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Huge Endorsement Deals With Colleges Made By Under Armour Starting To Pinch Profits

Under Armour and its rivals have pledged more than $1B to "secure outfitting deals with top college programs in recent years," and now those "megadeals -- some stretching as long as 15 years -- are starting to pinch profits at the sportswear maker," according to Sara Germano of the WALL STREET JOURNAL. Shares of UA "plunged Tuesday after the company walked back some of its aggressive growth projections." Earlier this year, the Baltimore company "set a record by agreeing" to a 15-year, $280M sponsorship with UCLA. The company has also "inked new contracts or renewals" with Wisconsin, Maryland, Auburn, Yale, Notre Dame and others within the past two years. UA Founder Chair & CEO Kevin Plank said the increased competition for top schools has gotten so intense among outfitters that "as these assets are being wrapped up it’s either act now, or lose them for, frankly, the mid to long term." Since '15, rival Nike has "agreed to three massive contracts of note." Schools say that it is the companies, not the schools, which have "spurred the big-ticket trend." Miami AD Blake James said, “It’s a competitive market." Miami is "currently in the second year of a 12-year contract" with adidas. Sources said that spurring some of the recent longer-term contracts was a "landmark 10-year deal" between Under Armour and Notre Dame signed in '14. A UA spokesperson said that the company was "responding to market forces, which drove up the price of its recent college deals" (WALL STREET JOURNAL, 10/27).

RISING COST OF ATTENDANCE: Plank said, "The message that we have to get across isn't that our story is about (being a $7.5B company). The story is about putting the infrastructure in place for us to be a $10 billion growing brand where we can really hit scale. ... When we've made investments in the past, we've performed so I don't know why people would second-guess that ... because nobody's seen a growth juggernaut like I think we've put into the market today with an opportunity to be one of the best brands in the world" ("Fast Money Halftime Report," CNBC, 10/26).

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