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Why The Gap Is Betting Its Future on the Kanye Effect
A deal with Kanye West worked for Adidas. Can it save Gap from bankruptcy?
Imagine the collective sigh of relief from Gap Inc.’s employees and shareholders on June 26. After a Bangladesh factory scandal, a bungled collaboration with designer Telfar Clemens, and employee layoffs and furloughs, their stock price spiked 42% in one day — its highest swing since 1980.
Earlier that day, the New York Times reported a 10-year licensing deal between Kanye West’s Yeezy and Gap. Gap hopes its upcoming Yeezy Gap line will generate $1 billion in annual sales within five years. That’s a lofty goal: Gap’s brand generated $4.6 billion in global revenue in 2019, and Gap Inc.’s net sales — including revenue from its brands Old Navy, Banana Republic, and Athleta — were $16.4 billion. If their projections pan out, Yeezy sales would account for over 6% of Gap Inc.’s overall revenue.
In addition to royalties, should Yeezy Gap meet revenue targets, Gap will grant Yeezy 8.5 million common shares. At its current stock price of $12, that stake would be worth just over $100 million. West reportedly takes around a 11% cut from Yeezy’s collaboration with Adidas, Adidas Yeezy, which since 2015 has released apparel as well as the popular Yeezy Boost sneaker line. Forbes estimates that…
