Mind the Yeezy Gap 👟

by 29 Jun, 2020

Mind the Yeezy Gap

Kanye West has signed a ten-year deal with Gap, giving the retailer exclusive rights to hang his new Yeezy’s line. There are some investors who don’t think Gap even has another ten years, but Kanye and the Kardashians are pretty business savvy (Kylie Jenner sold a billion-dollar brand!). This story deserves the time of day; is Yeezy dropping down to Gap’s level, or is Gap rising up to Yeezy’s level?

Gap is old school kinda cool. We all know it. We’ve all repped it. We can all find a Gap hoodie somewhere that’s never lost its shape in the wash, and that’s shown good stamina through our teenage years. It’s taboo, probably, but if Kanye awards the Gap brand style points, so will the mainstream.

Gap was heavily short-sold when this news broke with bears scrambling to cover their shorts (Yeezy rhymes with squeezy), but even Gap admits that a “huge success” would only mean $700 million in sales on a $15 billion revenue business. This is a retailer in secular decline, remember.

It would seem that unless this partnership changes the world, it isn’t logical for the stock to get blind bid up 25%. The business has received a $1 billion valuation correction, implying a billion-dollar return from a potential short bet.

Nike started selling Air Jordan’s in 1984. There was a sales goal of $3 million over three years, which was ambitious for a rookie at the time. Nike ended up selling $126 million of shoes in a single year. If you’re shorting Gap, go carefully!

If Kanye goes on mic about the partnership and spits a pitch, this thing has blow-up potential. We could be looking back on this in five years, thinking this dude has made one of the business calls of the century. Or not, of course. That’s investing!

There are countless investors throwing loose change at Gap this morning for single-digit portfolio positions, perhaps enough to make it move, are you amongst it?


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