, which has the effect of putting pressure on
stockholders to sell during the first step in order to avoid
obtaining a lower price in the second step; and freeze-outs
involve the acquisition of the remaining equity interest in a
company through the forced elimination of the minority
stockholders by means of a merger, reverse stock-split, sale
of assets or dissolution. The Preferred Stock would be
available to prevent the adverse consequences of such
transactions.

The Board of Directors recommends that you vote for
approval of the amendment to the Articles of Incorporation of
the Company to authorize issuance of Preferred Stock.

ITEM 3

PROPOSED AMENDMENT TO THE DUCKWALL-ALCO
STORES, INC. 1993 STOCK OPTION PLAN

During the 1994 fiscal year, the Board of Directors of
the Company adopted and the stockholders approved, the
Duckwall-ALCO Stores, Inc. 1993 Stock Option Plan
("Plan"). In the opinion of the Board of Directors, the
availability of a stock option plan will encourage key
employees of the Company to participate in the ownership of
the Company and provide additional incentive for such
employees to promote the success of the business of the
Company through sharing in the future growth of such
business. The Board of Directors of the Company has
adopted a proposed amendment to the Plan whereby a
maximum of 450,000 shares of Common Stock, rather than
200,000 shares, may be issued upon exercise of options
under the Plan.

Description of the Plan

Shares Subject to Options. A maximum of 200,000
shares of Common Stock may be issued upon exercise of
options under the Plan. The number of shares and option
price covered by outstanding options may be adjusted in the
event of any stock dividend, stock split, reorganization,
merger, consolidation, liquidation or any combination or
exchange of shares of Common Stock. In the event the
Company shall not be the surviving corporation in any
merger, consolidation or reorganization, or in the event of
acquisition by another corporation of all or substantially all of
the assets of the Company, every option outstanding
hereunder may be assumed (with appropriate changes) by
the surviving, continuing, successor or purchasing
corporation, as the case may be, subject to any applicable
provisions of the Internal Revenue Code of 1986, as
amended, and the treasury regulations promulgated
thereunder (the "Code") or replaced with new options of
comparable value in accordance with the applicable
provisions of the Code.

Administration. The Plan is to be administered by the
Compensation Committee ("the Committee") consisting of
not less than two nor more than five members of the Board
of Directors who are appointed by the Board. The
Committee will be composed solely of members of the Board
of Directors who are not employees of the Company and
therefore are not eligible to receive options under the Plan.
Subject to the provisions of the Plan, the Committee has
sole authority to determine which employees will be granted
options, when the options will be granted, the time or times
when options will be exercisable, the duration of the options
and the form of the option agreement.

Option Price. The option price of each option is
determined by the Committee, but in no event shall the price
be less than the greater of (a) the par value of the Common
Stock or (b) 100% of the fair market value of the Common
Stock on the day the option is granted. If such shares are
then listed on any national securities exchange, the fair
market value shall be the mean between the high and low
sales prices, if any, on the largest such exchange on the
date of the grant of the option or, if none, shall be
determined by taking a weighted average of the means
between the highest and lowest sales on the nearest date
before and the nearest date after the date of grant in
accordance with Treasury Regulations Section 25.2512-2. If
the shares are not then listed on any such exchange, the fair
market value of such shares shall be the mean between the
closing "Bid" and the closing "Ask" prices, if any, as reported
in the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") for the date of the grant of
the option, or, if none, shall be determined by taking a
weighted average of the means between the highest and
lowest sales on the nearest date before and the nearest
date after the date of grant in accordance with Treasury
Regulations Section 25.2512-2. If the shares are not then
either listed on any such exchange or quoted in NASDAQ,
the fair market value shall be the mean between he average
of the "Bid" and the average of the "Ask" prices, if any, as
reported in the National Daily Quotation Service for the date
of the grant of the average of the means between the
highest and lowest sales on the nearest date before and the
nearest date after the date of grant in accordance with
Treasury Regulations Section 25.2512-2. If the fair market
value cannot be determined under the preceding three
sentences, it shall be determined in good faith by the
Compensation Committee.

Eligible Employees. Key employees of the Company,
as selected by the Compensation Committee in its sole
discretion on the basis that such employees have made
material contribution within the past, or who are expected to
make material contributions in the future, to the successful
performance of the Company, are eligible to participate in
the Plan. The total number of employees of the Company
as of April 29, 1994 was approximately 3500.

Maximum Option Term. No option to be granted
under the Plan may be exercised after the expiration of five
years from the date of grant.

Nontransferability. No option is transferable by the
optionee except by will or by the laws of descent or
distribution.

Exercise of Options. Options under the Plan are
exercisable at the times and on the terms and conditions set
forth in the option agreement. Under certain circumstances
involving the merger, consolidation or reorganization of the
Company, or its liquidation or sale of substantially all of its
assets, the Plan provides that the Committee may provide
that each optionee shall, within a 30-day period, exercise all
or any part of the options granted. In addition, if a single
stockholder or group of stockholders deemed to constitute a
"person" under the securities laws acquires more than 33%
of the shares of Common Stock, or less than a majority of
the directors are persons who were either nominated or
selected by the Board of Directors, then the Committee may
accelerate the time during which any option outstanding
under the Plan will be exercisable in full.

The Plan provides that each option is exercisable only
by the optionee during his lifetime. In the event of the
optionee's death while he is an employee of the Company
(or within thirty days after the date of which such optionee
ceases to be so employed), unless otherwise provided by
the Committee in the option grant, the option, to the extent
still in effect and unexercised, may be exercised in whole or
in part by the person to whom the optionee's rights in the
option pass by will or by the laws of descent and distribution
within twelve months following the death of the optionee, but
in no event later than the expiration date specified in the
respective stock option agreement.

Ownership Limitations. Any person who owns 10% or
more of the voting power of the Common Stock may not
receive any option unless the exercise price of such option
is at least 110% of the fair market value of the Common
Stock on the date of grant and unless such option cannot be
exercised more than 5 years from the date of grant.

Options are subject to the limitation that the
aggregate fair market value of the Common Stock with
respect to which stock options may be first become
exercisable in any year may not exceed $100,000 as to any
individual holder.

Termination of Options. Options will terminate within
thirty days of the date of termination of employment for any
reason other than death, but in no event later than the
expiration date specified in the respective stock option
agreement.

Amendments. The Board of Directors may amend,
modify or terminate the Plan without the approval of
stockholders, except that stockholder approval will be
required for any amendment which would (I) increase the
maximum number of shares of Common Stock subject to the
Plan, except adjustments made by reason of stock splits,
stock dividends or made upon changes in capitalization, (ii)
alter the eligibility requirements for the optionees under the
Plan, (iii) extend the duration of the Plan or (iv) change the
provisions of the Plan with respect to the determination of
the option price. In addition, no amendment, modification or
termination of the Plan may be made which would adversely
affect the rights of any optionee under any then outstanding
options granted under the Plan without the consent of such
optionee.

Duration. No option may be granted under the Plan
after May 18, 2003.

Federal Income Tax Consequences. In general, the
grant of an option under the Plan does not result in any
Federal income tax consequences to the Company or to the
optionee. In addition, the exercise by an optionee of an
option under the Plan does not generally result in any
Federal income tax consequences to the optionee except
that, for purposes of determining the alternative minimum
taxable income of the optionee, if the stock received on the
exercise of an option granted under the Plan by an optionee
is substantially vested within the meaning of the Code, then
the excess, if any, of the fair market value of the Common
Stock received upon the exercise of the option at the time of
exercise over the amount paid for such Common Stock is
included in the determination of the optionee's alternative
minimum taxable income for the year in which the option is
exercised. If the stock received upon exercise of an option
granted under the Plan is not substantially vested within the
meaning of the Code, then the alternative minimum tax
consequences associated with exercise of the option
generally are taken into account in the year the Common
Stock becomes substantially vested.

