Gap soars most on record after Kanye West deal on apparel line
Kanye West’s Yeezy fashion label is coming to Gap, a move that may bring some much-needed life to the apparel chain.
The rapper and designer is teaming with Gap Inc. on a new line of apparel for men, women and kids called Yeezy Gap. Products are expected to debut in stores and online next year, the company said in a statement. Gap shares jumped the most since at least 1980 on the news.
The deal is a multiyear partnership, according to a Yeezy spokesperson. West has been traveling to Gap’s San Francisco headquarters from his ranch in Wyoming to work on the line, which is still in its design phase, the spokesperson said. The line won’t include footwear, a market in which Yeezy already collaborates with Adidas AG.
Gap shares soared as much as 42% in New York trading on Friday. The stock had fallen 43% this year through yesterday’s close.
The deal is “the right move to draw a younger shopper, rebuild lost connections and get people to look at the brand again,” Bloomberg Intelligence analyst Poonam Goyal said. “They still will need to do more to drive a full recovery and be a retailer of the future but this is a promising first step.”
The arrangement will expose West’s upscale brand to a broader market while letting Gap capitalize on Yeezy’s recent growth. Mark Breitbard, global head of the Gap brand, said in the statement that the new line would build on “the aesthetic and success” of the Yeezy brand.
Gap could use a lift as it grapples with a difficult turnaround effort. In January, it called off a plan to separate its Old Navy brand from the rest of the business. Last quarter, net sales fell 50% as it struggled to cope with prolonged store closures due to the pandemic. Even before Covid-19, the company was struggling to attract shoppers, especially to its namesake brand.
West’s compensation will be tied to sales and his business will earn royalties and potential equity under the terms of the deal. West, who worked at a Gap store as a teenager in Chicago, will also have input on presentation in stores and the e-commerce website.
Last year, Bank of America Corp. valued the sneaker side of the Yeezy’s business alone at as much as $3 billion, Bloomberg has reported. The shoes are made and distributed by Adidas, while West retains creative control and sole ownership of his brand.
Yeezy’s agreement with Adidas is in place through 2026. The brand was on track to generate $1.3 billion of shoe revenue in 2019, a 50% increase from a year earlier, according to Bank of America.
Gap Chief Executive Officer Sonia Syngal took over the company in March – just as much of the U.S. went into lockdown due to the coronavirus. She arrived with a transformation plan in place, but the pandemic has upended the situation.
Syngal, who previously led the company’s Old Navy chain, said Gap is renegotiating its rent agreements and in the meantime is paying “what we consider fair rent.” A number of the company’s landlords are challenging this in court.