* M&S has been FTSE 100 member since index created in 1984
* Company has struggled with tough competition
* Final results of quarterly FTSE 100 reshuffle due
Wednesday
* Micro Focus , Direct Line also on the cards for demotion
* Polymetal , Hikma, Meggitt likely replacements
(Adds details from FTSE press release, investor comments)
By Josephine Mason
LONDON, Sept 2 (Reuters) - Marks & Spencer MKS.L shares
fell on Monday on expectations the 135-year old retailer will be
relegated from London's FTSE 100 .FTSE index blue-chip stock
market for the first time and a "sell" rating from Goldman
Sachs.
Removal from the blue chip index in its quarterly review
would be another blow for Archie Norman, who became M&S chairman
two years ago to work alongside Steve Rowe, who was named CEO in
2016 and has been with the company for three decades.
Losing FTSE 100 membership would mean M&S shares could no
longer be held by investment funds that only track the index of
Britain's top companies, forcing them to dump the stock.
M&S shares, which have been part of the FTSE 100 since it
started in 1984, have lost about 40% of their value since
January 2018 as the British high street stalwart has struggled
with competition in clothing and food, particularly online.
At Monday's close, the shares were down 1.4%, lagging the
FTSE 100 index, which closed 1% higher.
Goldman Sachs reinstated its coverage of the stock with a
'sell' rating on M&S, which embarked on a major turnaround plan
as fast-fashion chains such as Zara and H&M that have eroded
profit in its clothing business. FTSE Russell, London Stock Exchange-owned index provider,
said Direct Line DLGD.L , Marks & Spencer and Micro Focus
MCRO.L are likely to be removed from the blue-chip index based
on Friday's closing prices.
While, precious metals mining firm Polymetal POLYP.L ,
generic drugmaker Hikma HIK.L and aerospace and defence group
Meggitt MGGT.L are the likely replacements. Polymetal, Hikma
and Meggitt have all been in the top 100 index before.
The final FTSE 100 review will be based on closing prices on
Tuesday, with the results announced after the end of trading on
Wednesday and going into effect on Sept. 23.
Valued at 3.76 billion pounds ($4.6 billion), M&S is ranked
112th in the FTSE 350 of large and mid-cap companies based on
Friday's market capitalisation, a position which would mean
automatic eviction from the FTSE 100.
In order to avoid constant changes to the index as a result
of day-to-day price volatility, companies are only demoted when
they drop below 110 in the ranking.
But the ousting of a British household name has caught
investors' attention.
Adrian Lowcock, head of personal investing, Willis Owen said
it was a sign of the times.
"High Street retailers have been struggling for some time
and M&S continues to look for that balance between quality and
price," he said.
"The wider list at risk of dropping out, if not this time
around possibly next – which includes ITV, Kingfisher,
Sainsbury's and WM Morrison Supermarkets - shows how markets
evolve and trends change."
M&S is only one of just 28 original members still in the
FTSE and one of only 16 with the same name, highlighting how
hard it is to stay at the top for long, A&J Bell investment
director Russ Mould said.
"In a way a spell out of the spotlight may well do it some
good and based on the performance of previous companies that
have fallen out of the UK benchmark it hasn't been too long
before they have returned," said Michael Hewson, chief market
analyst at CMC Markets UK.
The shares trade at a hefty discount to their retail peers
and the broader stock market.
($1 = 0.8145 pounds)
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M&S market cap https://tmsnrt.rs/2kaQI8F
M&S valuation https://tmsnrt.rs/2kerIgP
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