Shares of American clothing and accessories retailer Gap dropped by more than 7.4 percent on Monday after celebrity Kanye West threatened to walk away from his collaborative partnership with the company. West made his threat during an event on Sunday, telling Gap that he would kill the deal with his Yeezy brand if he wasn't given a spot on the company's board of directors.
The rapper, who is now running for the U.S. presidency, issued the ultimatum during his speech at his first 2020 presidential campaign rally over the weekend. The 43-year old musician also made a similar threat to sportswear giant Adidas, stating that he would walk away from his existing deal with the company if they refuse to place him on its corporate board.
During his speech West stated that having no control over his fashion collaborations with the companies had to change and that he would walk away if they refuse to give in to his demands. It isn't yet clear if West would make good on his threat or if both Gap and Adidas would consider giving in to his demands.
West had originally signed a partnership with Gap back on June 26. The collaboration included a planned launch of a new Yeezy Gap line of fashionable clothing described as "affordable elevated basics. " Gap had planned to launch the new line next year. Under the deal, Gap would pay West, through his solely-owned brand Yeezy, royalties, and equity from the sales of the new products.
Following the announcement of the partnership, Gap's share prices skyrocketed by more than 18 percent. The company has since lost nearly half of those gains. If West does decide to walk away from the deal, Gap could stand to lose an estimated $1 billion in annual sales over the next five years.
Retaining its partnership with West would also be vital for Gap, which has been struggling to keep afloat amid the slump in demand and store closures due to the coronavirus pandemic. For its latest quarter ending on May 2, the company reported a 43 percent drop in sales.
For Adidas, losing West's Yeezy partnership would deal a huge blow to a segment of its global sneaker business. According to Bank of America, the Adidas-Yeezy partnership had brought in more than $3 billion in revenues last year. Forbes had a much lower estimate, stating that the collaboration had raked it around $1.3 billion in 2019. West's threats of walking away from his Adidas deal did little to hurt its stock prices this week. On Monday, Adidas' share prices ended up 1.8 percent higher, closing at 242.20 euros per share in Frankfurt.
