Nike's Dow Jones Index Position Under Scrutiny

Nike will be removed from the S&P 100 index before trading begins on September 21, according to S&P Dow Jones Indices. This move ends the sportswear company's 18-year run in that blue-chip index and has prompted questions about its eventual removal from the Dow Jones Industrial Average, where it has been a component since 2013.

Nike's stock has gained only about 5% since joining the Dow. Over the same period, the S&P 500 has risen more than fourfold. The stock recently traded around $36, making it the lowest-priced component in the 30-member Dow. It is also the index's worst-performing stock this year and currently accounts for about 0.4% of its weighting.

Analysts link 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.

Dow Removal Rules Differ from Other Indexes

The Dow Jones Industrial Average operates differently from other major indexes. The S&P 500 and Nasdaq-100 have formal eligibility criteria based on factors like market capitalization. The Dow is price-weighted and lacks a mechanical rule that automatically removes a company after it falls below a specific threshold.

A Reuters analysis of the 10 changes to the Dow since 2013 found that at least half involved the lowest-weighted stock at the time of its removal. Market strategists said this means Nike could remain under pressure, though the timing of any potential change is uncertain.

Dow Changes Made on an As-Needed Basis

The Dow does not follow a fixed schedule for constituent changes. S&P Dow Jones Indices' methodology states changes are made on an as-needed basis in response to corporate actions or market developments. The latest change came in June when Verizon Communications was removed and replaced by Alphabet.

Verizon's relatively low share price was a factor. Verizon had been part of the Dow for over 22 years, during which its shares gained about 35% while the Dow rose nearly fivefold.

Decisions on index changes 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 in 2024.

Nike Turnaround Remains a Key Focus

Nike's falling share price coincides with a prolonged turnaround effort. CEO Elliott Hill returned to the company in 2024 to lead growth revival efforts. Nike has been dealing with weaker consumer traffic, pressure on discretionary spending, and a challenging macroeconomic environment across several markets.

The company also faces questions over its product portfolio's appeal, with analysts pointing to changing consumer preferences and competition from emerging brands. For now, Nike remains a Dow member. 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.