Under Armour Inc. (UA:US) extended its sponsorship contract with the U.S. speedskating team for eight more years, recommitting to the sport after criticism that its suits slowed down athletes at this year’s Sochi Games.
The contract, which had been due to expire this year, will now last until Dec. 31, 2022, the Baltimore-based company said today in a statement. As part of the deal, Under Armour will remain the team’s exclusive provider of competition suits.
Under Armour’s Mach 39 suits -- designed with help from aerospace company Lockheed Martin (LMT:US) Corp. -- came under scrutiny during the Olympics because of the American team’s disappointing performance. U.S. athletes have yet to medal in any speedskating events, compared with four medals in the 2010 Vancouver Games. Some athletes blamed a design flaw in the suits’ rear ventilation panels, the Wall Street Journal reported last week.
Today’s agreement helps Under Armour put the controversy behind it, said Camilo Lyon, an analyst at Canaccord Genuity in New York.
“It’s certainly a vote of confidence, and that’s the most important thing to take away from this event,” said Lyon, who recommends buying the stock. “It was easy to point the finger at the brand that was new. This closes the loop of the blame game.”
Under Armour shares rose as much as 4.5 percent to $111.97 in New York, the biggest intraday gain in three weeks. Even before the new contract, the speedskating controversy hadn’t taken much of a toll on the stock. It had climbed 23 percent this year through yesterday, compared with a 0.5 percent decline in the Standard & Poor’s 500 Index.
Kevin Plank, Under Armour’s chief executive officer and founder, said last week that the company was working to improve the outfits. Before last week’s flap, he had touted them as the fastest suits in the world.
“We are making changes right now with our team on the ground,” Plank said in an interview with Bloomberg Television on Feb. 14.
Concerns about the Mach 39 suits led the U.S. team to switch back to their older outfits. Still, the change hasn’t brought any medals to the athletes.
The best U.S. result before reverting to the old racing suits was a seventh-place finish, by Heather Richardson in the 1000-meter race. After switching suits, Richardson also took seventh at 1500 meters, as did Brian Hansen in the men’s edition.
American Shani Davis, the two-time defending champion in the 1000 who won two Olympic silver medals in the 1500, placed eighth in the 1000 before switching suits. He finished 11th in the 1500 after making the change.
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