Watch Kanye West threaten to end Adidas and Gap deals

New York (CNN Business)The Gap’s remarkable turnaround under CEO Sonia Syngal is continuing, thanks in part to Kanye West, TikTok and Simone Biles.

Gap (GPS) shares were up about 3% Friday morning after the retailer reported earnings and sales for its most recent quarter that topped forecasts and issued an upbeat outlook for the rest of this fiscal year. The stock has now soared nearly 35% in 2021.
Syngal, the former head of the Gap’s Old Navy unit, took over the whole company in March 2020. At the time, the Gap was in lousy shape. It had just decided to abandon plans to spin off Old Navy. Its Banana Republic was still struggling. And the core Gap brand needed a youthful fashion refresh.

    Then the pandemic hit, and the Gap faced a cash crunch due to store closures.

      Enter Kanye. The rapper announced a 10-year partnership with the Gap on a line of new Yeezy-branded clothes in June 2020….although he briefly threatened to abandon it one month later.


      The first piece from that collection, a $200 jacket, will begin shipping to customers this fall. Preorders have started in North America, Tokyo and Europe.
      Demand is apparently off the charts. During a conference call with analysts Thursday evening, Syngal said that “it’s had a great response. We’ve had a much younger customer. We’ve had 75% of those customers being new to the Gap brand. And so we’re excited to be out the gate.”
      Beyond Kanye, Syngal said that the Gap has benefited from solid demand for all of its clothing as consumers “embraced summer with optimism.”
      “We saw a celebration of American style, of ’90s nostalgia and the resurgence of denim. All of this sits in a sweet spot,” she said.

      The hoodie makes a huge comeback

      There has also been a resurgence of the Gap hoodie, which Syngal said was partly driven by viral TikTok videos.
      “Our classic Gap hoodie is having a moment, so much so that we reissued it in a vintage brown for preorder delivering this fall,” she said during the call, adding there are “elevated search levels” for it on Google and that sales for the teen version of the hoodie is widely outpacing adult sizes.
      “This is a brand that is resonating. This is a brand that people care about and want to wear proudly across their chests,” she said.
      Kanye West is reportedly worth $6.6 billion
      The Gap’s sporty Athleta brand is a big hit too. Sales rose 27% from the same quarter in 2019…before the pandemic. Athleta signed Olympic gymnastics legend Biles to a deal earlier this year, snagging her away from Nike (NKE).
      The Gap is hoping that the Biles partnership will help Athleta “really begin to take traction with the girl customer,” said Gap chief financial officer Katrina O’Connell on the conference call.
      That’s all helping to lift the Gap’s overall sales, which surged nearly 30% from a year ago and were also up 5% from pre-Covid levels in the second quarter of 2019.
      Strength at Old Navy drove much of the success, with US sales for the brand accounting for more than 60% of Gap’s total domestic revenue.
      “Gap deserves credit for the way it runs Old Navy and has kept the brand fresh and interesting for shoppers,” said Neil Saunders, managing director or GlobalData, in a report.
      “This investment has paid substantial dividends in the aftermath of the pandemic as Old Navy’s collections of relaxed family apparel at reasonable price points has resonated with consumers looking to refresh closets and kit out kids for back to school,” Saunders added.
      The Gap also said that it is hoping that Banana Republic, a business casual brand that has struggled for some time, will start to turn around this fall. Sales were up from last year’s pandemic levels but down 15% from the second quarter of 2019.

        Still, analysts are marveling at how quickly Syngal has turned around the entire company.
        “I don’t think I’ve ever seen a speed of transformation like the one you set in motion,” said Barclays analyst Adrienne Yih on the conference call.
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