Private equity's role in retail bankruptcies often boils down to the firms' operational strategies. Many of these companies seek out undervalued retailers and look for costs to remove from their businesses. As part of that process, they often fail to invest sufficient money in critical areas like the brand's store fleet or digital operations, Rieger-Paganis said.
Problems at these types of distressed chains are about to get more acute. Already struggling to bring in cash, the gradual rise in interest rates will make it tougher for them to refinance their debt as it comes due.
"This is going to be a cycle for quite awhile," Rieger-Paganis said.
In addition to the nine retailers who have already liquidated or are working to reorganize, Payless and Bebe are expected to add their names to that list.
A spokeswoman from Payless declined to comment on a recent Bloomberg report saying the chain will soon close up to 500 locations and file for bankruptcy. A spokeswoman for Bebe, which said earlier this month that it is exploring strategic alternatives, did not immediately respond to CNBC's request for additional information.
Regardless of their reason for filing for bankruptcy, more retailers who enter Chapter 11 are ending up in liquidation. That's because of a change in the bankruptcy code in 2005, which trimmed the timeline retailers have to gain approval for sale or reorganization.
While they used to be able to spend more than a year in bankruptcy, they now have 210 days to decide whether to keep a store's lease. Because going-out-of-business sales can take 90 days to run, senior lenders often try to make that decision in as little as 120 days.
As chains liquidate or restructure, their store footprints are eliminated or whittled down. Aeropostale, for example, shuttered nearly 600 stores in its reorganization last year. Meanwhile, Sports Authority's 460 locations went dark after it liquidated.
Year-to-date Chapter 11 filings:
- Gordmans Stores
- Gander Mountain
- General Wireless Operations (formerly RadioShack)
- BCBG Max Azria
- Michigan Sporting Goods Distributors
- Eastern Outfitters
- Wet Seal
- Limited Stores
But it isn't just bankrupt retailers chopping off real estate. Macy's, J.C. Penney, Sears and Kmart are in the process of closing nearly 400 stores, as smaller chains like GameStop and Abercrombie & Fitch take similar actions. Those vacancies are likely to have ripple effects through the industry, Rieger-Paganis said.
"People don't like to shop where there's a lot of vacant space," she said.
As the industry contracts, incumbent retailers like Kohl's and Target are investing in their physical shops in hopes of grabbing more market share. Between Macy's, Penney's, Sears and Kmart, Fung Global Retail & Technology estimates some $2.5 billion in sales will be captured by competing retailers.
Yet for traditional chains to grab their piece, they'll have to beat out the likes of Amazon. That could prove tough for these retailers, which have historically been slow to adopt change.
After attending last week's Shoptalk conference in Las Vegas, Citi analyst Paul Lejuez told investors that it's "easy to be impressed" by some of the technologies now available to retailers. However, the implementation of these technologies is likely to be slow and weigh on chains' profitability.
"The bottom line — it is hard to leave the Shoptalk conference feeling any better about the specialty retail and department store group," Lejuez said. He did, however, add the need for a physical store presence is "still apparent."
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