Gap is already reaping the rewards of its 10-year partnership with Kanye West, as former CEO Mickey Drexler reveals the Yeezy x Gap Round Jacket alone generated US$7 million / AU$9.47 million overnight.
“I probably shouldn’t say this… but I told him he shouldn’t do the deal because it doesn’t make any sense in my opinion,” admits Drexler during his interview with Yahoo Finance Live; Drexler is now the CEO of specialty apparel retailer, Alex Mill.
“I have a lot of friends at Gap still, but it doesn’t work for someone like Kanye. He is not a corporate person and Gap is a big corporation.”
“So I know the jacket sold out. They did $7 million on the jacket overnight. He is a smart guy but he shouldn’t have done it. And I don’t think they should have done it, either.”
The Yeezy x Gap Round Jacket – which was memed to oblivion when it was teased for its distinct form – marked the collaboration’s inaugural article of clothing. The first drop appeared in a bright cobalt blue, constructed with recycled nylon, featuring no zipper, and unisex. The price tag? US$200 a pop. A little later on, the same puffer jacket was (momentarily) available to purchase in a black colourway.
The “Kanye effect” has previously been observed on another notable occasion relating to Gap. Immediately after the collaboration was announced, Gap’s floundering stock (NYSE: GPS) surged by approximately 40%. Less than a year later, private documents reviewed by Bloomberg indicated the entire Yeezy x Gap collaboration had been given a total valuation of US$970 million (AU$1.24 billion), furthering the hype.
Gap expects the forthcoming Yeezy line designed and curated by Kanye West will generate US$150 million (AU$192 million) in sales during its first full year, eventually scaling up to billion-dollar revenue within eight years – with an extremely optimistic projection that sales are on track to break the billion-dollar threshold as early as 2023.
The objective may be a lofty one but far from impossible. In the face of the ongoing pandemic, Yeezy Adidas sneakers have held the line by achieving 31% of growth in annual revenue for 2020. Approaching a gross figure of US$1.7 billion (AU$2.17 billion), effectively, Yeezy managed to net US$191 million (AU$244 million) in royalties. In short, the man’s name is as good as gold when it comes to fashion.
If all goes to plan, Kanye West will earn even more considerable royalties from Gap x Yeezy sales – which increases on a sliding scale – as well as receive stock warrants when certain KPIs are fulfilled. The highest tier of compensation is listed at US$700 million (AU$894 million), as per an official securities filing.