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Marks & Spencer faces relegation from the FTSE 100

Emma-Lou Montgomery

Emma-Lou Montgomery - Fidelity Personal Investing

Marks & Spencer is once again perilously close to finding itself on the relegation list when the FTSE 100 has its next quarterly reshuffle later this week.

Marks & Spencer faces relegation from the FTSE 100

With its share price having more than halved over the past five years and now at a level last seen 19 years ago, all the signs are that the FTSE 100 stalwart is for the chop.

If that happens, it will be more bad news for the retail bellwether that has succumbed to the same fate as much of the retail sector in the past year or two. The trading environment has been brutal and there has been no let-up as one high street name after another has fallen foul of the consumer crunch.

M&S, the 135-year-old retailer, which has been a member of the FTSE 100 since it was launched in 1994, has seen its shares plummet. At less than 200p now, they are the lowest they have been since October 2000. Beleaguered investors have seen their holdings fall by over 33% in the past year and more than 54% in the past five years. And the retailer is now in very real danger of being relegated to the mid-cap FTSE 250 index at the next reshuffle, the constituents of which will be announced on Wednesday.

If M&S goes, the FTSE 100 will have just 27 of its original members left, only 16 of which still go by their original names. 

If this all seems a little too familiar, that’s because it is. It’s not the first time that M&S has come close to being demoted. Just back in May its days in the FTSE appeared to be numbered, but it held onto its coveted blue chip spot by the skin of its teeth. A year earlier it had also been perilously close, after its shares fell 5.5%. However, at crunch time it faced a reprieve; recovering to sit just nine spots away from being relegated into the FTSE 250 zone.

However, this time its luck may finally have run out.

Companies face automatic relegation from the FTSE 100 index if they fall below 111th place among qualifying companies on the London Stock Exchange, or conversely, promotion to the FTSE 100 if they rise to 90th position or above in the FTSE 250.

Centrica is another blue chip facing relegation based on Tuesday’s likely closing share prices. Jostling to take their place are Polymetal, Hikma Pharmaceuticals, Meggitt and Merlin Entertainments.

But, of course, promotion, while undoubtedly cause for celebration, does not come with any guarantees.

Indeed, if Hikma makes it into the FTSE 100 this week it will be no less than its fourth appearance; having made a brief appearance in the blue chip league back in March 2015, then again in June 2016 and most recently in December 2016.

Meggitt is also familiar with the FTSE 100, having dropped out in December 2015 after a decent run since October 2011.

Five year performance

(%)
As at 30 July
2014-2015 2015-2016 2016-2017 2017-2018 2018-2019
Marks & Spencer 25.4 -30.7 -2.0 1.2 -29.6

Past performance is not a reliable indicator of future returns

Source: Refinitiv, as at 30.7.19, in local currency terms with income reinvested 

Important information The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

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