Under Armor tells UCLA that it wants to end the deal with the school

UCLA athletic director Dan Guerrero, left, and Under Armour's Kevin Plank with a UCLA jersey following a meeting where they officially announced the UCLA and Under Armour agreement in 2016. <span class=(Brian van der Brug / Los Angeles Times)Image magnification .Fc.
UCLA athletic director Dan Guerrero, left, and Kevin Plank of Under Armor wearing a UCLA shirt after a meeting where they officially announced the UCLA and Under Armor deal in 2016. (Brian van der Brug / Los Angeles Times)

Under Armor has informed UCLA that it wants to end the record $ 280 million deal the clothing giant signed with the school in 2016, a potential financial blow that the Bruins intend to combat.

The company said in a statement Saturday that it wanted to end the partnership due to UCLA’s inability to provide unspecified marketing benefits as required by the contract between the parties.

“Under Armor recently made the difficult decision to suspend our partnership with UCLA, as we have been paying for marketing benefits that we have not received for an extended period,” the company said in a statement sent to The Times. “The agreement allows us to terminate in such a case and we are exercising that right.”

UCLA athletic director Dan Guerrero, whose 18-year tenure at the school will end this week, appeared to question Under Armor’s ability to unilaterally dissolve his agreement with the school in a letter he sent to Bruins constituents.

“We are exploring all of our options to resist Under Armor’s actions and will share more information as we can,” Guerrero wrote. “We want to assure you that UCLA Athletics remains committed to providing our staff and student athletes with the footwear, apparel and equipment necessary to train and compete at the highest level.”

Like many other companies struggling in the midst of the COVID-19 pandemic, Under Armor’s financial prospects are increasingly bleak. Wall Street analysts project that the company’s sales for the current fiscal quarter will drop 53.8% from the same period last year, according to American Banking and Market News. Under Armor’s shares opened at $ 9.11 on Friday, well below its 12-month high of $ 27.72.

Any loss of revenue would be doubly devastating for a UCLA athletic department already facing a massive budget deficit even before the pandemic led to the cancellation of spring sports and jeopardizing the fall sports calendar. The department obtained an interest-bearing university loan to cover a $ 18.9 million deficit for fiscal year 2019 and is expected to hit red numbers in 2020.

There are strong incentives for both Under Armor and UCLA to reach a friendly settlement.

“If you’re under armor, you have to handle this correctly because you’re still heavily invested, literally and figuratively, in the entire sports landscape and don’t want to be in a position where you are perceived to be playing hardball with one of their highest ranking clients. profile, “said David Carter, sports business expert and professor at the USC Marshall School of Business.

“On the other hand, if you are UCLA, you also have to worry because you need to continue many, many years after this to negotiate future sponsorship deals, whether with clothing manufacturers or beverage or financial services companies, so it is very delicate for both sides to find a solution, ”said Carter.

If UCLA and Under Armor split, the school would seek a new apparel deal, presumably with one of the other major players in sportswear. UCLA had received offers from Nike and Adidas before choosing Under Armor four years ago.

Under Armor currently has the second strongest foothold in the Pac-12 Conference among sportswear companies, and has agreements with California and Utah in addition to UCLA. Nike has agreements with seven schools, including the USC, while Adidas partners with Washington and the state of Arizona.

Carter said the pandemic could complicate UCLA’s efforts to find a comparable replacement agreement, forcing potential suitors to implement tiered payments and clauses based on attendance benchmarks and clothing sales. Furthermore, the Bruins still possess one of the most powerful brands in college sports.

“UCLA is in a big market, its athletic heritage is among the strongest in the country,” said Carter, “and those two things are not going to change.”

Under Armor agreed to a 15-year contract with UCLA in 2016 that was the richest footwear and apparel sponsorship in college sports history, replacing a deal the Bruins previously entered into with Adidas that expired in the summer of 2017. The deal He gave Under Armor a flagship program on the West Coast while providing UCLA with a massive infusion of cash and sportswear.

As part of the deal, Under Armor paid UCLA $ 15 million in advance, plus approximately $ 11 million per year in marketing fees and fees. The clothing company also agreed to supply the school with an average of $ 7.4 million in clothing, shoes and equipment each school year, while contributing $ 2 million over an eight-year period for improvements to sports facilities.

Under Armor has not received the expected return on investment due to UCLA’s recent struggles in its marquee sports. While UCLA’s Olympic sports programs, such as gymnastics and softball, have won national championships in recent years, the soccer team recorded record losses in three consecutive seasons and the men’s basketball team held the last tournament. from the NCAA in 2018.

New UCLA athletic director Martin Jarmond is familiar with Under Armor, having worked with the clothing company as part of his sponsorship of the Boston College athletic teams when he was the Eagles’ athletic director. Jarmond partnered with the company to produce the Boston College-themed Martin Jarmond Sportswear Collection.