Duckwall-ALCO Stores, Inc. Reports Higher Earnings for Third
Quarter and First Nine Months of FY2004 Company on Target to Open
Eight New ALCO Stores This Year ABILENE, Kan., Nov. 24
/PRNewswire-FirstCall/ -- Duckwall-ALCO Stores, Inc. , an operator
of 264 full-line discount and hometown variety stores in 21 states
in the central U.S., today announced higher sales and earnings for
the third quarter and first nine months of FY2004. For the quarter
ended November 2, 2003, earnings from continuing operations rose
14% to $530,000, or $0.12 per diluted share, compared with
$464,000, or $0.11 per diluted share, in the third quarter of
FY2003. Net earnings rose 12% to $523,000, or $0.12 per diluted
share, from $469,000, or $0.11 per diluted share, in the quarter
ended November 3, 2002. For the first nine months of FY2004,
earnings from continuing operations increased 7% to $2,588,000, or
$0.60 per diluted share, versus $2,430,000, or $0.56 per diluted
share, in the corresponding period of the previous fiscal year. Net
earnings for the nine months ended November 2, 2003 increased 18%
to $2,680,000, or $0.62 per diluted share, compared with
$2,269,000, or $0.52 per diluted share, in the first nine months of
FY2003. Sales increased 9.4% to $100.5 million in the most recent
quarter, while same-store sales rose 3.0%. Sales were strong in
August and September, but soft in October, when warm weather
unfavorably impacted sales of outerwear. Sales for the nine months
ended November 2, 2003 increased 7.5% to $310.0 million, versus
$288.5 million in the corresponding period of the previous fiscal
year. Same-store sales increased 0.9% when compared with the
prior-year period. "I am pleased that we continued to improve our
operating performance in the third quarter, largely due to higher
productivity at our distribution center, reflecting the successful
efforts of our associates to lower operating costs," commented Glen
L. Shank, Chairman and Chief Executive Officer of Duckwall-ALCO
Stores, Inc. "Our gross margin was impacted throughout the quarter
by an unfavorable mix of sales towards lower margin goods and
higher shrink." "We are continuing our efforts to improve the
productivity of existing stores through a remodeling program
initiated three years ago," continued Shank. "These remodels are
designed to revitalize the stores and allow the Company to achieve
certain very important long-term strategic goals relating to
merchandise presentation, product mix and marketing. The Company is
continually evaluating and adjusting, as necessary, its store model
to optimize performance." "We are also moving forward with a more
aggressive store expansion program than in recent years," continued
Shank. "The Company opened 7 new ALCO stores during the first nine
months of Fiscal 2004, and we are on target to open a total of 8
new stores for the year. This compares with 5 new stores opened
during the previous fiscal year." Gross margin declined to 34.2% of
sales in the most recent quarter, from 35.1% in the prior-year
period. The decline reflected an unfavorable mix of sales towards
lower margin products during the quarter, as well as an increase in
shrinkage expense. While the unfavorable mix occurred throughout
the quarter, October's mix issues were largely related to
unseasonably warm weather. For the first nine months of FY2004,
gross margin declined to 33.4% of sales from 33.9% a year earlier,
due entirely to a less favorable mix of sales and higher shrinkage
expense in the second and third quarters. The unfavorable mix
issues are at least partly a result of the Company's emphasis on
and expansion of consumable products, which generally carry a lower
margin. However, the Company believes that without this emphasis
its sales and earnings would have been lower and it is continually
adjusting and fine-tuning its merchandise assortment and prices to
maximize overall profitability. Operating expenses as a percent of
sales declined to 33.0% in the third quarter, from 33.9% a year
earlier, primarily due to lower distribution center, store
remodeling, medical insurance and incentive compensation costs,
partially offset by increased general insurance. Operating expenses
as a percent of sales for the nine months ended November 2, 2003
declined to 31.7%, from 32.1% in the prior-year period, due
primarily to lower distribution center, store remodeling, medical
insurance and incentive compensation costs, partially offset by
increased store opening and general insurance costs. Interest
expense declined slightly to $357,000 in the most recent quarter,
from $405,000 in the prior-year period, primarily due to lower
interest rates. For the first nine months of FY2004, interest
expense declined to $1,075,000 from $1,205,000 last year, again due
primarily to lower interest rates. These results reflect the
adoption of Emerging Issues Task Force Consensus No. 02-16 (EITF
02-16), which involves accounting for money received from suppliers
and had no material impact on earnings for the third quarter or
nine months ended November 2, 2003. Also, prior-year financial
statements reflect a reclassification of stores subsequently closed
into discontinued operations. During the third quarter, the
Company, as part of an ongoing program, remodeled 10 ALCO stores.
