Thread by @JoePompliano

In 2016, Under Armour & UCLA agreed to the largest sponsorship deal in the history of college sports — a 15-year, $280 million deal.

The interesting part?

Nike ended up benefitting the most.

Time for a thread 👇👇👇

1) First, some history...

From 2010-2016, Under Armour made an aggressive push into college athletics.

Why?

In an attempt to "move into Nike's turf," they selectively picked schools to sponsor, like Notre Dame & Wisconsin, based on geographic location.

2) Here's a few of the contracts Under Armour signed...

Wisconsin: 10-year, $96 million
Notre Dame: 10-year, $90 million
Cal: 10-year, $86 million
Auburn: 9-year, $78.1 million

The largest one?

An unprecedented $280 million commitment to UCLA.

3) Unfortunately for Under Armour, their billion dollar approach to brand expansion through college athletics revolved around one important thesis...

That their business would continue to grow.

The problem?

It hasn't

UA Stock
Jan 2010-Dec 2015: +1,082%
Jan 2016-Nov 2020: -67%

4) While there have been SEC accounting investigations, questionable real estate transactions, a mismanagement of inventory & an inability to build up their women’s business...

UA's struggles really all come down to one thing:

An unwavering commitment to performance-based gear.

5) While brands like Nike & Adidas spent the last decade riding the athleisure wave, Under Armour took a different approach.

UA spent $700M on fitness & health-related apps — looking to become a digitally interconnected fitness & health company.

Needless to say, it backfired.

6) In an effort to regain control of their business, Under Armour has made drastic changes.

Kevin Plank stepped down as CEO, hiring Patrik Frisk to run a turnaround plan centered on fixing their inventory management & e-commerce strategy.

Next up — cutting sponsorship costs.

7) After laying off thousands of employees & announcing $600M in restructuring costs, Under Armour started to purge college sponsorship contracts.

Their reasoning?

"Force majeure"

In simple terms, they're saying schools didn't fulfill contractual obligations due to COVID-19.

8) In 2020 alone, Under Armour has done the following:

— Paid Cincinnati a ~$10M buyout + $7M in product
— Terminated the Cal deal, which still had 7-years and $58M in cash left

The most newsworthy decision?

Under Armour also terminated their historic $280M deal with UCLA.

9) As you would expect, UCLA & Cal took exception to Under Armour terminating their agreements — claiming it has more to do with the financial struggles of their business than COVID-19.

Long story short, they filed lawsuits.

But with no sponsor, a door opened...

Enter, Nike.

10) Rather than continuing to cover up Under Armour's logo, UCLA announced a 6-year deal with Nike yesterday.

Details
— ~$7M-$10M in product annually
— Nike will outfit 22 of UCLA’s sports programs
— Football & men’s/women’s basketball will wear Jordan Brand

But there's more…

11) While financial details of the agreement are still vague, there is one clear winner:

Nike — who swept in & picked up one of the most iconic brands in college sports for pennies on the dollar.

How?

UCLA will plan to offset costs through legal recourse against Under Armour.

12) Although we won’t know the full outcome of this deal for quite sometime, one thing is obvious...

In a college sports world where recruiting is dominated by location, sponsorships & media exposure, Los Angeles-based UCLA linking up with Nike & the Jordan Brand is a win.

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