EasyJet is poised to fall out of the FTSE 100 after six years when the index listing London’s biggest public companies is reshuffled this week, while the high street retailer JD Sports is almost certain to be elevated to blue-chip status.
Just Eat, the takeaway ordering platform that has flitted in and out of the top-tier index, is also at risk of dropping back down to the FTSE 250, while generic drugs group Hikma could be relegated less than six months after securing promotion.
ITV, the commercial broadcaster, Tui, the tour operator, and J Sainsbury, the supermarket chain, are also close to the threshold for slipping out.
Marks and Spencer, one of the household-name stocks that was thought to be most vulnerable, looks set to escape, however. While its market capitalisation had dipped below the level needed to stay in the FTSE 100, the store group received a boost from a £601m rights issue it launched last month which should help secure its place.
The composition of the FTSE indices is tweaked every quarter to reflect changes in the market capitalisation of companies.
Companies are bumped out of the FTSE 100 if they are no longer one of the UK’s 110 largest listed groups, or promoted from the FTSE 250 if they score within the top 90 when the markets close on Tuesday.
Prominent companies such as M&S, Sainsbury’s, Tui and easyJet have stumbled in recent quarters as consumer confidence has wobbled and structural changes in the retail and travel industries have caused their market valuations to fall.
While M&S should retain its spot for the next quarter, analysts warn that it remains vulnerable in future reshuffles as the benefits from its historically profitable food division has waned and the store has become more exposed to challenges from online shopping and more nimble rivals.
Laith Khalaf, an analyst at Hargreaves Lansdown, warned that M&S’s food delivery deal with Ocado could help bring much-needed growth but still held risks for shareholders.
“This isn’t the first time M&S has flirted with relegation from the index, and it probably won’t be the last,” he said.
Despite the problems affecting some of the larger traditional retailers, JD Sports has managed to steadily increase both sales and its share price, amassing a market capitalisation of close to £6bn. Its stock has climbed 60 per cent over the past 12 months as the retailer has benefited from the continuing popularity of athleisure wear and a landmark deal to buy US retailer Finish Line.
Helal Miah, an analyst at The Share Centre, warned that the group was not immune to issues on the high street, however. “Despite the company doing well, for us it is one to be wary of, it offers a meagre dividend yield and trades at a premium valuation compared to its peers. Any disappointments will see some abrupt profit-taking.”
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