Burberry set to drop out of FTSE 100

It was once the height of fashion with both shoppers and investors, but Burberry’s fall from financial grace has been confirmed with the news that the British luxury brand is about to check out of the FTSE 100.
Shares in Burberry have fallen by almost a third in the past three months, valuing the company at £2.5 billion, significantly below the market capitalisation required to retain its place when the quarterly reshuffle of the senior share index is announced next week.
The retailer has suffered amid a global slowdown in demand for luxury goods, which also has hit the sales of rivals such as Kering, the Paris-listed owner of labels including Gucci and Balenciaga, and the Aim-quoted Mulberry.
“In the immediate term, it will drop out a lot of index funds and index trackers will have to sell Burberry. In the very short term, the share price will be under pressure there,” Joachim Klement, an analyst at Liberum, the broker, said.
In Britain about 20 per cent of all equities are held in tracker funds, with the majority of these tracking the FTSE 100. When a company drops out of the index, funds will automatically sell shares in the company. Provisional quarterly changes to the index are due to be announced on Tuesday, based on the session’s closing price.
Burberry issued a profit warning in July, its third since the start of the year, and removed Jonathan Akeroyd as its chief executive.
EasyJet is seen as vulnerable to falling out of the FTSE 100, according to calculations based on its latest closing share price. The budget airline has faced headwinds including softening demand for travel and rising input costs. Shares in easyJet have fallen by more than 10 per cent since the beginning of the year. Mike Ashley’s Frasers Group, which has a market cap of £3.9 billion, also has been been flagged as at risk of demotion to the mid-cap index.
Hiscox, the Lloyd’s of London insurer, could be set to return after a year in the FTSE 250. It fell out of the leading index in September 2023, but shares in Hiscox have risen by 13 per cent since the start of 2024 amid speculation of takeover bids from the Tokyo-based Sompo Holdings Inc and by Assicurazioni Generali Spa, of Italy.
Raspberry Pi has been tipped to become a FTSE 250 constituent after making its stock market debut in June this year. The share price of the mini-computer maker has climbed by 9 per cent since its float, giving the company a market value of £789.5 million.
While the final changes to the indices are not due to be announced until September 4, Klement said that the case of Burberry was “really clear cut” because the retailer was so far below the value required to stay in the FTSE 100. “With all the other stocks, they are really borderline. A week of strong performance in the share price will keep them in,” he said.
Burberry suspended its dividend and announced that it would cut about 400 UK-based jobs as part of a cost-cutting drive. The company’s problems go beyond the general travails of the luxury goods sector, however. It has been attempting to revive its fortunes for several years and under a number of different leaders.
Akeroyd, in his two-and-a-half-year stint, tried to move Burberry from mid-market to upmarket. The brand has now enlisted an American with a background in affordable luxury to lead the business. The arrival of Joshua Schulman, a former boss of Michael Kors and Coach, the American fashion brands, therefore could signal yet another change in direction.
Klement said: “In the long run, I don’t think it [the reshuffle] has much of an impact because in the end the entire fate of Burberry is in the hands of the current management and whether they can manage to pull off a turnaround, as they plan.”