Hedge funds are betting millions on Marks & Spencer crashing out of the FTSE 100 as its sales fall and share price plummets.
The 134-year-old company – which has been on the blue-chip index since it was created in 1984 – has become one of the UK’s most shorted stocks ahead of publishing its annual results on Wednesday.
Analysts are braced for M&S to reveal yet another drop in annual profits, with fears growing that its food arm – previously a star performer – may also have fallen into decline. And more store closures – up to 100 instead of 60 already planned – are reportedly due to be announced this week.
Passing trade: Analysts are braced for M&S to reveal yet another drop in annual profits
A further drop in M&S’s share price could see the company, currently placed 98th in the FTSE 100, relegated from the blue-chip index in a reshuffle coming at the end of the month. It would also earn millions for hedge funds, including Marshall Wace, Blackrock, Pelham Long and Lone Pine Capital, that are shorting M&S shares – betting that the price is about to plunge.
M&S was worth about £4.7 billion when the markets closed on Friday, but had been worth as much as £10 billion just three years ago. In the past year alone its share price has fallen by more than 26 per cent.
A 40 per cent surge in the value of online grocer Ocado to £5.3 billion last week on the back of a deal in the US could see it promoted to the FTSE100 in M&S’s place. Hedge funds that shorted Ocado shares lost an estimated £100 million when the deal with Kroger was announced.
Although M&S’s relegation from the FTSE 100 would be largely symbolic, it would still be a significant moment for such a staple of the British High Street.
Last night a spokesman for M&S declined to comment.
The London-based company, which was founded in 1884, has been struggling in recent years as it alienated its traditional shoppers while trying to keep up with changing fashion tastes to win new customers.
Dwindling sales and profits have seen it tumble towards the bottom of the FTSE, with online fashion rival Asos last year leaping past it in value.
And being replaced in the index of Britain’s most valuable firms by Ocado would be particularly ironic because its chairman is Stuart Rose – a former executive chairman of M&S.
The latest blow comes as M&S bosses are trying to mount a fightback against increased competition and a squeeze on consumer spending.
As part of its overhaul, M&S has closed stores, slashed hundreds of jobs and pledged to cut prices in a bid to revive the brand and counter the growth of discount supermarkets such as Aldi and Lidl.
The retailer announced it was overhauling its strategy again in November, and in March it parachuted in Stuart Machin, chairman Archie Norman’s former protege, as head of food. He reports to chief executive Steve Rowe.
Many analysts are expecting its results on Wednesday to reveal that food sales have dropped by about 0.2 per cent, while some believe they could have fallen by as much as 1.1 per cent.
Clothing sales are expected to have dropped 1.1 per cent.