Under Armour Sued By UCLA Over $280M Sponsorship Contract Breach

Under Armour Inc UAA, is facing a lawsuit filed by the University of California, Los Angeles (UCLA) over alleged contract breach, Bloomberg reported Wednesday.

What Happened: In June, there were reports that Under Armour was considering terminating the $280 million contract with the University. UCLA is claiming $200 million as compensation for the alleged breach of contract.

In May 2016, UCLA and Under Armor signed a sponsorship deal for a record 15-year period. The contract became effective after the team’s previous contract with Adidas expired in 2017. But within 4 years into the contract, Under Armour announced that it would discontinue this partnership citing that it did not receive marketing benefits as per the agreement.

UCLA challenged this unilateral decision by Under Armour, claiming, the decision was spurred by the coronarvirus pandemic and the company’s weak financial position.  

Why It Matters: Even though Under Armor beat expectations in its second-quarter earnings release, analysts opined that the bar was set too low.

The company cited COVID-19 outbreak, low demand for products, and increased competition as some of the prominent risk factors it faces going forward. 

In the past, the company has also faced a barrage of setbacks including an investigation into accounting practices by the SEC and Department of Justice, and a $1.3 billion unsold merchandise, according to Business Insider.

Price Action: Under Armour stock closed 2.85% lower on Wednesday, but during the after-hours UAA gained 0.81% and quoted $9.96.

Photo by Mike Mozart on Flickr