S&P Dow Jones Indices said earlier this month that Nike will be removed from the S&P 100 before trading begins on September 21 as part of a quarterly rebalancing. The move will end the company’s 18-year presence in the blue-chip index.
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According to Reuters, Nike’s removal from the S&P 100 has also prompted investors to question whether the company could eventually lose its place in the Dow, where it has been a component since 2013.
Nike has lagged the broader market
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Nike’s shares have gained only about 5% since the company joined the Dow, while the S&P 500 has risen more than fourfold over the same period. The stock has also become the lowest-priced component in the 30-member Dow, recently trading at around $36.
Read more: Global Market: Yuan hits 4-year high as traders bet on further gainsAnalysts have linked Nike’s roughly 80% decline in market value from its peak to slowing sales, a lack of innovation and intensifying competition from newer sportswear brands.
Nike is also the worst-performing stock in the Dow this year and currently accounts for about 0.4% of the index’s weighting.
Dow removal rules differ from other indexes
Unlike the S&P 500 and Nasdaq-100, which have formal eligibility criteria related to factors such as market capitalization and public float, the Dow is price-weighted and does not have a mechanical rule that automatically removes a company after it falls below a particular threshold.
Reuters analysis of the 10 changes to the Dow since 2013 found that at least half involved the lowest-weighted stock at the time it was removed.
Market strategists said Nike could therefore remain under pressure, although the timing of any potential change remains uncertain because there is no fixed threshold that would trigger its removal.
Dow changes made on an as-needed basis
The Dow does not follow a fixed annual or semi-annual schedule for changes to its constituents. S&P Dow Jones Indices’ methodology states that changes can be made on an as-needed basis in response to corporate actions or developments in the market.
The latest change came in June, when Verizon Communications was removed and replaced by Alphabet. S&P Dow Jones Indices said Verizon’s relatively low share price was a factor behind the decision, Reuters reported.
Verizon had been part of the Dow for more than 22 years. During that period, its shares gained about 35%, while the Dow rose nearly fivefold.
Decisions on changes to the index are made by the Averages Committee, which consists of three representatives from S&P Dow Jones Indices and two from the Wall Street Journal.
Other companies removed from the Dow in recent years include Dow Inc., Intel and Walgreens, all of which exited the index in 2024.
Nike turnaround remains a key focus
Nike’s falling share price has come amid a prolonged turnaround effort at the company. CEO Elliott Hill returned to the sportswear maker in 2024 to lead efforts to revive growth.
Nike has been dealing with weaker consumer traffic, pressure on discretionary spending and a more challenging macroeconomic environment across several markets.
The company has also faced questions over the appeal of its product portfolio, with analysts pointing to changing consumer preferences and competition from emerging brands.
For now, Nike remains a member of the Dow, but its low share price and weak performance have increased speculation about a potential future change. Any decision ultimately rests with the Averages Committee, which monitors the index regularly but does not disclose a specific timetable for constituent changes.
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