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JimmyHoffa

By JimmyHoffa
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Sbbruin

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Good write up and insight from our $9.95er.  Deal seemed too good to be true when we signed it given our shitful performance on the field/court, and it turns out it probably was.

Spoiler

Under Armour has notified UCLA that it intends to terminate its record-setting, $280-million apparel contract, as first reported by Ben Bolch of the Los Angeles Times.

The deal, which was struck in 2016, is for 15 years, taking it through 2031.

We’ve heard from a few sources on subject.

Under Armour is almost entirely driven by its dire financial situation. Its stock price has fallen precipitously since it struck the deal with UCLA back in 2016. It’s lost about 75% of its stock value since the UCLA deal was made, currently sitting at about $9 a share, spiraling from its all-time high of about $50 in September of 2015.  Its revenue grew to about $4.8 billion in 2016, expanding at about a 22% annual clip, and then slid to just 1% in 2019.

In November, its founder and CEO Kevin Plank, whom UCLA cut its apparel deal with, stepped down.

Like with many companies, the coronavirus pandemic dealt a huge blow to the shoe and apparel company, but Under Armour had already suffered enough body blows financially.

The pandemic-caused financial woes aren’t over anytime soon either.

The company has experienced some other issues, too, like an SEC investigation into its accounting methods.

It’s not a stretch to say that Under Armour could very well be on its last legs.

In an attempt to thwart that, it’s trying to shed overhead, and that $280-million contract with UCLA is a considerable albatross. 

Under Armour hasn't singled out UCLA; sources are indicating it's trying to get out of many of its sports apparel deal contracts. There are reports that it hasn't made payments to the professional athletes it sponsors. 

In trying to legally get out of the UCLA contract, Under Armour for the most part isn’t coming from a strong position of leverage.

Ironically, UCLA also doesn’t have a great leverage position itself.

UCLA athletics as an asset has greatly devalued in the last few years, mostly because of the under-performing football program losing revenue. The UCLA athletic department announced a $19 million deficit in 2018-2019. That debt has only ballooned amidst the pandemic.

Given all of this, where does the UCLA/Under Armour situation go from here?

It’s difficult to say, since both sides aren’t coming from a position of strength.

Under Armour is trying to legally get out of its contract. UCLA, as is evident by the e-mail Dan Guerrero sent to a small group of the UCLA community, is “exploring all of our options to resist Under Armour’s actions.”

Some close to the situation feel that Under Armour might actually have decent legal grounds for getting out of its UCLA deal. There are a number of ways it could claim UCLA breached its contract. UCLA athletes made it quite public they were ditching Under Armour shoes over the last several years, which would be a breach of UCLA’s terms. It’s pretty easy to surmise that UCLA hasn’t lived up to its performance expectations set forth in its contract, among other things.

The fact that Under Armour hasn’t made its required payments to UCLA recently might be a sign it believes it can get out of its contract.

Or, it literally doesn’t have the money.

Because of this, it might behoove UCLA to not try to legally enforce Under Armour to honor the contract – namely because, well, you can’t get blood out of a turnip. If Under Armour doesn’t have the money to pay UCLA its installment payments or even, at the minimum, supply UCLA’s teams with uniforms and equipment, it doesn’t appear to benefit UCLA to pursue that course.  

The parties that do have leverage in this little melodrama are Nike and Adidas.  Both of the competing apparel companies could come into the picture in some manner and try to get UCLA for pennies on the dollar.  

UCLA can’t negotiate with either Nike or Adidas while under contract to Under Armour. Under Armour can’t negotiate with Nike/Adidas to buy out its UCLA contract while under contract with UCLA. But UCLA and Under Armour could reach an agreement to allow UCLA to negotiate with the other two apparel companies.

Nike has never really shown real interest in UCLA. When UCLA was shopping around for a new apparel contract five years ago, Nike’s bid was so underwhelming it wasn’t considered a serious one.

