Marks and Spencer to drop out of FTSE 100 for first time in 35 years

4 September 2019, 12:00 | Updated: 11 September 2019, 10:21

Sliding shares will see the retailer drop out of FTSE 100 index for first time
Sliding shares will see the retailer drop out of FTSE 100 index for first time. Picture: PA
Nick Hardinges

By Nick Hardinges

High street giant M&S will be relegated from the FTSE 100 for the first time since becoming a founding member of the top City share index in 1984.

Sliding shares and declining sales mean that the once £1bn profit-making retailer will be demoted from the FTSE 100 for the first time in the index's 35-year history.

The firm's relegation was confirmed on Tuesday as the markets closed, with Marks & Spencer's share value falling below the threshold for inclusion.

The high street staple will now be listed on the FTSE 250 following the quarterly reshuffle of the top UK-listed companies.

No official announcement will be made until later today and the decision will not be implemented until Monday 23 September.

The relegation of M&S is symbolic of issues facing high street shops
The relegation of M&S is symbolic of issues facing high street shops. Picture: PA

It comes as the company's chief executive Steve Rowe announced plans to close 120 stores in a bid to shore up profits.

Share prices for the retailer have dropped to a 20-year low and are down 40 per cent for the year.

Before the financial crash its shares were worth about £7 in 2007 compared to just £1.87 today, according to analysis from Bloomberg.

The company have struggled to adapt to consumer trends and habits, particularly the shift to online shopping, and there are still lingering concerns that its clothing section has not modernised enough in the 21st century.

Its decline is seen as emblematic of the struggles that many high street shops, such as Debenhams and House of Fraser, are facing.

Chief executive Steve Rowe plans to close 120 under-performing stores
Chief executive Steve Rowe plans to close 120 under-performing stores. Picture: PA

Helal Miah, investment research analyst at the Share Centre, said: "M&S, for many generations, has been a stalwart of the UK retail market and a founding member of the FTSE 100.

"Its relegation will be highly symbolic of the troubles on the UK high street and the challenges the UK retail sector faces as the internet plays an increasingly important role."

Marks & Spencer's clothing sector has long been struggling and its previously strong food business has begun to show signs of weakness.

Chairman Archie Norman was also at the helm when ITV dropped out of the FTSE 100 and he has previously reassured consumers and employees that doing so does not spell the end for a business.

He said: ""When I went to ITV we dropped out of the FTSE 100, the sky didn't fall in - the business was the same business the day after."

But falling out of the index will be seen as losing a mark of prestige as it represents the country's 100 largest listed firms.

Rivals Next's value is more than double that of M&S at £7.9bn
Rivals Next's value is more than double that of M&S at £7.9bn. Picture: PA

Its market value of £3.7bn is less than half what it was worth in November 2015, whereas rivals Next sit more than twice as much at £7.9bn.

Last year, Mr Norman told shareholders the company was facing an existential crisis with the rise of online shopping.

He warned them that M&S was on a "burning platform."

Mr Norman said: “We don’t have a God-given right to exist and unless we change and develop this company the way we want to, in decades to come there will be no M&S,”

Others included on the relegation list were Micro Focus and Direct Line, whereas mining company Polymetal, pharmaceutical business Hikma and engineering firm Meggitt all made their way on to the index.

Retailers at risk of relegation at the next reshuffle include Sainsbury's, Morrisons and B&Q's owner Kingfisher.

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