Upon the sale of the Common Stock received
pursuant to the exercise of an option granted under the Plan
("option stock"), an optionee will generally recognize either a
taxable gain equal to the excess of the amount realized from
the sale over the optionee's basis in the shares of option
stock, or a taxable loss equal to the excess of the optionee's
basis in the shares of option stock over the amount realized
from the sale. Such gain or loss from the sale of option
stock will generally be considered gain or loss from the sale
of a capital asset, provided that such sale does not occur
within two years from the date the option is granted or within
one year from the date the option is exercised, and that the
option stock is held for investment purposes.

However, if an optionee sells shares of option stock
prior to the expiration of two years from the date the option
is granted or prior to the expiration of one year from the date
the option is exercised, then the optionee generally will
recognize ordinary income in the year the option stock is
sold in an amount equal to the difference between the lesser
of (1) the fair market value of the shares of option stock on
the date of exercise, and (2) the amount realized on the sale
of the option stock, and the exercise price. The excess, if
any, of the amount realized on the sale of the option stock
over the fair market value of the option stock on the date of
exercise will generally be considered gain from the sale of a
capital asset if the shares are held for investment purposes.

For purposes of computing an optionee's alternative
minimum taxable income in the year the option stock is sold,
the optionee's basis in the option stock is increased by the
amount included in the determination of alternative minimum
taxable income as a result of the receipt of such option
stock.

The Company does not generally realize any income
tax consequences on the issuance or exercise of options
under the Plan; however, if an optionee sells option stock
prior to the expiration of two years from the date the option
is granted or prior to the expiration of one year from the date
of exercise, the Company may deduct an amount equal to
the amount included in the optionee's ordinary income,
provided the Company satisfies applicable information
reporting and income and payroll tax withholding
requirements.

Miscellaneous Information. To the extent that any
option remains unexercised upon its termination or
expiration, the shares subject to such option will again be
available for the granting of other options under the Plan.

The Plan does not contain any provisions requiring an
optionee to hold the optioned stock for any period after
exercise of the option. However, such a provision may be
included in any option agreement relating to an option
granted by the Committee.

Plan Benefits

Directors who are not executive officers or employees
of the Company are not eligible to receive options under the
Plan. The dollar value and number of options which will be
received by the five individuals named in the Summary
Compensation Table (other than Mr. DeCordova) are not
currently determinable due to the discretionary nature of the
Plan. The Plan provides that all employees of the Company
are eligible to receive Plan benefits and that the Committee
has sole authority to determine which employees will be
granted options under the Plan. As of the date hereof, the
Committee has not decided which employees, if any, will be
granted such options.

The Board of Directors recommends that you vote for
approval of the amendment to the Duckwall- ALCO Stores,
Inc. 1993 Stock Option Plan.

ITEM 4

RATIFICATION OF SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS

The Board of Directors, upon recommendation of the
Board's Audit Committee, has selected the independent
certified public accounting firm of KPMG Peat Marwick LLP
as Duckwall's independent auditors to audit the books,
records and accounts of the Company for the year ending
February 1, 1998. Stockholders will have an opportunity to
vote at the Annual Meeting on whether to ratify the Board's
decision in this regard.

KPMG Peat Marwick LLP has served as the
Company's independent auditors since 1969. A
representative of KPMG Peat Marwick LLP is expected to be
present at the Annual Meeting. Such representative will
have an opportunity to make a statement if he or she desires
to do so and will be available to respond to appropriate
questions.

Submission of the selection of the independent
auditors to the stockholders for ratification will not limit the
authority of the Board of Directors to appoint another
independent certified public accounting firm to serve as
independent auditors if the present auditors resign or their
engagement otherwise is terminated.

The Board of Directors recommends that you vote for
approval of the selection of KPMG Peat Marwick LLP.

COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934
(the "Exchange Act") requires Duckwall's directors and
executive officers, and persons who own more than 10% of
the Company's outstanding Common Stock, to file with the
Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership in Duckwall
Common Stock and other equity securities. In addition,
under Section 16(a), a director, executive officer or 10%
stockholder who is a trustee and has a pecuniary interest
(such interest includes situations where a member of the
trustee's immediate family is a beneficiary of the trust) in any
holding or transaction in the Company's securities held by
the trust, must report the holding or transaction on the
trustee's individual form. Securities and Exchange
Commission

regulations require directors, executive officers, greater than
10% stockholders and reporting trusts to furnish Duckwall
with copies of all Section 16(a) reports they file.

