Rapper and designer Kanye West, also known as Ye, says he’s terminating his partnership with ailing apparel retailer The Gap Inc., potentially spelling the end of a troubled association that left both sides disappointed.
Lawyers for West sent a letter to Gap on Thursday. They argued the company had failed to release apparel and open stores as stipulated in the agreement.
“Gap left Ye no choice but to terminate their collaboration agreement because of Gap’s substantial noncompliance,” Nicholas Gravante Jr., a partner at Cadwalader Wickersham & Taft, said in an email.
Ye had “diligently tried to work through” the issues with Gap directly and through his lawyers but got nowhere, Gravante said. The artist will now move forward with opening Yeezy retail stores.
Ye and representatives for Gap didn’t immediately respond to requests for comment. The company had high hopes for the Yeezy deal when it was announced in June 2020, but product drops were intermittent and the tie-up hasn’t meaningfully helped Gap’s results.
Bloomberg News reported earlier this week that Ye intended to wind down his current corporate deals and not sign new ones, instead independently retailing his designs.
Gap shares were up 1% to $9.45 at 9:58 a.m. in New York. The company’s stock has lost almost half of its value this year amid management upheaval and operational missteps.
The Wall Street Journal reported Ye’s planned termination of the Gap deal earlier Thursday.
Q2 sales across The Gap Inc.’s brand portfolio
This comes weeks after The Gap reported $3.86 billion in total company sales for its fiscal second quarter, which ended July 30, 2022. That’s an 8% dip, according to Chief Financial Officer Katrina O’Connell.
Online sales declined 6% compared to last year. They represented 34% of total net sales, O’Connell said. Compared to pre-pandemic levels in 2019, online sales increased 55%. The Gap Inc. ranks No. 19 in the Top 1000, Digital Commerce 360’s database ranking North American online retailers by web sales.
Store sales declined 10% compared with the 2021. Year-to-date, total sales were down 11% compared to last year. They were down 5% relative to pre-pandemic levels in 2019, O’Connell said.
“Coming off of peak inflation and the higher gas prices, particularly impacting the low-income consumer in June, we have seen an improvement in sales trends in July and into August, consistent with many other retailers,” O’Connell said during a fiscal Q2 earnings call, according to a Seeking Alpha transcript.
Sales for The Gap Inc.’s Gap brand were $441 million globally. That’s down 10% compared with 2021. Meanwhile, the Old Navy brand reported $2.1 billion. Although that’s the most among Athleta, Banana Republic, Gap and Old Navy, it’s still a 13% drop from the prior year.
Athleta and Banana Republic, despite both increasing net sales compared with 2021, combined to make about as much as Gap brand. Athleta net sales were up 1%, bringing it to $344 million. Banana Republic net sales increased 9% to $539 million.
In-store sales
O’Connell said The Gap Inc. plans to open 30 to 40 Athleta stores and 20 to 30 Old Navy stores. It also expects to close about 50 Gap and Banana Republic stores this year. That would bring the company to approximately 85% of its goal. It plans to close 350 stores in North America by the end of fiscal 2023, she said.
Similarly, Bed Bath & Beyond Inc. is starting to close down and liquidate 56 stores as part of a wide-ranging turnaround plan, which the troubled retailer is betting will rekindle some of its lost appeal with U.S. shoppers. The closings, many of which are happening in the upper Midwest, New York and New Jersey where its locations are more densely packed, are the first round of what will ultimately total about 150 stores. Bed Bath & Beyond ranks No. 30 in the Top 1000.
The Gap Inc. ended its fiscal second quarter with $3.1 billion in inventory. That’s up 37% from the previous year’s second quarter. This is part of a trend in the retail industry.
Several months ago, a plague of empty shelves and out-of-stock online merchandise restricted shoppers. Now, retailers say they have a lot of inventory, but much of what they have isn’t in high demand anymore.
Earnings percentage changes may not align exactly with dollar figures due to rounding.
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