Under Armour highlighted the challenges faced by the American college sports industry because it ended equipment deals with two leading college courses, worth hundreds of millions of dollars.
Part of the marketing campaign with Under Armour in recent years is an arrangement with UCLA and UC Berkeley to provide the university with a mix of cash and products in exchange for the right to equip their sports equipment team.
Both universities said they would dispute Under Armour’s move to terminate the transaction. According to the arrangement between Armour and the University of California, Los Angeles (UCLA), when the agreement was signed in 201
David Swartz, an equity analyst at Morningstar, said: “This is clearly a failure of Under Armour. “They did not sign a 15-year, $280 million contract, just for The contract was terminated after four years. “
The competition for apparel contracts highlights another financial headache faced by universities, as the Covid-19 pandemic endangered the university sports industry of more than $8 billion. This also marks Under Armour’s major strategic shift in response to Nike and Adidas.
The company said in a statement: “Under Armour recently made a difficult decision to terminate the partnership with UCLA and the University of California at Berkeley because we have been paying for long-term unreceived marketing proceeds” on Monday .
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Berkeley’s sports department said the Under Armour contract “has no reason to terminate,” and a UCLA spokesperson said the school is “exploring all the options we have taken to resist Under Armour’s actions”.
Under Armour was founded in 1996 by former American college football player Kevin Plank, who developed the company’s signature sweat-wicking T-shirt after being frustrated by wearing cotton clothing. Since then, it has grown into a company with $5 billion in assets, signing championship players including basketball player Stephen Curry and American football Tom Brady.
The deal with the college sports team marks Under Armour’s most important marketing attempt in recent years. Under this arrangement, top schools can earn tens of millions of dollars a year, and brands such as Under Armour, Nike, and Adidas have the right to use student athletes as billboards for their products when playing games on TV.
Ray Tanner, director of another leading university sports program at the University of South Carolina, said he recently contacted Under Armour to “discuss our current contract agreement.” A spokesperson for the company did not immediately comment on Under Armour’s relationship with the University of South Carolina.
Other notable projects signed by Under Armour include Auburn University, Notre Dame University and Yale University.
In recent years, the company’s challenges have included the convergence of management changes, the shrinking of US wholesale retailers and the widespread trend towards so-called sportswear or fashion-inspired clothing, which is not the strength of performance apparel brands.
Last month, Under Armour’s chief financial officer David Bergman stated that during the Covid-19 crisis, the company has taken several steps to improve liquidity, including modifying its credit lines and providing convertible bonds. He also said that the company will review the terms of its sports marketing contract to retain cash flow.
According to the schedule in its latest annual document, Under Armour will pay $131 million in sponsorship and marketing agreements by the end of 2020.
Before the contract was terminated, the UCLA Sports Department reported a deficit of US$18.9 million for the 2018-2019 school year, indicating potential financial challenges, even before the pandemic actually canceled sports activities since spring. In the past, school athletes have been complaining about the problems they claim to have encountered with products received from Under Armour.