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Under Armour renegotiating athletes’ endorsement contracts amid coronavirus slowdown

Under Armour has been renegotiating athlete endorsers’ contracts in response to sharp drops in sales and demand for athletic apparel during the coronavirus pandemic.

The Baltimore-based brand saw its sales plummet 23 percent in the first quarter and reported a loss of $590 million as most of its stores around the globe have remained closed since mid-March.

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After financial results were released Monday, analysts asked executives how they are trimming expenses. Robert Drbul, an analyst with Guggenheim Securities LLC, asked during a teleconference whether endorsement contracts allow for renegotiating payments to athletes.

“We’ve been negotiating and working with them, and we’ve been able to get some extended payment terms there, which are helpful just in general with our overall capital preservation efforts,” said David Bergman, Under Armour’s chief financial officer.

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Bergman did not disclose further details on specific athletes. The brand has marketing agreements with athletes across a range of sports, including higher-profile names such as Stephen Curry, Michael Phelps, Misty Copeland, Lindsey Vonn, Tom Brady and Bryce Harper.

“Relative to sports marketing contracts and endorsements,” Bergman said, “we’ve got pretty good relationships with a lot of those assets obviously, and we have been moving kind of our noninventory vendors and relationships out a little bit further in payment terms.”

It’s likely that most big sports brands are looking closely at athlete contracts as part of reducing costs, according to an April report in Footwear News that cited an anonymous brand executive. Contracts will be renegotiated and enforcement of contracts could depend on wording regarding what is covered, the story said.

Drbul also asked Under Armour how the brand has been able to adjust or cancel inventory during the health crisis.

The company was able to quickly reassess demand and make production adjustments for the second half of the year, Bergman said.

“A lot of the fall/winter 2020 product, we’ve been able to get ahead of that pretty well," he said. “It wasn’t as easy to adjust some of the spring/summer 2020 because a lot of that was already in production.”

That will mean higher levels of inventory in the second quarter, he said.

Patrik Frisk, Under Armour’s president and CEO, said the brand is trying to work with vendors, who are struggling themselves as retailers cancel merchandise orders.

“We’re also thinking ahead to 2021 demand and making sure that we’re trying to help our vendors as much as we can,” Frisk said. “Ultimately, we want to make sure that we come out of this with a strong vendor base.”

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