Another Sign of Trouble: Overexpansion by Specialty Retailers

Demand is only half of the equation.

Everybody is watching retailers these days for signs of an economic slowdown. Is the current sales slowdown because of weather or increased consumer caution? Investors have been agonizing over these questions lately.

Now, there's more to fret about. Despite the slowing sales, specialty retailers are still planning to open new stores at some pretty fantastic rates this year. Square footage at specialty retailers is expected to increase about 11%, more than last year's 6.7% and the fastest increase in years, according to Lazard Freres' analyst Todd Slater. That kind of growth just "isn't rational," he says, especially if the economy really does cool. ...