Summary
- Under Armour moves to terminate costly marketing deals with UCLA and potentially Cal.
- The college deals cost over $20 million annually with limited benefit.
- The stock remains a solid buy near the recent double bottom at $8.
- This idea was discussed in more depth with members of my private investing community, DIY Value Investing. Get started today »
The last few months have been full of sports cancellations, especially at the collegiate level. While professional sports have looked to restart paused leagues, most college events were cancelled with some discussion of continuing the cancellations into the fall college football season.
Up until recently, the financial impact wasn't fully considered with most TV contracts and sponsorship deals left untouched with the resumption of play plans. Under Armour (UA, UAA) fired the first major shot canceling over-priced sponsorship deals for college sports. The athletic apparel retailer cutting the fat is a bullish sign on the beaten-down stock.
Image Source: UCLA website
Cutting Off UCLA
At the time in 2016, the Under Armour deal for the marketing rights at UCLA was a record-breaking one. UA signed a 15-year, $280 million deal for those rights at the Pac 12 with an average cost of $18.7 million per year.
Including a big deal with California, Under Armour agreed to spend an incredible $336 million on these two programs alone averaging $27.3 million per year through 2026. The UCLA deal runs another five years.
These big deals came at the tail end of a string of massive collegiate apparel agreements. The deals reset the market for NCAA's large programs and included big deals for Ohio State (Nike (NYSE:NKE)), Texas (Nike), Michigan (Nike) and Notre Dame (Under Armour).
These big deals in the 2016 time frame of the UCLA contract still top the list of the most expensive contracts. At the end of 2019, Forbes listed these as the most valuable NCAA sports apparel deals:
