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Gap Stock Surges After Kanye West Signs Deal To Sell A New Yeezy Clothing Line With Struggling Retailer

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The Ye Effect may be the new Oprah Effect: This morning Kanye West’s fashion and shoe company Yeezy and clothing retailer Gap GPS announced a ten-year partnership for a Yeezy Gap clothing line. 

Yeezy Gap will hit stores next year with a line of “modern, elevated basics for men, women and kids at accessible price points,” according to a statement from both partners announcing the news. West will receive an undisclosed percentage of royalties and, potentially, an equity stake, dependent on sales achievements.

Shares of Gap, which has struggled over the past five years to keep up with fast fashion retailers, surged nearly 40% when markets opened Friday morning in response to the news, but then tapered off. As of shortly after 1:50 pm ET, the stock was trading at $12.50, up 22% from Thursday’s close. The deal is welcome news for the retailer, whose namesake brand has lost its iconic status, and, as of earlier this month, had cash flow of negative $1.1 billion compared to negative $136 million last year.

“Gap has been a challenge for us,” Gap CEO Sonia Syngal said on a conference call earlier this month, adding that “years of inconsistent execution have depleted brand health.” Other brands under the Gap umbrella include Banana Republic, Old Navy and Athleta.

Years ago, West, who worked at a Gap store in Chicago as a teenager, expressed interest in partnering with the brand, whose product is quite different from his pricey Yeezy high-fashion line that sells shoes for more than $1,000 a pair and $925 cardigans.

“I’d like to be the Steve Jobs of the Gap,” he said in a 2015 interview on the now defunct Style.com. “I’m not talking about a capsule. I’m talking about full Hedi Slimane creative control of the Gap.”

But last year the rapper and designer, who is known to often change course, told Forbesthat  “What makes celebrity products sell so well is scarcity. … So if they make it too broadly available, I think it crashes the business model.”

That said, the Yeezy clothing line wasn’t selling “so well.” While his deal with Adidas to sell Yeezy shoes makes up the bulk of his $1.3 billion fortuneForbes estimates that his stake of the partnership is worth $1.26 billion—the Yeezy fashion line has struggled. His high-fashion line, meanwhile, is nothing more than a rounding error when it comes to his net worth. 

Partnering with a celebrity has been good—at least initially—for the stock of other companies.  When Oprah Winfrey announced she was partnering with and investing in WW (then Weight Watchers) in 2015, its stock surged 92%. Earlier this month, shares of the beauty giant Coty COTY rose 7% when it announced that it was potentially pursuing a partnership with West’s wife, Kim Kardashian West.

 It’s too early to say whether West’s Yeezy line can  help turn Gap around for good, but it will be another chance for him to do what he loves.

“I am a product guy at my core,” West told Forbes last year. “To make products that make people feel an immense amount of joy and solve issues and problems in their life, that’s the problem-solving that I love to do.”

Madeline Berg, Forbes Staff, Hollywood & Entertainment

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