THE ICONIC BRITISH retailer Marks and Spencer has dropped out of the FTSE 100 stock index for the first time – a mark of how turbulent the last few years have been for the 135-year-old retailer.
Tumbling from the FTSE 100 – which includes 100 high-value businesses from across key sectors including retail, banking, pharmaceuticals, energy and telecom – is a symbolic blow to the company that began as a market stall in Leeds in 1884.
This is the first time Marks and Spencer has not been a FTSE 100 member since the index launched in 1984, after its market value dropped to £3.7 billion amid ongoing troubles facing the company.
The retailer, founded on the slogan ‘don’t ask the price, it’s a penny’ has faced significant difficulties in recent years as customers have moved online and lost interest in its clothing, especially the womenswear ranges that once defined Marks and Spencer.
Marks and Spencer had long settled among the lowest-valued companies in the index, so the news comes as little surprise. The company will now be relegated to the FTSE 250, which is a lower tier of the market value index.
What happens now?
While the news has little real impact on the day-to-day operations of the business, it’s certainly an ominous bellwether for one of the most recognisable British shops.
Come 23 September, the retailer will no longer form part of the index after its market value on Tuesday fell below the threshold necessary for inclusion – and it’s hard to know when and if Marks and Spencer will ever return to the list of the largest UK-listed firms.
With issues like Brexit and a weak pound causing trouble for plenty of UK businesses, M&S is acutely vulnerable as it tries to plot a path back to better times - it might be hard to imagine now, but in 1998 it was the first British retailer to make over £1 billion in annual profit.
“Brexit and the falling pound hardly make for calming mood music for investors in companies like M&S, which are heavily exposed to the domestic economy and fluctuations in import prices,” noted Nicholas Hyett, equity analyst at Hargreaves Lansdown.
In May, Marks and Spencer posted profits that did little to assuage worries among investors, with total sales dropping by 3% to almost £10.4 billion.
The company has been shutting down under-performing stores, with more than 100 pegged for closure by 2022.
“We are deep into the first phase of our transformation programme and continue to make good progress,” chief executive Steve Rowe said at the time.
“We remain on track with our transformation and are now well on the road to making M&S special again,” he added.
In a letter to shareholders in May, Marks and Spencer Chairman Archie Norman, a business veteran who has helped develop both Asda and ITV, said that the company needed change that was “transformative, not a touch of the tiller”.
“Therefore we are aiming to transform all the pieces of the jigsaw: the way we are organised, the way we work, our technology, our store base, our products, our supply chains and our value in the market,” he wrote.
In one example of the company’s evolution, M&S is soon planning to offer a food delivery service after striking a partnership with online supermarket Ocado.
Partly a bid to capitalise on the food sales that have remained largely positive in recent years, the move has been met with some scepticism by analysts, who worry that the company is not doing enough to tackle the endemic issues facing it.
“Ocado is not yet making a profit from food sales so the rewards of this partnership are uncertain,” Laith Khalaf, an analyst at Hargreaves Lansdown, told the BBC.
One person who has played down the prospect is Norman. In May, he told the media: “When I went to ITV we dropped out of the FTSE 100, the sky didn’t fall in.”
While the sky might not yet fall in, the next few months will prove crucial for the company. “It may be some time before M&S can start to look upwards again,” predicted Hyett.
With additional reporting from © AFP 2019
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