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Gap soars after signing 10-year deal with Kanye West

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On Friday, Gap announced it signed a 10-year deal with rapper and fashion designer Kayne West to create a clothing line. Yahoo Finance's Sibile Marcellus joins The Ticker to break down the details.

Video Transcript

- Shares of Gap popping in the session after Kanye West announced he's collaborating with the clothing company to develop a new line. Sibile Marcellus is here with the details on that front. And I guess, Sibile, question is, can Kanye be the magic to turning Gap around?

SIBILE MARCELLUS: That's definitely what Gap is hoping for. The stock was hot this morning once the news became known to investors. It was up about 30%. Right now, it's up about 17%.

It added more than 1.4 billion to Gap's market cap. And this is a really big deal because Gap's sales plunged 50% in the first quarter. So they really need this.

And as a part of this partnership, we're going to have Kanye developing a clothing line for Gap for men, women, and children that'll be sold in physical stores and online. And the "Yeezy" Gap line will debut some time next year in 2021. Gap did not disclose the exact terms of the deal, but we do know that Yeezy will get royalties and may get equity depending on how sales go.

Now it's interesting to note that Gap is hoping this works as well as Kanye's partnership with Adidas for Yeezy sneakers. That sneaker line has become a billion dollar business for Adidas at launch in 2015, and Adidas' sneaker section is worth more than $3 billion, at least that was the case last year. We'll see how the coronavirus pandemic impacted that. But that is the case. So Gap definitely hoping that they'll be able to get some of the success Kanye had with Adidas.

- Yes. Certainly looks like investors are liking it, at least on the day of the announcement. We'll stay tuned for the clothing line. Thanks for that, Sibile.