Umbro is locked in negotiations with Sports Direct after the sportswear retailer refused to take ownership of some of its order of England replica football shirts for 2008.
Sports Direct is understood to have told Umbro it would not take a certain percentage of its order after England failed to qualify for the Euro 2008. As a result, Umbro has been left with a stockpile of replica shirts in its distribution centre.
Umbro said in statement that it had contractual arrangements with key customers regarding the shirts but added that it was, "highly unlikely that by the year end they will have taken ownership of a significant number of England replica jerseys that are currently in Umbro's distribution facilities".
Sports Direct, which owns a 30% stake in Umbro, is understood to have demanded that the sportwear brand reduce the wholesale cost of the shirts so it can sell them in its stores at heavy discounts next year. Umbro is also believed to be in talks with other retailers such as JJB Sports about their orders and terms but this is thought to relate to a much smaller volume of shirts.
Umbro added it had already agreed to certain changes to arrangements with its retail customers involving increased support of the retail sell-through. This will come via increased marketing and a contribution to markdowns.
A spokesman for Umbro added that its contractual arrangements with key customers were "legally enforceable" but added that Umbro hoped to "avoid that route".
Umbro said the failure of retailers to take the stock would have a "material impact on revenues for the current year."
The replica shirt row and sebsequent profit warning are not expected to affect Nike's offer for the sportswear brand.