This compared with 13 store remodels in the third quarter of the
prior year. Through the first nine months of this year, a total of
22 stores have been remodeled. The Company plans to remodel one
more store this fiscal year bringing the total remodels this year
to 23. Since the inception of the store remodeling program three
years ago, a total of 86 stores have been remodeled, including 32
during each of the last two fiscal years. In addition to these
stores, a total of 16 new ALCO stores opened during the last 3
fiscal years also reflect this new format. This brings the total
number of stores with this new format to 102. During the most
recent quarter, the Company opened no ALCO or Duckwall stores.
Management currently plans to open a total of approximately 8 new
ALCO stores in the current fiscal year. Duckwall-ALCO Stores Inc.
is a leading regional retailer that currently operates 264
full-line discount and hometown variety stores in 21 states in the
central portion of the United States under the names "ALCO" and
"Duckwall" respectively. The Company's strategy is to target
smaller markets not served by other regional or national full-line
retail discount chains and provide the most convenient access to
retail shopping within each market. The Company is headquartered in
Abilene, Kansas and its common stock is listed on the NASDAQ
National Market under the symbol "DUCK." 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 quarterly
10-Q filings and other public documents, copies of which are
available from the Company on request. CONTACT: Dick Mansfield Vice
President, Finance, Treasurer and Chief Financial Officer
785-263-3350 x286 e-mail: internet home page:
http://www.duckwall.com/ or RJ Falkner & Company, Inc.,
Investor Relations Counsel at (800) 377-9893 or via e-mail at
DUCKWALL-ALCO STORES, INC. Consolidated Statements of Operations
(In thousands, except per share amounts) Unaudited Three Months
Ended Nine Months Ended November 2 November 3 November 2 November 3
2003 2002 2003 2002 Net sales $100,457 $91,832 $310,006 $288,463
Cost of sales 66,129 59,601 206,541 190,687 Gross profit 34,328
32,231 103,465 97,776 Selling, general and administrative 31,340
29,337 92,857 87,715 Depreciation and amortization 1,799 1,756
5,474 5,016 Total operating expenses 33,139 31,093 98,331 92,731
Operating income from continuing operations 1,189 1,138 5,134 5,045
Interest expense 357 405 1,075 1,205 Earnings from continuing
operations before income taxes 832 733 4,059 3,840 Income tax
expense 302 269 1,471 1,410 Earnings from continuing operations 530
464 2,588 2,430 Earnings / (loss) from discontinued operations, net
of income tax (7) 5 92 (161) Net earnings $523 $469 $2,680 $2,269
Per share data (diluted): Earnings from continuing operations $0.12
$0.11 $0.60 $0.56 Net earnings $0.12 $0.11 $0.62 $0.52
Weighted-average shares outstanding: Basic 4,234 4,259 4,230 4,228
Diluted 4,363 4,355 4,323 4,361 DUCKWALL-ALCO STORES, INC.
Consolidated Balance Sheet (In thousands) Unaudited November 2,
November 3, 2003 2002 Assets Current assets: Cash and cash
equivalents $2,941 $3,004 Receivables 1,755 2,180 Inventories
147,664 142,639 Prepaid expenses 2,273 2,500 Total current assets
154,633 150,323 Property and equipment 86,344 83,203 Less
accumulated amortization 58,450 52,557 Net property and equipment
27,894 30,646 Property under capital leases, net of accum.
amortization 3,212 3,753 Other non-current assets 183 258 Deferred
income taxes 557 286 Total assets $186,479 $185,266 Liabilities and
Stockholders' Equity Current Liabilities Current maturities of
long-term debt $569 $492 Current maturities of capital lease
obligations 712 703 Accounts payable 33,758 33,957 Income taxes
payable 52 500 Accrued salaries and commissions 5,382 5,435 Accrued
taxes other than income 5,089 4,657 Other current liabilities 4,184
2,872 Deferred income taxes 2,101 1,340 Total current liabilities
51,847 49,956 Notes payable under revolving loan credit facility
22,951 27,060 Long-term debt, less current maturities 91 661
Capital lease obligations, less current maturities 4,850 5,569
Other noncurrent liabilities 1,372 2,148 Deferred revenue 529 857
Total liabilities 81,640 86,251 Stockholders' equity Common Stock,
$.0001 par value, authorized 20,000,000 shares in 2004 and 2003;
issued and outstanding 4,265,593 and 4,259,195 shares in 2004 and
2003, respectively 1 1 Additional paid-in capital 48,808 48,748
Retained earnings 56,030 50,266 Total stockholders' equity 104,839
99,015 Total liabilities and stockholders' equity $186,479 $185,266
DATASOURCE: Duckwall-ALCO Stores, Inc. CONTACT: Dick Mansfield,
Vice President, Finance, Treasurer and Chief Financial Officer of
Duckwall-ALCO Stores, Inc., +1-785-263-3350, ext. 286, ; or RJ
Falkner & Company, Inc., Investor Relations Counsel,
+1-800-377-9893, , for Duckwall-ALCO Stores, Inc. Web site:
http://www.duckwall.com/
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