US sportswear manufacturer Under Armour is prematurely cutting its partnership with the University of California, Los Angeles (UCLA). The deal, which was announced in 2016, was considered to be the largest apparel deal in the history of the National Collegiate Athletic Association (NCAA) and American collegiate sports.
The 15-year deal, estimated to be worth more than $280 million, involved Under Armour exclusively designing and supplying the apparel, equipment, and footwear for all of UCLA's men's and women's athletic teams. According to Under Armour, it chose to end the contract with UCLA as it was no longer able to return its promised marketing benefits.
The Baltimore-based company added that it is allowed to terminate the deal under such an event as stipulated in the original signed contract. Under Armour had mentioned in a statement that the decision to prematurely end the contract was a difficult one to make. However, the continued costs of paying for unrealized marketing benefits are simply too large to ignore. The company recognized that the current situation is proving to be extremely challenging to athletes, sports programs, teams, and performance brands but the company is doing everything it can to get through those challenges.
The company currently has similar, albeit smaller, apparel deals with other major US schools, including Auburn, Texas Tech, Utah, Notre Dame, and Wisconsin. It is not yet clear if the company is considering ending those contracts as well given the halting of sports events amid the continued threat of the coronavirus pandemic.
So far, Under Armour has been the only sportswear company to terminate a contract with its partner schools. Other companies that have standing apparel deals with sports teams and colleges include Nike and Adidas. Both companies have yet to comment on whether or not they are considering ending contracts.
In response to Under Armour's decision, UCLA revealed that it plans to fight the move. The university stands to lose millions in benefits if the deal is terminated. When the agreement went into effect in 2017, Under Armour paid UCLA $15 million upfront. Under the deal, the apparel company agreed to pay around $11 million in rights and marketing fees on top of providing an average of $7.4 million worth of clothing, shoes, and equipment to the school's teams each year.
Given the global economic slump and the massive reduction in demand due to the coronavirus pandemic, Under Armour can ill-afford to continue spending on its previously inked contracts. In February, Under Armour reported that it could stand to lose up to $60 million or more in one quarter if the disruptions to its business will continue. The company's share prices have also suffered, dropping by more than 20 percent since the start of the year.