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Gap Stock Gets a Lift from Kanye West Collaboration

By Howard Smith - Jun 26, 2020 at 1:15PM

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The apparel retailer's shares jumped 30% after it announced a clothing line partnership with the music industry powerhouse, who is also a fashion designer.

Gap (GPS 0.56%) on Friday announced a new collaboration with singer and entrepreneur Kanye West to bring his Yeezy clothing line to the retailer. The news sent Gap shares soaring more than 30% in morning trading. The new Yeezy Gap apparel line will be available in stores and online starting in 2021, the company said. 

West owns the Yeezy brand, which was recently valued at $2.9 billion according to the announcement. "This new apparel partnership furthers the size and scope of the Yeezy business, building on the ground-breaking success of Yeezy footwear," Gap said. 

Gap customer at checkout

Image source: Gap

West will lead the Yeezy design studio in developing a new clothing line of "elevated basics for men, women and kids at accessible price points." Gap will pay Yeezy royalties and possibly equity related to the line's sales levels. 

Gap's business -- like the operations of many retailers -- has been severely disrupted by the COVID-19 pandemic. In its first-quarter earnings call earlier this month, management said they had focused on conserving cash by cutting capital expenditures to "recession level lows," as well as suspending dividends and share repurchases. They also furloughed most of Gap store employees and reduced headcount by 15%. 

The retailer also worked to extend payment terms with its vendors, and withheld rent on its stores. Mall owner Simon Property Group (SPG -2.24%) counts Gap as its largest tenant, and has sued the company over missed rent payments.  

Howard Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

The Gap, Inc. Stock Quote
The Gap, Inc.
$10.70 (0.56%) $0.06
Simon Property Group, Inc. Stock Quote
Simon Property Group, Inc.
$113.25 (-2.24%) $-2.60

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