LONDON — After months of hanging by its fingernails, Marks & Spencer will drop out of the FTSE 100 index of blue chip stocks, with the London Stock Exchange confirming the much-anticipated news at the close of trading on Wednesday.
Marks & Spencer, which has seen its shares fall by 40 percent this year, has been dropped due to its shrinking market capitalization, which stood at 3.77 billion pounds on Wednesday.
Shares closed up 3.4 percent at 1.93 pounds, with many analysts arguing that the ailing company can now focus on turning the business around.
This is the first time in 35 years that M&S has dropped out of the index. The changes will take place as of Monday, Sept. 23.
An M&S spokeswoman declined to comment on the relegation. Earlier this year during a results presentation, M&S chairman Archie Norman was unruffled by the prospect of falling out of the FTSE 100.
“We fell out of the FTSE when I was at ITV and the sky didn’t fall in. It was the same business the next day,” said Norman, the former chairman of British broadcaster ITV, and the former chief executive officer and chairman of Asda.
M&S, a fixture on the British high street and once a flourishing purveyor of apparel, food, home and children’s wear, has been battling with falling sales and profits and competition from faster and more sophisticated retailers such as Zara, H&M, Next and supermarkets Tesco, Waitrose and Sainsbury’s.
The retailer has been struggling for years, although the first half of 2019 was particularly brutal: Over the summer, the shares took a hammering after M&S formed a joint venture with Ocado for an online grocery delivery firm known as Ocado Retail Ltd.
Investors thought the 750 million pounds that M&S paid for its 50 percent share in the venture was too high a price for what many described as too late a move into online supermarket services.
When the deal closed last month, M&S said it expected Ocado Retail Ltd. to generate 70 million pounds in synergies for M&S Food by 2022, due to increased buying scale, improved sourcing economies, and a “significant reduction” in product trial and development costs.
Separately, in July, the retailer let go Jill McDonald, its new boss for apparel and home, amid supply chain challenges, floundering sales, shrinking shop floors and customers looking to competitors for their seasonal fashion and basics.
M&S’s ceo Steve Rowe has taken over the leadership of the business directly in the near term.
Marks & Spencer posted a drop in sales and profits in the 12 months to March 31 as the company began reducing its store footprint. Revenue was down 3 percent to 10.38 billion pounds, with profits before tax and adjusting items falling 9.9 percent to 523.2 million pounds.
Profits after tax climbed 28.2 percent to 37.3 million pounds due to a decrease in adjusting items, including operating costs.
The apparel and home division revenues were down 3.6 percent in the year, partly driven by the store closure program, with like-for-like sales down 1.6 percent.
M&S admitted that its apparel range remained “too wide,” with the volume of options “splintering our buying scale and making our shops challenging to navigate.”