Why Under Armor is trying to end its record-breaking apparel contract with UCLA

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You may have noticed people online talking about Under Armor and UCLA on Saturday because the sportswear company is trying to pull out of its massive clothing deal with the Bruins.

But even though Under Armor and UCLA were trending all day, you may still have some questions about what exactly is happening, what it means and what people think about it. That is fine because we are here to help analyze what is happening here.

A reminder: Under Armor’s $ 280 million deal with UCLA

In May 2016, Under Armor and UCLA announced a $ 280 million 15-year clothing and footwear deal, marking the largest clothing deal in NCAA history.

It went into effect in 2017 and, as UCLA noted at the time, “Under Armor will exclusively design and supply game day footwear, apparel and training gear and uniforms for UCLA college sports teams for men and women.”

UCLA previously had an agreement with Adidas that expired in the summer of 2017, Los Angeles Times reported.

But now Under Armor wants to get out?

Yes. In a statement Saturday, Under Armor told the Bruins that it wants to end the clothing deal because it says the school is not meeting the end of the deal and that it provides unspecified marketing benefits “for an extended period.”

In a statement explaining their decision, Under Armor said (via ESPN’s Adam Rittenberg):

“Under Armor has 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 of time.” The agreement allows us to terminate in such a case and we are exercising that right.

“We know this has been a challenging time for athletes, sports programs, and high-performance apparel brands. Under Armor will continue to preserve our strength in this challenging environment, while maintaining a strong network of partnerships with individuals, organizations, and leagues that make us the authority on the field for focused artists. ”

UCLA plans to fight Under Armor’s efforts to end the deal, more on that later, as it is likely to lose significant financial benefits from the deal.

More way Los Angeles Times:

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’s financial problems are not new. And as sales were predicted to take a hit amid the COVID-19 pandemic, the company’s stock plummeted 20 percent in February following reports that it could lose as much as $ 60 million in a quarter, Forbes reported.

As of November 2019, the Department of Justice and the Securities and Exchange Commission were investigating Under Armor’s accounting practices.

So what does UCLA have to say about this?

Naturally, the Bruins are unhappy, and their finances certainly don’t help.

UCLA Athletics had a deficit of $ 18.9 million for fiscal year 2019 and needed “a loan with central campus interest” The Mercury News reported in January.

The department is also on the verge of transition, as athletic director Dan Guerrero is already halfway there and will retire on July 1 after an 18-year term. Martin Jarmond is taking over a six-year contract with an average of $ 1.4 million annually, according to the school.

In its response to Under Armor, UCLA said:

UCLA Athletics learned this week that Under Armor is trying to terminate its 15-year clothing and shoe contract with us and the Bruin community. We are exploring all of our options to resist Under Armor’s actions. We remain committed to providing our hardworking staff and student athletes with the footwear, apparel and equipment necessary to train and compete at the highest level, as they, and our loyal Bruins fans, deserve. “