M&S returns to FTSE 100 as investors cheer turnaround progress
Marks & Spencer (M&S) has secured a return to the FTSE 100 share index, four years after the bellwether retailer was relegated amid a battle for its very future.
FTSE Russell, which manages the constituents of UK stock markets, carries out quarterly reviews based on the companies’ market values.
In addition to M&S, it also promoted drugmakers Dechra and Hikma from the FTSE 250 along with technical products provider Diploma.
Asset manager abrdn, insurer Hiscox, autocatalyst maker Johnson Matthey and housebuilder Persimmon were demoted from the top flight to the mid-cap FTSE 250; the latter a casualty of the current housing market turmoil.
The review was based on their share prices at the market close on Tuesday and the changes will take effect at the start of trading on Monday 18 September.
The headline name to secure promotion is undoubtedly M&S.
Moonpig is among companies returning to the FTSE 250 index following the review
It had traded as a FTSE 100 company since the index was founded in 1984 but was expelled in September 2019 as it battled challenges on many fronts.
The company had been slow to adapt to rising demand for online shopping and was lumbered with a tired, expensive store estate that was unable to compete with rivals’ often cheaper fashion offerings.
The clothing itself was also widely seen as behind the times.
Food has always been its strongest performer in terms of growth but investors took fright in February 2019 when M&S announced its £750m joint venture partnership with Ocado.
Stuart Machin is the current chief executive of M&S. Pic: M&S
It even brought back its best-known motto “this is not just food” PR campaign that year in a bid to bolster sales and boost shareholder confidence but it was not enough to prevent the drop.
M&S had a market value of £3.7bn when it was relegated.
That number has since recovered to £4.4bn, with shares up 70% this year on the back of a sustained improvement in its core numbers thanks to successive turnaround plans finally bearing fruit, the latter led by chief executive Stuart Machin since May 2022.
Its last set of annual results, which covered the 12 months to April, showed an 11.5% rise in clothing and home sales while food revenue was 8.7% higher.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said of its achievements: “The focus of the M&S brand on both quality and price has been a clear advantage and its stock selection has received renewed loyalty from shoppers.
“Shrinking its estate, and closing larger stores in town centres, is paying off, with smaller shops in retail parks offering easy to use click and collect services.
“But there are still challenges ahead, with the longer-term outlook for retail hard to map.”
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Big fall in retail sales in July
Those challenges include the continuing, and shifting, effects of the cost of living crisis on households.
Mr Machin has placed his focus on achieving sustainable growth through a relentless focus on customers.
He told the Mail on Sunday in May: “‘I don’t think we will ever declare victory, definitely not under my leadership.”
Foreign state investors would be allowed to hold stakes of up to 15% in British national newspapers, ministers are set to announce amid a two-year battle to resolve an impasse over The Daily Telegraph’s ownership.
Sky News has learnt that the Department for Culture, Media and Sport could announce as soon as Thursday that the new limit is to be imposed following a consultation lasting several months.
The decision to set the ownership threshold at 15% follows an intensive lobbying campaign by newspaper industry executives concerned that a permanent outright ban could cut off a vital source of funding to an already-embattled industry.
It would mean that RedBird IMI, the Abu Dhabi state-backed fund which owns an option to take full ownership of the Telegraph titles, would be able to play a role in the newspapers’ future.
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RedBird Capital, the US-based fund, has already said it is exploring the possibility of taking full control of the Telegraph, while IMI would have – if the status quo had been maintained – forced to relinquish any involvement in the right-leaning broadsheets.
One industry source said they had been told to expect a statement from Lisa Nandy, the culture secretary, or another DCMS minister, this week, with the amendment potentially being made in the form of a statutory instrument.
Other than RedBird, a number of suitors for the Telegraph have expressed interest but struggled to raise the funding for a deal.
The most notable of these has been Dovid Efune, owner of The New York Sun, who has been trying for months to raise the £550m sought by RedBird IMI to recoup its outlay.
