Marks & Spencer has lost its position in the FTSE 100 for the first time since the index’s creation in 1984.
The retailer’s market capitalisation fell to £3.7bn earlier this week, and it will be officially removed from the rankings on 23 September. The relegation means that larger pension and tracker funds will no longer be required to invest in the business.
“It symbolises the state of the UK retail market,” Helal Miah, analyst at UK retail stockbroker the Share Centre told Drapers. “There is currently a clear distinction between UK and overseas companies among those being promoted and relegated in the recent reshuffles. UK-focused businesses such as M&S are struggling, and are being replaced by more international and globally diversified businesses.”
He added: ”There will be no immediate impact on the share price but in the longer term it may result in a brand issue because it’s prestigious to be in the FTSE 100. However, management shouldn’t be focused on staying in the FTSE 100 but on the underlying operations of the business.”
Although the relegation will limit M&S’s access to large international institutional investors, analysts highlighted that this should not be a priority.
It will also mean the UK retailer will no longer face as much scrutiny from analysts, which one retail expert considered a positive thing.
“It potentially should help to take a little bit of the spotlight off the business,” he said. “However, what does this mean for their ego? They have always been in the index and are a very proud [company], which has been one of the negatives for the business. This can be used as a wakeup call that the world is changing and they need to change with it.”
He added: “The reality is it’s not going to mean that much. It’s purely a position in an index, which shouldn’t really have any impact on the way the business is run and the way it accesses capital.”
This was a sentiment echoed by M&S chairman Archie Norman, who told shareholders last year: “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.”