Why Nike Stock Fell and What Changes Outside the S&P 100

The decline in Nike stock cannot be explained by a single event. The company’s removal from the S&P 100 drew attention, but the stock had already been under pressure for years due to sales, margins and expectations. In early September 2026, market data released at the time indicated that the stock was about 78% below its all-time high.

For investors, the central point is to separate index news, operational change and financial results. A stock can fall because it leaves an index, but it can also fall because the market starts to question the company’s ability to restore growth and profit. In Nike’s case, these factors appear at the same time, but they do not carry the same weight.

The problem started inside the business, not in the index

Nike acknowledged, in explanations related to the third quarter of fiscal 2025, that it had become too dependent on a few classic footwear lines. These included Air Force 1, Dunk and Air Jordan 1. The company did not say these lines would be discontinued, but rather that it needed to reduce the supply of some products to rebalance the portfolio.

This type of adjustment is delicate. A well-known sneaker usually has predictable demand, store turnover and a restocking history. When the company decides to reduce this dependence, it creates room for new products, but that room does not automatically turn into sales. A launch needs to gain attention, reach the right channels, convince consumers and generate new orders from retailers.

That is why the transition can pressure revenue in the short term. If the company sells fewer older products before new products reach scale, consolidated results feel the impact. The risk for investors is that the replacement takes longer than expected, or that the launches have a good initial reception but are not large enough to change the company’s numbers.

Discounts, inventory and the full-price dilemma

Another important factor was the attempt to rebuild sales without relying so heavily on promotions. In the annual report for fiscal 2026, the company described two simultaneous fronts: strengthening wholesale distribution and transforming its owned digital channels into a full-price destination, meaning less dependence on discounts.

This is a classic dilemma in retail. When there is old inventory, the company can use markdowns to free up space and generate cash. The problem is that consumers may get used to waiting for a promotion. If the company reduces discounts, each sale can be more profitable, but order volume may fall. If it keeps discounts for too long, it may preserve traffic, but weaken the brand’s perceived value.

The fiscal 2026 numbers show this uneven recovery. Wholesale sales rose 6%, while Nike Direct sales fell 6%. The direct segment includes owned stores and digital channels. In Greater China, sales fell 11%, with reports of weaker store traffic, intense promotions and excess inventory. Converse, another business in the group, fell 31%. These percentages are changes in reported dollars, before adjustments for currency effects.

The increase in wholesale is a better sign than a broad-based decline, but it needs to be read carefully. Selling to retailers is not the same as seeing the end consumer buy quickly in stores. If retailers are buying more only to restock shelves, the effect may be temporary. If the product turns over well and orders repeat, the signal becomes stronger.

Why profit suffered more than revenue

When a company sells less and still needs to offer discounts, profit can fall much more than revenue. That is what appeared in Nike’s fiscal 2025 results: annual revenue fell 10%, while diluted earnings per share fell 42%. Gross margin also declined, with discounts and inventory-related costs among the factors cited.

Gross margin is the part of revenue left after the cost of goods sold, before expenses such as marketing, administration and other structures. Imagine a store selling fewer pairs of shoes and, at the same time, cutting prices to clear inventory. Rent, staff, logistics and advertising do not necessarily fall at the same speed. As a result, a moderate drop in sales can turn into a much larger drop in profit.

In fiscal 2026, annual revenue was broadly stable, but diluted earnings per share fell again, from US$ 2.16 to US$ 2.10. The decline was smaller, but that does not mean an automatic return to the previous profitability pattern. For the market, stabilizing is different from recovering.

It is also important to look at margin with context. In the fourth quarter of fiscal 2026, Nike reported a gross margin of 49.2%. This number included about nine percentage points related to the expected recovery of tariffs paid under the International Emergency Economic Powers Act, known by the acronym IEEPA. Removing only this disclosed benefit, the margin would be approximately 40.2%, close to the 40.3% reported a year earlier. This calculation is not a fully adjusted margin, as it removes only this specific item, but it shows why an apparent improvement needs to be broken down.

What it means to leave the S&P 100

S&P Dow Jones Indices announced on September 4, 2026, Nike’s removal from the S&P 100, effective before the market open on September 21, 2026. According to the same communication, the company remained in the S&P 500. This distinction is essential.

The S&P 100 is a smaller group within the S&P 500 universe. It does not work like an automatic queue in which the company in the next position enters and another leaves solely by ranking. The methodology considers criteria such as company size, listed options and balance among sectors, and also involves an assessment by the responsible committee.

In practice, funds that replicate the S&P 100 need to adjust their portfolios to reflect the exclusion. This can generate technical selling of the stock. Funds that track the S&P 500, however, are not required to remove Nike because of this change. In addition, leaving an index does not cancel shares, does not remove the company from the exchange and does not, by itself, change sneaker sales or future profit.

The rebalancing effect can pressure the price, but there is no guarantee of a decline on the effective date. Because the announcement occurs before the change, other market participants may position themselves in advance, and buyers may absorb part or all of the selling flow. That is why removal from the S&P 100 explains possible technical pressure, but it does not explain the previous years of depreciation.

How to assess a possible recovery

After a sharp decline, a common question arises: has the stock become cheap? Price alone does not answer that. A stock can be far below its peak and still be expensive if expected profit has fallen substantially. It can also look pressured in the short term but improve if future profit exceeds expectations. Value depends on what the company can earn and the multiple the market accepts paying for those earnings.

A simple example helps. If a company earns US$ 5 per share and the market pays 30 times that profit, the implied price would be US$ 150. If profit falls to US$ 3 and the market starts paying 20 times, the implied price goes to US$ 60. The 60% decline would come from two forces at the same time: lower profit and less willingness from investors to pay for it. This is only a hypothetical example, not an estimate of fair value for Nike.

To monitor the company’s recovery, some signals deserve attention:

• New products with scale: it is not enough for a small line to grow quickly. It is necessary to watch the impact on total revenue, margin and recurring orders.
• Real retail turnover: wholesale sales are positive, but the ideal is to verify whether inventories are moving through to the end consumer.
• Less promotion without a sharp loss of demand: full price is better for margin, as long as there are enough buyers.
• Stabilization in China: the reading should separate currency, units sold, traffic and discount level.
• Margins explained by operations: improving through price, mix and product cost is different from improving through a one-off benefit, such as tariff recovery.

These signals may appear before profit returns to its previous level. The market usually anticipates scenarios, but it can also be disappointed if the improvement remains only in the narrative. A more convincing recovery would require less dependence on old inventory, healthy demand for new products and sustainable margins without excessive promotions.

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