As of Monday, September 21, Nike will no longer be part of the S&P 100 stock index, which includes the hundred largest companies listed on the United States stock exchanges. However, the sportswear brand will continue to be listed in the S&P 500 index.
The reason is the loss in the value of the company’s shares: 78% in the last five years. Its shares, which reached a high near $179 in 2021, have fallen to almost $40 today, leaving a loss of more than $200 billion in market value.
Specifically, Nike closed at $38.40 on Friday, its lowest level in 12 years, and its shares have lost about half their value in a year. For its part, Nike’s market value now stands at around $57 billion, up from approximately $264 billion at the end of 2021. In that same time, the S&P 100 gained 83%.
This has led S&P Dow Jones to leave the mark out of the S&P 100. The move was announced a few days ago, and will take effect in two weeks coinciding with the usual quarterly adjustment. The objective, as explained by S&P Global, is for each index to be more representative of its market capitalization range.
Experts read Nike’s departure from the S&P100 as something symbolic, since the company continues to be among the most powerful in the world, but also a reflection of a structural problem that threatens one of the biggest brands in the sector. Until recently, Nike had what investors look for in a consumer company: global reach, cultural relevance, distribution, pricing power and a strong, attractive brand.
Adidas places its price around 148 euros, more than triple that of Nike
But in recent years, that has changed markedly. Among other things, competition, both traditional and new, has gained ground. Adidas has maintained and strengthened its positioning in the market; and although it has also experienced a decrease in the value of its shares over the last five years, it places its price around 148 euros, that is, more than three times that of Nike.
In addition, other competitors have consolidated, such as On or Hoka, awakening the attention and interest of both consumers and investors.
Likewise, experts say that Nike has focused excessively on direct sales to consumers, neglecting and weakening some wholesale relationships, which could have taken its toll on its penetration. Added to this are the difficulties in growing in some markets, such as China, and a general drop in demand as a result of an inflationary context and a higher cost of living.
On the other hand, the development of artificial intelligence has captured the interest of investors in technology firms. Proof of this is that, compared to the departure of Nike, or Colgate-Palmolive, from the S&P 100, there is the entry of Dell Technologies, or Sandisk, among others. This indicates that everything related to data centers, servers or cybersecurity is gaining ground in the stock indices, and that companies linked to more traditional consumption are finding it difficult to maintain their positions.
Nike ended the fiscal year, which ended on May 31, with sales of $46.4 billion, an increase of 0.2% compared to the previous year. However, annual profit fell more than 3%, to $3,108 million, in the first full year with Elliott Hill as CEO and leading the company driving a transformation plan.
In June, Hill noted that decisive steps were being taken to strengthen Nike’s foundation and reposition the business for long-term growth. “We made significant structural improvements to lay the foundation for our Sport Offense strategy in our team culture, our innovative products, the strength of our brand and the way we serve consumers in our countries and cities”; he explained in a statement. “While we continue to face revenue headwinds, we are encouraged by progress on high-performing products and are focused on consistent execution, increased profitability, and expanding our achievements to reach our full potential.”.
It is worth wondering if the company’s stock market situation will have effects on the brand. According to August data from Brand Finance, Nike is the third most valuable clothing brand in the world, behind Chanel and Louis Vuitton; and despite a 7% drop in its brand value, which now stands at $27.3 billion. It ranks as the second strongest, with a Brand Strength Index (BSI) of 89.9, after losing almost 5 points.
In contrast, Adidas has experienced an opposite trend: a 2% increase in its brand value, up to $18.9 billion, ranking seventh globally.