Adidas, however, was UCLA’s apparel supplier for 18 years prior to Under Armour. It’s easy to speculate it would be more motivated to try to swoop in and get UCLA at a bargain. You’d have to think it would try to pick up UCLA for considerably less than it bid in 2016.  From what we can gather, if Adidas did agree to take on UCLA, for whatever price, Under Armour would be responsible for the remaining balance of its contract to UCLA.  So, let’s say Adidas struck a deal at half the price tag for UCLA for the remaining nine years of the Under Armour contract, UCLA could legally try to enforce Under Armour to be on the hook for the other half. It might be worth some legal time spent trying to get as much blood out of the turnip.

This type of resolution would seem to benefit Under Armour, too, taking the big chunk of the financial commitment to UCLA off its books.

UCLA’s deal with Under Armour in 2016 was a record-setting one for college programs. The $280-million price tag was the highest in the history of college sports, surpassing the deals cut by such behemoth athletic departments as Ohio State, Texas and Michigan.  

Currently, UCLA isn’t listed on the Under Armour site as one of its representative athletic departments.

It’s entirely speculative here how this could play out, and the role the other apparel companies could play in the saga.

UCLA very well could try to get at least apparel from Under Armour for its upcoming school year, or maybe even just for fall sports.

It’s certain, though, that this is just the beginning of an apparel deal story with plenty of twists, turns and intrigue.

 

Edited by Sbbruin
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kopp0e

kopp0e 1135

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On 6/27/2020 at 11:53 AM, mdmost said:

So for anyone who was upset we didn't give Under Armour more of a look, maybe it was a good idea to not leave Nike.

 

Under Armour will probably wind up with only Notre Dame & Maryland, before long...

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'stache

'stache 21805

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1 minute ago, Al_4_ISU said:

I don't know if they even need a name.  I saw someone online suggest Washington Football Club.  I thought that was kind of cool.

I like the DCFC or DCFB as their full time moniker, and like someone said, if a "mascot" develops naturally (that isn't racsist) they can reassess down the road. Of course, the risk is that the assholes will just keep calling them by the slur "unofficially" since there will be a lack of an "official" mascot.

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Al_4_ISU

Al_4_ISU 12460

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4 minutes ago, 'stache said:

I like the DCFC or DCFB as their full time moniker, and like someone said, if a "mascot" develops naturally (that isn't racsist) they can reassess down the road. Of course, the risk is that the assholes will just keep calling them by the slur "unofficially" since there will be a lack of an "official" mascot.

That's going to happen anyways, because they'll have to make a point about being victims of PC culture.

I wouldn't surprised if I occasionally call them that out of habit, despite fully supporting the name change.  That'll fade over time I'd assume.

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texifornia

texifornia 56930

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8 minutes ago, 'stache said:

I like the DCFC or DCFB as their full time moniker, and like someone said, if a "mascot" develops naturally (that isn't racsist) they can reassess down the road. Of course, the risk is that the assholes will just keep calling them by the slur "unofficially" since there will be a lack of an "official" mascot.

That's basically what happened with Ole Miss' mascot. Everyone got their anger out bitching about the inoffensive bear, so when the Landshark thing happened naturally it was quickly embraced.

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Dnaguy

Dnaguy 11948

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I just think it would be cool if the team was called the War Pigs.

1.) Play the Black Sabbath song before the team comes out At home.... because that song is awesome.

2.) It is kind of a fuck you to Washington politicians ... it leans the other way from racist mascot / dunking on a minority  to political commentary / fucking with those who have the power

3.) They already do the pig thing

4.) Hail to the Redskins can be changed to hail to the War Pigs.

 

Edited by Dnaguy
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Somnio

Somnio 751

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Posted
On 7/24/2020 at 11:53 AM, texifornia said:

Nah, they're fucked. 

Giving UCLA that much money was lunacy though, they're just not a huge draw.

Well, I'm gonna go out on a limb and say their business model of selling $75 shirts in an economic crisis is not a sound one.

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