Nike's Continued Place in the Dow Jones Called Into Question as Company Exits the S&P 100

Nike's position in the Dow Jones Industrial Average is becoming increasingly uncertain, as the sportswear maker prepares to exit yet another major stock index.

S&P Dow Jones Indices has announced that Nike will be removed from the S&P 100 before the start of trading on September 21. The change is part of the quarterly rebalancing and will end Nike's nearly 18-year run in the index. The company will, however, remain in the S&P 500.

Analysts link Nike's removal from the S&P 100 to the sharp decline in the company's market value. Over the past five years, Nike's market capitalization has fallen by around 80%, compounded by slowing sales, a lack of innovation, and stronger competition from new rivals.

This change has raised questions among investors about whether the Dow Jones Industrial Average, which Nike has been part of since 2013, could be the next major index the company exits.

Nike's shares have risen only about 5% since joining the index, while the S&P 500 has significantly outperformed that figure over the same period. The stock's price, which has recently been around $36, gives Nike the lowest weighting among the Dow's 30 companies.

Nike's weight in the Dow Jones is about 0.4%, making it the index's smallest component. The company also remains the index's weakest-performing stock so far this year.

Josh Bishop, partner and head trader at TimesSquare Capital Management, said that based on historical data, Nike could be considered a candidate for removal from the Dow Jones.

However, unlike the Dow Jones, the S&P 500 and Nasdaq-100 have specific criteria governing companies' inclusion in and retention within the index. The Dow Jones, meanwhile, weights stocks based on their price and has no specific threshold for automatically removing companies.

Reuters' analysis of the Dow Jones's last 10 changes since 2013 showed that in at least five cases, the stock with the lowest weighting was the one removed from the index.

Shay Boloor, chief market strategist at Futurum Equities, noted that the probability of Nike's removal is higher over the coming year, though making an exact prediction is difficult since there is no automatic mechanism for removing companies from the Dow Jones.

The final decision on changes to the Dow Jones index is made by a committee, and changes are not carried out on any fixed, predetermined schedule. Accordingly, Nike's exit from the S&P 100 does not in itself mean the company will also leave the Dow Jones.