“I don’t think I have seen a deal this smart, perhaps, since Tom Ford and Gucci. We’re going back 20 years when Tom Ford was at Gucci,” says Scafidi.

A week before Kanye West announced that he was running for the highest seat in the White House, he revealed plans to rebuild another famed American institution. Gap recently inked a 10-year deal with Kanye West for a Yeezy Gap apparel line. The co-branded apparel line for men, women, and children is set to arrive at Gap stores in 2021. Gap made $4.6 billion in annual sales last year and anticipates that the Yeezy Gap line will bring in an additional $1 billion in annual sales. For comparison, Adidas’ footwear deal with West reportedly pooled in $1.3 billion in sales for the brand last year. 

West’s deal with Adidas is novel in itself because of the royalties he receives. Royalties are legally-binding payments given to designers for their originally-created works—in West’s case this is the Yeezy trademark. At Adidas, West receives 15 percent in royalties on wholesale on top of a marketing fee. That is a significant royalty deal in comparison to an athlete like Micheal Jordan, who only gets around 5 percent royalties from his deal with Nike—although the Jordan Brand product assortment is much larger than Yeezy for Adidas. 

“He [Tom Ford] took a brand that had been historically very relevant that had fallen on hard times, made it extremely buzzy again, and didn’t just take a salary, much like Kanye isn’t just taking royalties, he took stock.”

West’s deal is very different from Telfar Clemens’ canceled collaboration with the Gap. Clemens was offered royalties, a $100,000 design fee, and an option to renew the deal after two seasons. West on the other hand will receive royalties, have the option to renew the deal after the first five years, and most importantly, acquire up to 8.5 million shares of common stock from Gap—as far as we know, West doesn’t hold any Adidas stock or equity. For clarity, common stock are shares of ownership of a company. So along with royalties, West also has the chance to gain equity or a piece of Gap if his line meets certain sales targets. 

According to an SEC Filing, West can receive a third of those 8.5 million shares of Gap if his apparel line makes $250 million in net sales in one fiscal year—to clarify, a fiscal year is an one-year period defined by the company for financial purposes. And if the line makes $700 million in net sales during a fiscal year, he can receive all 8.5 million shares. According to Susan Scafidi, the founder of Fordham’s Fashion Law Institute, it’s an unprecedented deal between a brand and a celebrity. 

For context, eight years after Tom Ford became the creative director of Gucci, he not only became the Vice Chairman of the luxury house, but also held 1.6 million shares of Gucci stock in 2002—at that point Ford held more shares than any other manager within the company. By 2003, Ford made $138 million within three years by simply cashing out just some of his stock. Around this time, Ford owned 1.2 percent of all outstanding shares of Gucci. Although Gucci stock was worth double than what Gap’s all-time high was in 2000, West is presented with a similar opportunity to own 2.3 percent of Gap’s outstanding shares. Speculatively, if West can restore Gap to its former glory—and raise the value of its shares to as much as $50— he could make well over $275 million off those stocks alone. That’s nearly double the amount he’s made off royalties from his Yeezy Adidas deal last year, which was estimated to be around $140 million

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