By Shashwat Chauhan and Anuja Bharat Mistry
Sept 17 (Reuters) – Nike’s grip on its spot in the Dow Jones Industrial Average is looking increasingly tenuous as the struggling sportswear giant braces for an exit from another Wall Street benchmark.
S&P Dow Jones Indices said this month it will remove Nike from the S&P 100 before trading begins on September 21, as part of a quarterly rebalancing, after 18 years in the index of blue-chip companies.
Analysts attributed the removal to an 80% slump in the company’s market value following its struggles with slowing sales due to lack of innovation and competition from upstarts over the past five years.
The shakeup has investors doubting Nike will remain in the Dow Jones Industrial Average, the more than 130-year-old benchmark of blue-chip U.S. equities.
Since it joined in 2013, Nike shares have risen 5% while the S&P 500 has more than quadrupled. Nike’s share price, recently $36, makes it the smallest factor in the price-weighted Dow index, a position that has typically preceded other index 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 S&P 500, whose eligibility rules state market cap and public float limits, the Dow weights components by share price alone and has no stated eligibility-change triggers. But a Reuters analysis of the last 10 Dow changes since 2013 found at least half involved the stock with the smallest weight at the time of its removal.
Nike currently holds the smallest weight among the Dow’s 30 components, at 0.4%. It is also the index’s worst performer 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.
NO SET TIME FRAME
The most recent change in the Dow’s constituents was the removal of telecom major Verizon Communications in June, in favor of Alphabet, which S&P Dow Jones Indices said was driven by Verizon’s low share price.
Changes to the Dow are made on an “as-needed basis,” according to S&P Dow Jones Indices’ methodology. Instead of an annual or semi-annual reconstitution, changes in response to corporate action and market development can be made at any given time.
Verizon’s exit in June marked the end of a more than 22-year stay in which its shares advanced 35% while the Dow nearly quintupled.
Changes to the index rest with the Averages Committee — which is made up of three representatives from S&P Dow Jones Indices and two from the Wall Street Journal.
Other recent exits include chemicals company Dow Inc, chipmaker Intel and pharmacy chain Walgreens in 2024.
The committee monitors factors including whether the index’s highest-priced stock exceeds 10 times the lowest. Goldman Sachs, the top-weighted stock, traded on Wednesday at around $968 — about 27 times Nike’s price.
While the committee monitors these factors, there is no timeline on when it would act. The committee meets “regularly” and all index-related discussions are confidential.
S&P Dow Jones Indices declined to comment.
Nike’s share price decline has accompanied a prolonged struggle at the company. CEO Elliott Hill rejoined the sportswear maker in 2024 to lead a turnaround and emphasized during a June earnings call that the company is navigating a “more complex macro environment,” with increased pressure on consumer traffic and discretionary spending across its 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.
(Reporting by Shashwat Chauhan and Anuja Bharat Mistry in Bengaluru; Editing by Colin Barr and Sriraj Kalluvila)
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