The new Yeezy Gap range will launch next year

The new Yeezy Gap range will launch next year

Shares in Gap Inc have jumped 13% after the US specialty apparel retailer revealed it has inked a deal with Kanye West to design a new line of adult and kids' clothing.

The new Yeezy Gap range will launch next year, and will introduce both the Gap and Yeezy brands to new audiences.

Media superstar West worked in a Gap store as a teen growing up in Chicago, and has since become a disruptive force across music, footwear, fashion and architecture. 

"We are excited to welcome Kanye back to the Gap family as a creative visionary, building on the aesthetic and success of his Yeezy brand and together defining a next-level retail partnership," says Mark Breitbard, global head of Gap Brand.

Under West's creative direction, the Yeezy design studio will develop the new line to deliver modern, elevated basics for men, women and kids at accessible price points, with the creative process just getting underway. 

Kanye West maintains sole ownership of the Yeezy brand and was recently valued at $2.9bn in April 2020, while Gap Inc maintains sole ownership of Gap brand. 

West already has a Yeezy footwear line with sportswear company Adidas. 

As part of the multi-year deal, Yeezy will receive royalties and potential equity if the line sells well. Media reports suggest the partnership is for ten years, and that the new line has the potential to bring in US$1bn in annual sales. 

Streetwear style

B.Riley analyst Susan Anderson believes the Kanye West collaboration, which will sell the Yeezy brand at a more affordable price point, "could provide Gap with additional upside by FY25. We have observed strong demand for the Yeezy brand, which is sold at a designer price point and often sells out quickly, so we anticipate demand for the Yeezy brand to remain high. 

"We also believe the streetwear style that the Yeezy brand brings will drive new customers who have generally not shopped at Gap or other [Gap Inc] retailers and can potentially drive revenue in other formats. 

"Lastly, we believe that in a worst-case scenario, the Yeezy collaboration can add $250m in annual sales for the Gap brand by FY25, and potentially as much as $1bn+ in annual sales by FY25."

Turning point?

Gap Inc – the largest specialty apparel company and second largest apparel e-commerce business in the US – operates brands including Old Navy, Gap, Athleta and Banana Republic.

But performance at the namesake Gap brand has long been lacklustre, blamed on uninspiring ranges, a lack of newness, and a position and brand essence. The company's most recent results set new alarm bells ringing after the Gap brand failed to shift online despite widespread store closures due to the coronavirus pandemic.

During the first quarter to 2 May, net sales halved at Gap Global, with store sales down 64% and online sales falling by 5%.

CEO Sonia Syngal told analysts: "Gap has been a challenge for us." 

Steps already taken have seen a 25% headcount reduction, new products and segments like Gap team, and new opportunities including a recent licensing deal with IMG. This will introduce complementary products like baby equipment, home décor, and furniture to the Gap, Banana Republic, and Janie and Jack assortments.

At the time, Neil Saunders, managing director of GlobalData Retail, noted: "When other retailers were almost doubling their online revenues, Gap's e-commerce sales dropped by 5%. We believe this is indicative of the brand's lack of traction with customers and its inability to stimulate loyalty. 

"It aptly demonstrates that a fair proportion of sales are driven, not by a burning desire to visit and buy from Gap, but from chance visits to stores and impulse buys often stimulated by excessive discounting. As soon as stores are closed, Gap drops off the radar and consumers have neither the will nor inclination to shop the brand online.

"As we have noted so many times, the heart and soul of this problem stems from Gap's anaemic ranges. These are bland and undifferentiated and do nothing to stimulate consumers. Against a market saturated with alternative apparel destinations, this simply isn't good enough. 

"Gap has been aware of this problem for an eternity but has consistently failed to act."

Under Syngal, the former boss of Old Navy who was promoted as the company's new CEO in March, it may well be that the Yeezy partnership marks the turning point.