Nike’s spectacular fall

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Lin Lin (0:38)

Nike. It's got an iconic swoosh. It's synonymous with its Just Do It slogan. It's also synonymous with sportswear domination.

One of the biggest brands in the world for decades. But right now, it's getting absolutely belted. More than 200 billion US dollars has been wiped from its market value since its peak. Its share price is back around levels last seen more than a decade ago. And it's now been dumped from the top 100 companies on the US share market. So how does a brand that big lose its edge? And what can every other major company learn from it? Welcome to ABC Business Daily.

I'm ABC Business Reporter, Lin Lin, in the chair for Carrington Clarke.

Daniel Ziffer (1:28)

And I'm ABC Business Reporter, Daniel Ziffer.

Lin Lin (1:30)

Dan, great to speak to you again. How are you?

Daniel Ziffer (1:33)

Excellent. Always a joy to be here on the pod.

Lin Lin (1:36)

Dan, I want to do this thought experiment with you. When you ask yourself, what are the names that come to mind in terms of the biggest brands globally, just rattle off your top five.

Daniel Ziffer (1:51)

Oh, this implies I have thoughts, Lin, but I guess most of them would probably be American. I would think McDonald's, Coca-Cola, Disney, probably Amazon now, but definitely up amongst them, sports brand Nike.

Lin Lin (2:07)

Yeah. And as a millennial myself, I remember growing up wanting to wear Nike sneakers, but often not being able to, because they were pretty premium in terms of pricing. They were really seen as very, I suppose, cool, right? And they were so dominant in popular culture. And there was, I guess, this magic around the brand.

Daniel Ziffer (2:29)

I certainly remember when my dad went on one of his first big overseas trips when I was a child, he came back with a pair of Nike sneakers from America, from a conference he'd been at, and they were easily the coolest thing I'd ever owned in my life.

Lin Lin (2:42)

Did he win Dad of the Year that year?

Daniel Ziffer (2:45)

Well, he's well ahead in the competition most years already, Lin. So, but it was certainly very popular.

Lin Lin (2:51)

Yeah. So I think most of us, maybe everybody would agree that Nike has been this force internationally for such a long time. It's also had a massive presence when we think about big sporting events in basically every code, tennis, football, athletics, certainly basketball, because I kind of associate Nike to Air Jordans and the Michael Jordan era as well.

It's a brand that's really dressed some of the most famous athletes in the world as well as celebrities. But that success seems to be faltering and something interesting has now happened that I really want to get into as a global business case study. What do you think?

Daniel Ziffer (3:37)

Well, something really substantial has happened, which is Nike will be dropping from the top 100 companies on the US stock market. So it's going to fall out for the first time in almost 20 years. And the reason is that it's vastly less valuable than it used to be. So it's seen about 230 US billion dollars, that's more than 320 Australian billion dollars, right from its market capitalization. That's from when shares hit a record high of about 180 US dollars five years ago.

Now it's now closer to around $38 for a share. So like a mendous fall down the hill. The share price has fallen more than 76% since that high. A really astonishing meltdown in the value. And that is because people haven't been buying the shoes and investors haven't been buying the direction that the company's been going in.

Lin Lin (4:33)

Yeah, I mean, the fact that the stock has lost four fifths of its value in just five years is pretty stark when you think about this fall from grace. And you've also got to wonder now that it's going to be dropped from the S&P 100, what kind of an impact it might have given that we know ETFs have really taken off and are just have been so popular in many years as well. I mean, I think it's worth bearing in mind that Nike still remains in the S&P 500, which as a comparison point is far more widely followed.