Under Armour wants out of its record-breaking deal with UCLA.
As first reported by the Los Angeles Times, the athletic brand has alerted the university that it wants to terminate the current $280 million, 15-year contract, which was signed in 2016.
In a statement emailed to FN, the company said: “Under Armour has recently made the difficult decision to discontinue our partnership with UCLA, as we have been paying for marketing benefits that we have not received for an extended time period. The agreement allows us to terminate in such an event and we are exercising that right. We know that this has been a challenging time for athletes, sports programs and performance apparel brands alike. Under Armour 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 on-field authority for focused performers.”
After the news broke, UCLA’s current athletic director Dan Guerrero addressed the students, staff and alumni through a letter that read: “We are exploring all of our options to resist Under Armour’s actions and will share more information as we can. We want to reassure you that UCLA Athletics remains committed to providing our hard-working staff and student-athletes with the footwear, apparel and equipment needed to train and compete at the highest level.”
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Endorsement deals, particularly one of this magnitude, are always risky — and when Under Armour made the move, insiders noted it would be difficult to quantify the return. “I have trouble justifying any of these deals in terms of a return on sales — there just isn’t enough merchandise being sold,” explained Matt Powell, a sports-industry analyst with The NPD Group. “Instead, they must be viewed as a marketing spend.”
As the challenged brand seeks to cut ties with UCLA, it is examining every aspect of its business. Even prior to the pandemic, the company had lost significant ground to its athletic competitors — and the stock hit a 9-year low in May.
In May, the company said it initiated several major moves to preserve cash flow, including slashing its annual operating expenses by about $325 million, centering marketing efforts on digital and temporarily laying off workers in U.S. stores and distribution centers. (It has since brought back some of its retail workers as stores reopen.)
For the first quarter, Under Armour saw a net loss of $589.7 million, or $1.30 per share. On an adjusted basis, its net loss was $152 million, or 34 cents per share. Revenues, meanwhile, decreased 23% to $930.2 million, with the company attributing roughly 15 percentage points of that drop to the COVID-19 health crisis. The brand ended Q1 with $959 million in cash, with about $700 million in outstanding borrowings under its revolving credit facility.
