Nike. Growth was the whole point.
Nike's sales fell 2% and 200 billion dollars came off its valuation. The business is roughly where it was. The belief in it is gone.
THE GIST ON NIKE: "Nike"
What happened to Nike?
Last year Nike's sales dropped by 2%. Over the same stretch, $200 billion got wiped off its valuation. And in 11 days it's getting dropped from the S&P 100, America's list of the top 100 firms, for the first time in 18 years.
Because Nike had one job: get bigger. And it didn't.
What is a share price?
A share price is a bet on what the company will earn later. In 2021, Nike was worth $264 billion, because everyone believed it would keep growing forever. Today it's worth $57 billion.
It sold $46 billion worth of trainers last year and made $3 billion in profit. The business is roughly where it was, but the belief in it is gone.
What caused it?
Nike decided to sell direct. Growth was the reason it was worth a quarter of a trillion dollars in the first place.
What has replaced it on the list is four tech firms, and the one directly replacing Nike is Palo Alto Networks, who sell cybersecurity software.
What is the lesson?
Nike has lost three quarters of its value, but the S&P 100 has gone up by 84%. So the money has never been in doing well. It's in doing better than everyone expected you to.
We've all experienced this somewhere: the kid who was meant to be something in school, the difficult second album, the second series. Do well when everyone expects brilliant and it goes down as failure. And it just cost one of the most valuable sports brands in the world $200 billion.
Is Nike still cool?
Your take. One tap, then see how everyone else voted.
Quick answers
Why is Nike leaving the S&P 100?
Its sales fell 2% and $200 billion was wiped off its valuation. It is dropped for the first time in 18 years.
What was Nike worth?
$264 billion in 2021 and $57 billion today, even though it sold $46 billion of trainers last year and made $3 billion in profit.
What does this show about share prices?
They are a bet on what a company will earn later. Doing well is not enough, you have to do better than everyone expected.
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