Nike Excluded from S&P 100 Index After 18 Years

The S&P 100 is an index that selects 100 of the top-tier companies in the U.S. Inclusion in this index automatically leads to investment from passive funds and ETFs.

Nike's exclusion from this index is due to underperformance in market capitalization and earnings, which could be a significant blow to the company.

Nike's stock price peaked at $176 per share in November 2021, but has since steadily declined without a rebound, fluctuating between $36 and $38 this week. This represents a decrease of approximately 80% from its peak, and its market capitalization has slid by about 169 trillion Korean Won.

Nike has been on a continuous downward trend for five years without any significant rebound.

While the overall sports brand market recorded sales growth after the COVID-19 pandemic, Nike alone has shown stagnation in growth. Competitors such as Adidas, New Balance, and Asics all exhibited upward trends in sales.

As competitors grew at a rapid pace, Nike was the only one to show sluggish performance, contrary to market trends.

Following the pandemic, a global running boom spread due to increased interest in health management and exercise. Brands like Adidas, Asics, Hoka, and On Running capitalized on this by focusing on running-centric products, achieving strong sales.

However, Nike failed to adequately respond to this running boom, instead concentrating on fashion footwear and limited-edition strategies rather than functional products.

These Chinese brands reinforced their product competitiveness in conjunction with the running boom, putting pressure on Nike.

Nike is struggling in the Chinese market, recording negative sales growth.

He did see some success during the COVID period by concentrating on best-selling products.

He adhered to a strategy that emphasized fashion footwear rather than functional athletic shoes like soccer or running shoes.

Elliott Hill, a Nike veteran who emphasizes functionality, was suddenly appointed as the new CEO. He has begun reorganizing the vast array of shoe types into three main pillars centered on running shoes.

He is pushing for a rapid strategic shift towards the running shoe market, streamlining lineups such as Pegasus, Structure, and Vomero as the mainstays, along with Premium Plus Free.

Nike has begun to reduce its direct-to-consumer (DTC) ratio and restore its distribution structure. While it previously adhered to a strategy of direct sales through its website and app, it has now decided to re-supply products to multi-brand stores like Foot Locker.

This is an attempt to regain consumer touchpoints, a move to reactivate traditional channels.

In the 1970s, a jogging boom swept the U.S., and Nike completely dominated the American market with its Cortez model. This is a prime example of how the jogging culture and Nike's symbolism were intertwined at the time, as depicted in the movie 'Forrest Gump.'

In the past, Nike was able to grow because Adidas failed to adequately respond to market changes.

In the current market, running brands specializing in functionality such as Hoka and On Running are expanding their market share. While Hoka focuses on functional running shoes, there are questions about whether it can become a mainstream brand.

This strategy successfully worked in the Chinese market.

Along with improved product quality, a wave of patriotic consumption contributed to a significant increase in the popularity of the Chinese local brand Anta Sports.

Anta Sports is expanding its market share through a variety of brands.

Nike's insistence on direct-to-consumer (DTC) sales through its website and app is criticized as a drawback. Multi-brand stores like Foot Locker offer the advantage of comparing various shoe brands in one place, but Nike withdrew its products from these stores.

Consumers could try on and purchase other brand shoes at multi-brand stores instead of Nike, which demonstrated that brand loyalty to Nike was lower than expected.

Ultimately, Nike's departure from offline stores provided consumers with an opportunity to turn to other brands.

Cases of trying on and purchasing competitor shoes from Adidas, Hoka, On Running, and New Balance increased.

This means that Nike's DTC strategy inadvertently provided opportunities for its competitors.

Negative forecasts for Nike continue in the financial sector. Morgan Stanley suggested a target price of $31, raising concerns that Nike might be collapsing.

J.P. Morgan also lowered Nike's target price, with major investment banks issuing underweight recommendations for Nike.

The current Pegasus and Structure lineups are considered insufficient in the market.

It appears that it will take a long time for Nike to regain its fundamental competitiveness.

This is interpreted as an emphasis on restoring the essence of functional performance shoes that consumers desire.

While Nike's stock performance is poor, it doesn't mean the company is failing, but rather that it is descending from its past 'unrivaled' No. 1 position to being 'similar to' other top competitors. Nike still possesses a strong core fandom.

In other words, Nike is moving from a dominant market position to a level similar to its competitors, but its brand potential remains strong.

Nike is revising its DTC strategy and restoring traditional distribution channels. It has resumed supplying products to offline and external platform channels like Foot Locker and Amazon.

It is suggested that innovative new products with overwhelming performance are essential for Nike's revival.

The emphasis is on the need for products with fundamental competitiveness that are clearly superior to existing competitor products.