What Target’s bankruptcy means for small suppliers

The retailer's decision to withdraw from Canada leaves vendors in the lurch

The recent news that Target Canada is shutting all its stores and exiting Canada was a shock to the whole country.

Much of the media coverage to date has focused on the 17,600 jobs that will be lost and the vast swath of soon-to-be vacant stores across the country as a result of the decision. Both outcomes will have a significant impact on Canada’s economy.

But what about all the small vendors who acted as suppliers to Target—how is this bankruptcy going to impact them?


When Target Canada sought protection from creditors through the courts, suppliers became unsecured creditors in the process. Such vendors typically don’t get paid until all the secured creditors have been paid first. Per its court filing, Target Canada owes $3.4 billion to 1,796 creditors, and does not have enough true assets to cover this liability. As a result, unsecured creditor bills—like those of small suppliers—are likely to go unpaid.

Suppliers who had outstanding invoices to Target prior to the court filing will not see those invoices paid anytime soon, and may never receive payment in full. You should not count on getting paid by Target Canada for any products shipped prior to the court filing.


I have heard from several Target suppliers who have purchase orders from Target that remain unfilled or that they were in the process of finalizing with the retailer. Some of these suppliers even had the Target logo printed on their inventory already.

But the rules for payment changed the moment Target obtained court protection from creditors. You should check with legal counsel to determine if you can realistically expect to be paid if you ship such items.

You may be inclined to think: “They would never do anything to harm me—I have a great relationship with my buyer at Target.” But relying on the word of your buyer will not lead to payment being made whatever their intentions, and once the goods are shipped it may be difficult or impossible to recover them.

Do not throw good money after bad. Your outstanding invoices may not be paid and future invoices issued may not either, unless they are specifically protected in the court process.


Ironically, consumers are now finally flocking to Target, seeking the discounts they anticipate will accompany the company’s liquidation. According to media reports, the Saturday after Target’s exit announcement was the biggest sales day for the retailer since it opened in Canada.

A buyer from another large retailer recently told me that she expects to be able to purchase additional inventory in her category at a discount from suppliers to Target who are holding inventory. But until Target’s lower priced inventory filters through the system, small suppliers may also have a harder time selling to other retailers since those retailers may see their own sales fall.


Not getting paid by Target and sitting on inventory for longer than expected will create short term working capital issues for small suppliers—especially those with goods on the water coming from Asia that were supposed to fill Target purchase orders.

Even if suppliers are able to sell Target-destined inventory to other retailers, they will still have to wait 30–60 days to get paid on the invoices they issue after shipping. A few would-be Target suppliers who also sell to other high-quality retailers have approached FundThrough to finance their outstanding invoices to non-Target customers so they can get through this short-term hurdle.

This article first appeared on Profitguide.com

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