Another potential offer from Todd Boehly, the Chelsea Football Club co-owner, and media tycoon David Montgomery, has yet to materialise.
RedBird IMI paid £600m in 2023 to acquire a call option that was intended to convert into ownership of the Telegraph newspapers and The Spectator magazine.
That objective was thwarted by a change in media ownership laws – which banned any form of foreign state ownership – amid an outcry from parliamentarians.
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The Spectator was then sold last year for £100m to Sir Paul Marshall, the hedge fund billionaire, who has installed Lord Gove, the former cabinet minister, as its editor.
The UAE-based IMI, which is controlled by the UAE’s deputy prime minister and ultimate owner of Manchester City Football Club, Sheikh Mansour bin Zayed Al Nahyan, extended a further £600m to the Barclays to pay off a loan owed to Lloyds Banking Group, with the balance secured against other family-controlled assets.
Other bidders for the Telegraph had included Lord Saatchi, the former advertising mogul, who offered £350m, while Lord Rothermere, the Daily Mail proprietor, pulled out of the bidding last summer amid concerns that he would be blocked on competition grounds.
The Telegraph’s ownership had been left in limbo by a decision taken by Lloyds Banking Group, the principal lender to the Barclay family, to force some of the newspapers’ related corporate entities into a form of insolvency proceedings.
The newspaper auction is being run by Raine Group and Robey Warshaw.
The DCMS declined to comment.
Burberry, the UK’s only global luxury brand, is to cut around 1,700 jobs worldwide over the next two years after reporting a steep financial loss.
The company lost £66m in pre-tax profit in the year ended in March as luxury goods sales fell across the world and the company weathered an “uncertain” environment and a “difficult macroeconomic backdrop”.
A year earlier, it recorded £383m in profit.
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It’s suffered in recent years with the share price falling to such an extent the business was removed from the FTSE 100, the index of most valuable companies listed on the London Stock Exchange.
Despite the financial performance, the company was upbeat, with chief executive Joshua Schulman saying “I am more optimistic than ever that Burberry’s best days are ahead and that we will deliver sustainable profitable growth over time”.
What cuts are being made?
The retailer did not specify any shop closures – in the past year, it closed 26 and also opened 26 stores – but did highlight shift cuts and consolidations.
“We don’t have a store closing programme, per see,” Mr Schulman told investors
The night shift at Burberry’s Castleford factory will be cut, it proposed, saying the shift has resulted in overproduction.
“Significant” investment in the facility will be made, however, as the ambition is to scale up British production “over time”, Mr Schulman said.
Changes to the retail network across the world will be made with shop staff being scheduled around “peak traffic”.
Burberry will be “realigning” shop staff, he said, “so that we can offer the best service” at the busiest times.
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There will also be a “simplification” of Burberry’s regional structure and a “rebalancing” of central and regional responsibilities to reduce duplication and “accelerate decision making” through the retail network.
But the majority of changes will be made to “office space teams” around the world, the CEO said.
Commercial and creative teams have already been consolidated, Burberry’s annual results said.
What’s gone wrong?
Aside from the global slowdown in luxury goods sales over recession fears, additional headwinds have come in the form of President Trump’s tariffs.
“Clearly, the external environment has become more challenging since mid-February”, Mr Schulman told investors.
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Trump’s tariffs: What you need to know
Tariff risks were higher than first planned, the annual results said.
It led the US market to be described by Mr Schulman as “choppy” since February when Mr Trump began announcing tariffs on Mexico, Canada and China, as well as on goods such as steel and cars.
Sales also fell in the Asia Pacific region by 16%, the results showed.
Criticism was levelled at the 2021 British government decision to withdraw VAT refunds for overseas visitors, “which has made the UK the least competitive destination in Europe for tourist shopping”, the results read.
“Business in our UK home market continues to be seriously impacted” by the move.
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