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Kanye ‘Ye’ West terminates Gap partnership

Yahoo Finance Live anchor Brian Sozzi breaks down rapper Kanye West's decision to end his partnership with Gap and how this could affect Gap moving forward.

Video Transcript

[AUDIO LOGO]

JULIE HYMAN: It is official. Kanye West is terminating his partnership with Gap after a rocky two years. The partnership was announced in June 2020. It was supposed to last 10 years. And that drama is where we find Sozzi's Tale today. Is he officially Ye now? Do we--

BRIAN SOZZI: I think he's Ye.

JULIE HYMAN: --we have to fawn him as Ye and not whole name?

BRIAN SOZZI: I think he is.

JULIE HYMAN: I don't know.

BRAD SMITH: Legally, yeah.

JULIE HYMAN: Legally, he's Ye, right?

BRAD SMITH: Yes.

BRIAN SOZZI: But I will say this, I'm on Team Ye. And that is coming from the standpoint and following Gap for about the past 15 years of my life. And just watching this slow-motion train wreck that has continued to unfold management team after management team. But nonetheless, this deal is now over.

So now, you have to start thinking about what is next for Gap? What should they be focusing on as they look to turn the page from this absolute disaster of a partnership and look to 2023? So I compiled a list here that I thought about overnight. I did.

So first and foremost, find a permanent CEO. As we know, a but of my joke has been Bob Martin, he's the longtime board member that they installed in as the interim CEO. They have to find a permanent CEO who's going to come in there and maybe try to drive some turnaround. It's just has not happened with any of the CEOs that they have been--

JULIE HYMAN: Hey, bring Mickey back.

BRIAN SOZZI: Maybe. Maybe they should. Maybe they should. But next up, close hundreds of stores. You know, I just went back and re-- got the numbers on Gap from their annual report, they still operate 830 Gap stores in North America and overseas. Is just too many stores. They need to cut that number in half, just given where the sales trajectory of that business is.

Next, turn around Old Navy. Old Navy has been not a good operator for Gap this year because they bought too much inventory. It's still going to probably take a couple of quarters for them to work down that inventory. Notably, in plus-size women's clothing, to get that business going back to what it was doing before.

Next, sell Athleta. Athleta has been a strong business for three years. Sell to a company like VF Corp who would probably have-- put this brand to a lot of good use and expand it much more aggressively than Gap is doing. That would get Gap some cash where it could probably invest more in Old Navy and open up more stores.

But look, the turnaround is going to take a long, long time for this company, if there ever is one. And there's some more things on the list, too. Work down bloated inventories. Make consumers care again about The Gap brand. I don't think they're gonna be able to do that, no matter who they hire.

And then last but not least, don't get carried away with the strength of Banana Republic. Banana Republic has had two very good quarters, in large part because we've been back to the office and people still view BR as a good place to get back-to-office work attire. But still, if I'm Gap, I would not be betting large sums of inventory in a long-term Banana Republic turnaround.

Nonetheless, here's my take, which again, I'm not surprised about. And there I am in those new Kanye glasses. That is great. Out of all my graphics that we have done in the past year, that by far is my fave. As I mentioned, I'm on Team Kanye. He should have been taken care of better here by Gap. They just did not know what to do with Kanye, you know?

And maybe, if you're looking back, maybe Kanye should just open up his own retail store or maybe gotten an investment from Gap or another retailer? But still, Kanye I'm glad he's no longer affiliate with Gap. It's time for him to get his good designs somewhere else besides Adidas.

BRAD SMITH: It was such a missed opportunity.

BRIAN SOZZI: Yes, absolutely.

BRAD SMITH: I think everybody can agree on that. But it also comes down to how they mismanaged what the entire story for Ye could have been. You have a person who is a former employee, who has been able to jettison up the ranks over the years and work his way to being one of the top musicians, top musical minds of our time. And now has been able to annex his name to so many other ventures, as well, especially on the clothing front.

And being a generator of a hypebeast product, in this environment, where everybody is trying to do that, is a difficult thing. When you have Kanye or Ye that you're working with on that, you'd be hard-pressed not to be able to capitalize on that. They were able to do so in some of the viral products but it's not something that was sustained over an extended period of time.

BRIAN SOZZI: And the problem here is now it is unlikely Gap is going to be able to sign another partnership. What person would want to work with a company like Gap, just given how this is unfolded? Probably no one.

BRAD SMITH: We'll see. We'll see if they're able to find somebody.