To Duckwall's knowledge, based solely upon review
of the copies of such reports furnished to Duckwall and
written representations that no other reports were required,
during the 1997 Fiscal Year all Section 16(a) filing
requirements applicable to its directors, executive officers,
greater than 10% stockholders and reporting trusts were
complied with.

OTHER BUSINESS OF THE MEETING

The Board of Directors is not aware of, and does not
intend to present, any matter for action at the Annual
Meeting other than those referred to in this Proxy Statement.
If, however, any other matter properly comes before the
Annual Meeting or any adjournment, it is intended that the
holders of the proxies solicited by the Board of Directors will
vote on such matters in their discretion in accordance with
their best judgment.

ANNUAL REPORT

Duckwall's Annual Report to Stockholders, containing
financial statements for the year ended February 2, 1997, is
being mailed with this Proxy Statement to all stockholders
entitled to vote at the Annual Meeting. Such Annual Report
is not to be regarded as proxy solicitation material.

STOCKHOLDER PROPOSALS FOR 1998 ANNUAL
MEETING

It is presently anticipated that the 1998 Annual
Meeting of Stockholders will be held on May 21, 1998.
Stockholder proposals intended for inclusion in the proxy
statement for the 1998 Annual Meeting of Stockholders must
be received at the Company's offices, located at 401
Cottage Street, Abilene, Kansas, 67410-0129, within a
reasonable time before the solicitation with respect to the
meeting is made, but in no event later than December 31,
1997. Such proposals must also comply with the other
requirements of the proxy solicitation rules of the Securities
and Exchange Commission. Stockholder proposals should
be addressed to the attention of the Secretary of Duckwall.

By Order of the Board of Directors

/s/ Charles E. Bogan
Charles E. Bogan
Secretary

May 1, 1997
Abilene, Kansas

DUCKWALL- ALCO STORES, INC.
ANNUAL MEETING May 22, 1997
THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS

The undersigned stockholder of Duckwall-ALCO Stores,
Inc., a Kansas Corporation, appoints Mr. Glen L. Shank and
Mr. Charles E. Bogan or either of them, with full power to act
alone, the true and lawful attorneys-in-fact of the
undersigned with full power of substitution to vote all of the
shares which the undersigned is entitled to vote at the
annual meeting of the stockholders to be held at the offices
of the Company, 401 Cottage Street, Abilene, Kansas, on
May 22, 1997 at 10:00 A.M. CDT and at any adjournment
thereof, with all the power the undersigned would possess if
personally present, as follows:

1. Election of Directors:

[ ] FOR ALL NOMINEES LISTED BELOW (Except as
marked to the contrary below)

Glen L. Shank Dennis A. Mullin
William J. Morgan Robert C. Amenta
Robert L. Barcum

[ ] WITHHOLD AUTHORITY (to vote for all
nominees listed below)
Instructions: To withhold authority to vote for
any individual nominee, write that
nominee's name in this space.
_____________________________________________

FOR AGAINST ABSTAIN

2. Amendment to the Articles of
Incorporation of the Company to grant
to the Company the authority to issue
up to 10 million shares of Preferred
Stock, at its discretion. [ ] [ ] [ ]

3. Amendment to the Duckwall-ALCO
Stores, Inc. 1993 Stock Option Plan. [ ] [ ] [ ]

4. Ratification of the selection of
KPMG Peat Marwick LLP as auditors
for the Company. [ ] [ ] [ ]

THIS PROXY WILL BE VOTED "FOR" ITEMS 1, 2, 3, AND
4 IF NO INSTRUCTIONS TO THE CONTRARY IS
INDICATED. IN THEIR DISCRETION, THE ATTORNEYS-
IN-FACT ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS PROPERLY MAY COME BEFORE
THE MEETING.

Dated___________________________, 1997

_____________________________________

_____________________________________
Please sign name as name
appears. If signing as a
representative, please include capacity.