M&S to escape FTSE 100 demotion by ‘skin of its teeth’
High street giant Marks & Spencer looks set to narrowly avoid relegation from Britain’s blue chip share index in this week’s FTSE reshuffle, but airline easyJet is on course to nosedive out of the top tier.
Markets experts said M&S is perilously close to being booted out of the top tier for the first time since the FTSE 100 was launched in 1984 after its shares have tumbled by nearly a fifth over the past six months as sales and profits have come under pressure.
But it is likely to be saved from an embarrassing demotion thanks to its £601 million investor cash call.
M&S is launching the rights issue to help pay for its joint venture with online grocer Ocado to boost its food offering and online delivery service.
EasyJet is not expected to have such a lucky escape, with the smallest market cap of any firm in the FTSE 100 at around £3.6 billion and could be first to go if JD Sports is promoted, AJ Bell said.
The airline has seen shares take a hammering after slipping to a pre-tax loss of £275 million for the six months to March 31 amid rising costs and greater uncertainty due to Brexit.
Its ejection would mark the end of a more than six year tenure in the premier shares league.
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “M&S now looks like it’s going to avoid relegation from the FTSE 100 by the skin of its teeth, and largely thanks to an extra £601 million of capital raised through a rights issue.
“While the fresh capital won’t actually be available until after the FTSE reshuffle calculation, we expect the index provider to give M&S the nod, on the basis the money’s in the post.”
He added easyJet looks to be “going down for sure”, with other firms close to the trapdoor including Just Eat, Hikma Pharmaceuticals and an “outside chance Sainsbury’s and ITV get involved in the dogfight”.
The quarterly reshuffle by the FTSE Russell, which is based on Tuesday’s closing share prices, is expected to see sportswear retailer JD Sports enjoy contrasting fortunes as it is forecast to make its debut in the blue chip index.
Its shares have surged as it has bucked the wider high street gloom with rising sales and profits.
For JD Sports, the promotion would cap a successful recent shares run for the chain and comes in stark contrast to the stock market fortunes of its main rival Sports Direct.
Sports Direct shares have had a difficult year, with the group and its controversial owner Mike Ashley rarely out of the headlines as his empire has sought to expand, snapping up the likes of House of Fraser and Evans Cycles.
JD Sports is likely to be joined on the list for promotion by Cambridge-headquartered software specialist Aveva, which recently sealed a deal to merge with France’s Schneider that effectively doubled the company’s size.
The next set of stock promotions and relegations will be announced after the market closes on Wednesday, based on the previous night’s closing prices, and are set to take effect on June 24.