Alco Stores' fiscal Q2 earnings slipped to US$2M from US$2.3M a year ago as sales from continuing operations grew 1% to US$119.8M, same-store sales fell 1.9%; CEO says drought negatively affected results

ABILENE, Kansas , September 7, 2012 (press release) – ALCO Stores, Inc. (ALCS), which specializes in providing a superior selection of essential products for everyday life in small-town America, today announced operating results for its second quarter ended July 29, 2012.

Net sales from continuing operations, excluding fuel, for the second quarter of fiscal 2013 increased 1.0% to $119.8 million, compared to the second quarter of fiscal 2012. Same-store sales, excluding fuel, decreased 1.9%. Net sales from continuing operations, excluding fuel, for the 26 weeks ended July 29, 2012, increased 2.5% to $235.1 million, compared to the same period of the prior year. Same-store sales, excluding fuel, decreased 0.2%.

Net earnings for the second quarter of fiscal 2013 were $2.0 million, or $0.52 per diluted share, compared to net earnings of $2.3 million, or $0.60 per diluted share, for the second quarter of fiscal 2012. Net earnings for the 26 weeks ended July 29, 2012, were $0.7 million, or $0.18 per diluted share, compared to net earnings of $0.8 million, or $0.20 per diluted share, for the same period of the prior year.

Earnings from continuing operations, net of tax, for the second quarter of fiscal 2013 were $2.1 million, or $0.55 per diluted share, compared to $2.3 million, or $0.60 per diluted share, for the second quarter of fiscal 2012. Earnings from continuing operations, net of tax, for the 26 weeks ended July 29, 2012, were $1.0 million, or $0.26 per diluted share, compared to $0.8 million, or $0.21 per diluted share, for the same period of the prior year. Both net earnings and earnings from continuing operations for the second quarter and first half of fiscal 2012 included a one-time, non-cash after-tax charge of approximately $0.3 million, or $0.08 per share. This charge was the result of accelerated recognition of certain deferred financing fees from the Company's previous revolving credit agreement. During the second quarter of fiscal 2012, the Company entered into a new revolving credit agreement with Wells Fargo Bank, National Association and Wells Capital Finance, LLC.

Richard Wilson, President and CEO, commented, "The Company's second quarter results were impacted by the severe drought which affected the majority of our trading area and the agricultural business in the Midwest. Our second quarter earnings were also negatively impacted due to increased expenses relating to a shift of the store inventory process into the second quarter from the third quarter, new store expenses, and a one-time expense relating to a supply chain study. The Company's gross margin rate expanded by 30 basis points due to better pricing disciplines and the initial impact of our new regional pricing initiative. For the second quarter of fiscal 2013, gross margin dollars grew by 1.9% and margin rate increased to 32.7%. On a year-to-date basis, gross margin dollars grew by 2.7% with an improved margin rate of 31.2%."

Wilson concluded; "We expect improved results in the second half of the year from new initiatives in both Hardlines and Softlines, as well as the addition of frozen foods to our consumables offering beginning in October. We also expect a positive impact from the rollout of our regional merchandising strategy this fall."

Investor Conference Call

ALCO Stores, Inc. will host an investor conference call at 10:00 a.m. Central Time on Friday, September 7, 2012, to discuss operating results for the fiscal year's second quarter, ended July 29, 2012. The dial-in number for the conference call is 888-802-2269 (international/local participants dial 913-312-1444), and the Conference Code is 2645599. 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 September 7, 2012 through September 12, 2012, by dialing 888-203-1112 (international/local participants dial 719-457-0820), and the Replay Code is 2645599. 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 ALCO Stores, Inc.

ALCO Stores, Inc. is a broad-line retailer, primarily located in small underserved communities across 23 states. The Company currently has 215 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 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.

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