Under Armor highlighted the challenges facing the U.S. college sports industry as it moved to finalize equipment deals with two leading hundreds of millions of dollars worth of college programs.
The agreements with the University of California, Los Angeles, and the University of California, Berkeley, were part of an Under Armor marketing push in recent years to provide universities with a mix of money and products in exchange for the right to equip their sports. teams
Both universities said they would challenge Under Armor’s move to end the deals. Under Armor’s deal with UCLA, it was touted as “the largest apparel deal in the history” of US college sports at the time it was signed in 2016, at a cost of $ 280 million over 15 years. . The Berkeley-Under Armor contract is worth $ 86 million over 10 years.
“It is clearly a failure for Under Armor,” said David Swartz, equity analyst at Morningstar. “They didn’t sign a 15-year, $ 280 million contract just to terminate it four years later.”
The fight over clothing contracts highlights another financial headache facing universities, as the Covid-19 pandemic threatens the collegiate sports industry of more than $ 8 billion. It also marks a significant strategic shift for Under Armor in its challenge to Nike and Adidas.
“Under Armor recently made the difficult decision to suspend our partnerships with UCLA and the University of California, Berkeley, as we have been paying for marketing benefits that we have not received for an extended period,” the company said in a statement Monday.
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The Berkeley sports department said Under Armor “has no reason to terminate” its contract, while a UCLA spokeswoman said the school is “exploring all of our options to resist Under Armor’s actions.”
Under Armor was founded in 1996 by Kevin Plank, a former college football player who developed the company’s exclusive sweat-wicking jerseys after feeling frustrated playing with cotton clothing. Since then it has grown into a $ 5 billion team, signing champion athletes, including Stephen Curry basketball and Tom Brady American football.
The agreements with university sports teams marked the most important marketing forays of Under Armor in recent years. The best schools receive tens of millions of dollars per year under such agreements, while brands like Under Armor, Nike and Adidas earn the right to use student-athletes as billboards for their products when games are broadcast on television. .
The director of another leading university sports program, Ray Tanner of the University of South Carolina, said that Under Armor was recently contacted to “discuss our current contractual arrangement.” A company spokesman had no immediate comment on Under Armor’s relationship with the University of South Carolina.
Other notable programs signed by Under Armor include Auburn University, Notre Dame University, and Yale University.
The company has been challenged in recent years by a confluence of management changes, a contraction of US wholesale retailers, and a broad trend toward so-called athleisure, or fashion-inspired apparel, which is not the performance apparel brand strength.
Last month, Under Armor chief financial officer David Bergman said the company had taken several steps to improve liquidity during the Covid-19 crisis, including modifying its line of credit and convertible bond offering. He also said the company would review the terms of its sports marketing contract to preserve cash flow.
Under Armor will pay $ 131 million in sponsorship and marketing deals through the end of 2020, according to a schedule in its most recent annual filing.
The termination of the contract came after the UCLA sports department reported a deficit of $ 18.9 million during the 2018-2019 school year, indicating underlying financial challenges even before the pandemic effectively canceled sports activities since the spring. Athletes at the school have in the past expressed problems they claim to have experienced with the products they received from Under Armor.
