Marks & Spencer set to exit FTSE 100 for first time since 1984

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
A view of a Marks and Spencer shop in Singapore December 14, 2018. Photo: REUTERS/Edgar Su

Marks & Spencer (MKS.L) is likely to dumped out of the FTSE 100 next week, marking the first time ever the iconic retailer has not been included in the index since it was created over 30 years ago.

FTSE 100 is an index of the 100 biggest companies listed on the London Stock Exchange. It is reshuffled once every three months to reflect changes in the value of businesses, with three companies promoted and three relegated each time. The next reshuffle will occur next week based on the closing share prices on Tuesday 3 September.

Marks & Spencer shares have declined by 10% over the last three months and M&S looks set to fall out of the FTSE 100 unless it enjoys a huge share price rally between now and next Tuesday.

Demotion to the FTSE 250 would be humiliating for a retailer that is seen as a bellwether for the UK high street, but the firm has struggled with falling clothing sales and slumping profits over the last decade.

“Marks & Spencer’s modest £3.5bn stock market valuation means it looks doomed to automatic relegation and that would end the retailer’s membership of the index, which dates right back to the launch of the FTSE 100 in 1984,” Russ Mould, investment director at stockbroker AJ Bell, said in an email.

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“M&S is one of just 28 original members that are still in the FTSE 100, 35 years after its launch. Sixteen, including M&S, are still there under the same name while 12 more are present under a different identity and a further 13 are now part of another FTSE 100 constituent following merger and acquisition activity.”

M&S CEO Steve Rowe and chairman Archie Norman are betting a tie-up with Ocado on online food deliver can help turn around the struggling giant. Food sales have been one of the few bright spots at M&S in recent years.

However, the cost of this transformation plan saw pre-tax profit fall 10% last year and forced M&S to ask investors for an extra £600m. Morgan Stanley said earlier this month “the nearer term risk-reward profile doesn’t look very appealing” despite being “optimistic about the turnaround potential long term.”

British Gas-owner Centrica (CNA.L) is also set to be dumped out of the FTSE 100 next week. CEO Iain Conn recently announced he is leaving the energy giant amid customers losses and the first dividend cut in a decade. Car insurance company Direct Line is likely to be the third company to be relegated to the FTSE 250.

Precious metal miner Polymetal (POLY.L), generic drug maker Hikma (HIK.L), and engineering group Meggitt (MGGT.L) are all set to be promoted to the FTSE 100.