1 day ago
Nike's Dow Seat at Risk After S&P 100 Exit
Nike is being removed from an important group of large companies called the S&P 100.
Its stock price has fallen sharply because sales have slowed and newer competitors have gained attention.
Nike is also the smallest-priced stock in the Dow, another major stock index.
This has led some experts to think Nike could leave the Dow next.
However, the Dow does not automatically remove a company when its stock price falls.
A committee decides when changes are needed.
Nike’s chief executive, Elliott Hill, is working on a turnaround.
The company says it is dealing with tougher economic conditions and weaker consumer spending.
S&P Dow Jones Indices will remove Nike from the S&P 100 before trading begins on September 21.
Analysts linked Nike’s removal to an 80% decline in market value over struggles with sales, innovation and competition.
Nike has the smallest share-price weighting in the 30-stock Dow at 0.4% and is its worst performer this year.
Nike shares have risen 5% since joining the Dow in 2013, while the S&P 500 has more than quadrupled.
The Dow’s Averages Committee has no automatic deletion rule and makes changes confidentially on an as-needed basis.
- Who
- Nike, S&P Dow Jones Indices, and the Dow Jones Industrial Average’s Averages Committee are central to the report.
- What
- Nike will leave the S&P 100, while investors and analysts are assessing whether it could also be removed from the Dow.
- Where
- The changes concern major U.S. stock-market indexes.
- When
- Nike’s S&P 100 removal is scheduled before trading begins on September 21; there is no stated timetable for any Dow change.
- Why
- Nike’s market value and share price have declined amid slowing sales, limited innovation, stronger competition and pressure on consumer spending.
Removal Increasingly Likely
Removal Remains Uncertain
Nike’s small Dow weighting
Removal Increasingly Likely
Analysts say Nike’s position as the Dow’s lowest-priced and smallest-weighted stock makes it a likely removal candidate; historical analysis found at least half of recent removals involved the lowest-weighted stock.
Removal Remains Uncertain
The Dow has no automatic rule requiring removal when a stock becomes the smallest component, so Nike will not leave solely because of its current weighting.
Timing of a possible change
Removal Increasingly Likely
Some market observers believe the odds of Nike’s removal are much higher over the next year, given its share-price decline and status as the Dow’s worst performer this year.
Removal Remains Uncertain
The Averages Committee changes components only as needed, meets regularly and does not disclose its discussions, leaving no predictable timetable for a decision.
Nike’s business outlook
Removal Increasingly Likely
Analysts say Nike has become less appealing to consumers outside a few key franchises and has struggled with slowing sales, lack of innovation and competition from newer brands.
Removal Remains Uncertain
Nike is pursuing a turnaround under CEO Elliott Hill and says it is navigating a more complex macroeconomic environment, including pressure on consumer traffic and discretionary spending.
Key facts
- S&P 100 removal
- Scheduled before trading begins on September 21.
- Nike’s Dow weighting
- 0.4%, the smallest among the Dow’s 30 components.
- Market-value decline
- Analysts attributed an 80% decline to Nike’s prolonged struggles.
- Dow membership
- Nike joined the Dow in 2013.
- Nike stock performance
- Shares have risen 5% since joining the Dow, compared with a more-than-fourfold increase for the S&P 500.
- Dow removal rules
- The index has no mechanical deletion threshold and changes are made on an as-needed basis.
- Recent Dow change
- Verizon Communications was replaced by Alphabet in June, with its low share price cited as a factor.
Quotes
Drake MacFarlane
Research analyst at M Science
“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.”
telegraphindia.com
“Nike, in the market outside of a couple key franchises, just does not seem to be as appealing to consumers as it once was.”
telegraphindia.com
Sources
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