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 Yeezy directly sold $1.3 billion worth of footwear with Adidas in 2019.
Adidas’s CEO Kasper Rørsted has acknowledged Yeezy’s intangible, all-important ability to generate hype, known as the Kanye Effect.
The morning of the announcement, West primed the Yeezy media ecosystem to amplify the Gap news the same day it broke, labeling the pseudo event #WestDayEver. He shared an unreleased music video filmed in 2005 for his song “Spaceship,” set in a store with Gap’s signature blue tones, inspired by his experiences working at Gap retail as a 15-year-old.
West simultaneously released his Yeezy Adidas Foam Runners at his Yeezy Supply e-commerce store, which sold out at his site in minutes. He teased a new song, which released June 30, 2020, entitled “Wash Us in the Blood.” He also reminded followers of his upcoming collaboration…