Why M&S is about to drop out of FTSE 100
Struggling high-street stalwart loses its place among the UK’s top 100 companies
Marks & Spencer is to be relegated from the FTSE 100 index of the UK’s biggest companies.
It is the first time the retailer has dropped out of the top set since the FTSE 100 was launched in 1984.
The announcement follows news earlier this year that M&S is closing 120 stores as part of a restructuring plan, while its shares have plummeted 45% over the past three years.
“Symbolically, falling out of the FTSE is just another milestone in the slow-but-steady decline of what used to be a great British institution,” retail expert Richard Hyman told the BBC.
What is the FTSE 100?
The FTSE 100 is a list of the UK’s biggest companies ranked by market value.
The index reshuffles four times a year according to share price movements, with the bottom companies dropping out and being replaced by climbers from the FTSE 250.
Membership of the FTSE 100 is seen as a mark of business prestige, says The Guardian.
Why is it about to drop out?
The biggest reason behind M&S’s fall from the FTSE 100 is the decline in its clothing business, which accounts for most of its profits.
“There has been a decade-long complaint by investors and customers that it has failed to revamp its clothing lines, especially within womenswear, and lacks appeal for the younger generations,” says Helal Miah, an analyst at the Share Centre.
“The group has also been too slow to adapt to online retailing and has been left behind by others who offer a more compelling online service.”
M&S’s predominantly high street model has failed to contend with the rise in internet shopping and competition from the likes of Asos and H&M.
Retail analyst Nick Bubb says M&S has been facing the prospect of falling out of the FTSE 100 for some time. “M&S has been declining remorselessly for many years, as a result of weak and arrogant management, and stronger, more focused competition.
“The problems have mainly been on the clothing side, where M&S tries and fails to be all things to all people in the mid-market,” he said.
Why does it matter?
As little as ten years ago, M&S was making an annual profit of £1bn - but the latest annual figure put profits below £100m.
Being relegated from the FTSE 100 means that M&S shares will be dumped by investment funds that track only Britain’s highest-value companies.
Archie Norman, the M&S chairman, previously said: “When I went to ITV we dropped out of the FTSE 100, the sky didn’t fall in.”
But he warned shareholders last year: “This business is on a burning platform. 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.”
Tony Shiret, an analyst at the stockbroker Whitman Howard, told the Guardian: “It is significant [for M&S] in the sense that it is a fairly objective measure of the diminished scale of the company.”
But Nick Bubb added: “Other companies have grown bigger and M&S has got smaller. Life will go on after the exit from the FTSE 100 and in some ways, a lower profile might help M&S.”