Nike’s Slide Raises Fresh Questions About Its Dow Future

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Index Exit Raises Dow Concerns

Nike’s position in the Dow Jones Industrial Average is increasingly under scrutiny as the sportswear company faces removal from another major U.S. equity benchmark.

S&P Dow Jones Indices said earlier this month that Nike will be dropped from the S&P 100 before the opening of trade on September 21 as part of a quarterly rebalancing. That decision ends an 18-year run in the large-cap, blue-chip index.

Analysts have linked the move to a sharp deterioration in Nike’s valuation, pointing to an 80% decline in its market capitalization over the past five years amid weakening sales, a perceived slowdown in product innovation, and intensifying competition from newer brands.

The removal from the S&P 100 has intensified speculation that Nike’s tenure in the Dow Jones Industrial Average – a more than 130-year-old barometer of blue-chip U.S. stocks – could also be at risk.

Performance and Weighting Put Pressure on Nike

Since joining the Dow in 2013, Nike shares have gained 5%, while the S&P 500 has more than quadrupled over the same period. At a recent price of $36, Nike is now the smallest contributor in the Dow’s price-weighted structure, a status that has often preceded past constituent removals. Nike declined to comment.

“Just looking at it historically, it probably is a candidate for removal,” said Josh Bischoff, partner and head trader at TimesSquare Capital Management.

Unlike the Nasdaq-100 and the S&P 500, which set explicit eligibility requirements based on criteria such as market capitalization and public float, the Dow calculates index weights solely from share prices and does not specify formal triggers for constituent changes. However, a Reuters review of the 10 changes to the Dow since 2013 found that in at least half of the cases, the stock with the lowest weight at the time was removed.

Nike now accounts for just 0.4% of the 30-stock Dow – the smallest share in the index – and is its weakest performer so far this year.

“I would describe the odds (of Nike’s removal) as much higher over the next year, but it’s tricky because the Dow doesn’t have a mechanical deletion rule where Nike automatically falls out after crossing some threshold,” said Shay Boloor, chief market strategist at Futurum Equities.

How the Dow Committee Acts

The latest change to the Dow’s membership came in June, when Verizon Communications was replaced by Alphabet. At the time, S&P Dow Jones Indices said Verizon’s relatively low share price was a factor behind that decision.

Under its methodology, S&P Dow Jones Indices makes adjustments to the Dow on an “as-needed basis” rather than following a fixed annual or semiannual schedule. Instead, changes can be announced at any time in response to corporate developments or shifts in market conditions.

Verizon’s removal ended a run of more than 22 years in the index, during which its share price rose 35% even as the Dow nearly increased fivefold.

Oversight of the Dow rests with the Averages Committee, which includes three members from S&P Dow Jones Indices and two representatives of the Wall Street Journal.

Recent departures from the Dow have included chemicals producer Dow Inc, semiconductor maker Intel, and pharmacy chain Walgreens in 2024.

The committee tracks indicators such as whether the highest-priced Dow component exceeds 10 times the price of the lowest. As of Wednesday, Goldman Sachs – currently the most heavily weighted stock in the index – was trading at around $968, roughly 27 times Nike’s share price.

Despite monitoring these conditions, the committee does not operate under a formal timetable for making changes. It meets “regularly,” and its deliberations on index composition remain confidential. S&P Dow Jones Indices declined to comment.

Nike’s Operational Struggles Weigh on Sentiment

Nike’s stock weakness has unfolded alongside broader operational challenges. CEO Elliott Hill returned to the company in 2024 with a mandate to engineer a turnaround. During a June earnings call, he underscored that Nike is operating in a “more complex macro environment,” pointing to mounting pressures on store traffic and discretionary spending across its key markets.

“Nike, in the market outside of a couple key franchises, just does not seem to be as appealing to consumers as it once was,” said Drake MacFarlane, research analyst at M Science.

Dow Composition Snapshot