Nike’s falling share price puts its Dow seat in jeopardy

Nike's share price decline has raised concerns about its continued presence in the Dow Jones Industrial Average. The sportswear company has been a member of the blue-chip index since 2013, but its recent struggles have put the removal of its shares in jeopardy. S&P Dow Jones Indices announced this month that Nike will be removed from the S&P 100 before trading begins on September 21, as part of a quarterly rebalancing.

Analysts attribute the removal to an 80% slump in the company's market value due to slowing sales, lack of innovation, and competition from new players over the past five years. Since joining in 2013, Nike's shares have only risen 5%, while the S&P 500 has more than quadrupled. The weak performance of Nike makes it the smallest factor in the Dow's price-weighted index, a position that typically precedes other index removals.

Unlike other indices, the Dow doesn't have clear eligibility rules for removal, but a recent analysis by Reuters found that at least half of the 10 Dow changes since 2013 involved the stock with the smallest weight at the time of removal. Currently, Nike holds a 0.4% weight in the index and has been the worst performer this year.

While some market strategists believe the odds of Nike's removal in the next year are higher, there is no specific timeline for the changes. The committee that oversees the index meets regularly and makes adjustments based on various factors, including the price ratio between the highest and lowest-priced stocks. Nike's CEO, Elliott Hill, has been leading a turnaround initiative, but the company continues to face challenges in attracting consumer interest compared to its earlier years.