M&S to be relegated from FTSE100
High street stalwart M&S is expected to be expelled from the FTSE100 in the quarterly reshuffle of the London index. The prediction came after M&S shares closed at 187p on Tuesday, giving the retailer a market value of £3.64bn.
FTSE Russell, the index provider, will confirm M&S’s exit after the end of trading on Wednesday, with the change taking effect on 23 September.
Shares in M&S have slid 36 per cent over the past year as investors lost faith after a decade of failed reinventions and three years of profit falls. The firm’s relegation would mark the first time M&S has traded outside of the index of top 100 listed UK companies in the 35 years since it was launched.
Emma-Lou Montgomery, associate director at Fidelity International said: “While expected, this is a significant moment in the company’s history – and means the once-favoured retailer has fallen out of the index of leading shares for the very first time since it was created in 1984.
“This is a landmark moment for the British brand M&S in particular, marking an even broader shift in the FTSE 100 from a domestically UK focused market to an international one. As the threat of a ‘no deal’ Brexit persists investors are clearly becoming concerned about buying companies that are purely exposed to the UK.
“The stock story of Marks and Spencer is a good example of why a diversified investment strategy continues to be so important. M&S was considered a safe bet – a historic member of the FTSE 100 and a much-loved British retailer – yet the glory days seem to be coming to an end with the share price more than half what it was five years ago.”
Other stocks in the frame for relegation include Micro Focus, Direct Line and Centrica. Polymetal, Hikma and Meggitt are most likely to be promoted to the FTSE100.
Helal Miah, investment research analyst at The Share Centre, said: “It is interesting to see a clear distinction between those on the way up and those heading down and highly reflective of the current economic and political environment and the themes we have been highlighting in our quarterly Profit Watch UK report. On the way out is the more UK focussed businesses while those with a more global exposure look to replace them.
“Marks and Spencer for so long has been a candidate going down only to just escape at the last minute. The last time around it was saved by its well-timed rights issue, but alas, it can only hold out for so long and this time there seems little that can save it from going down bar a spectacular recovery in the share price by the end of the day.”
M&S has long suffered complaints by investors and customers that it has failed to revamp its clothing lines, and lacks appeal for the younger generations. In the past its foods division has helped offset the general merchandise division, but not so much anymore as growth opportunities from its smaller convenience food stores disappear and competition intensifies.
The group has also been too slow to adapt to online retailing and has been left behind by other retailers offering a more compelling online service.