After the beginning of the month, Gap released the earnings report, which came worse than expected, no one was willing to give Gap another chance. The sales for the 2020 Q1 fell 43% due to store closure in the pandemic. It reported a net loss of $932 million - $2.51/ share, compared to last year's profit of $227 million.
Net sales dropped to $2.11 billion from last year's $3.71 billion, but online sales increased by 13%. At the end of the quarter it had $2.2 billion in merchandise inventory, and $1.1 billion in cash, $600 million short than it had the beginning of the quarter.
At that time, since the beginning of the year, Gap stock had lost more than 31%.
Things took a turn for the better, as Gap announced its partnership with artist Kanye West. The partnership will benefit both parties: both will have "new audiences," Kanye will be able to sell his products to the masses, and Gap will probably have more customers that are interested in West’s designs and may this will help the company regain its fame.
The clothing line will be available next year and consist of "modern, elevated basics" at an affordable price. For Kanye, this is a return to the roots, as he used to work in a Gap store before he became famous, but this is not his first fashion collaboration. He started his fashion brand more than ten years ago, Yeezy, and has a long partnership with Adidas. Still, the Gap collaboration comes with strings attached: the fashion retailer will alter the designs to put their mark on it. The one-decade deal starts this month, while West will design clothes for men, women, and children. Gap hopes to reach $1 billion in annual sales in five years.
The deal announced on Friday was auspicious for Gap: its stock price gained more than 18% during regular trading.
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Sources: bbc.com, cnbc.com
