FTSE 100 reshuffle: Burberry and Easyjet set to be downgraded

FTSE 100 constituents Burberry and Easyjet are expected to be eliminated from London’s main market next month during a reshuffle.

The main market’s quarterly rebalance is due on 20 September, with the review being based on prices at close on 3 September.

Easyjet managed to claw back into the FTSE 100 in March, but the low-cost carrier has struggled to maintain this success, with its stock price dropping 17 per cent in the last six months.

“The shock of the pandemic may now be in the rear-view mirror, but Easyjet has yet to regain its pre-crisis momentum,” explained Susannah Streeter, head of money and markets at Hargreaves Lansdown.

“Ryanair’s disappointing recent performance put investors on edge and although third quarter numbers landed better than expected, there are still worries that the pent-up demand for travel among consumers may start running out of steam.”

Meanwhile, Burberry’s stock price plunged to a 14-year low this month, making it among the FTSE 100’s worst performers of 2024 so far.

Sales at the luxury retailer were revealed to have fallen by 21 per cent in its results last month, and the firm suspended its dividend as a result.

“The costs of refreshing the store estate have also been onerous and it will take time for Burberry’s brand elevation to reap rewards,” added Streeter.

Who will be moving up into the FTSE 100?

Those set to take the place of the two companies in the main market are real estate investment trust Tritax Big Box and insurer Hiscox.

Tritax recently completed a key acquisition of UK Commercial Property REIT, with Streeter noting its shift in strategy “to capitalise on both large and small warehouses and logistics centres, which are crucial for current e-commerce trends”.

Meanwhile, Hiscox’s share price has been buoyed by speculation of a potential bid from Japan’s Sompo Holdings Inc and Italy’s Assicurazioni Generali Spa.

Tritax’s stock price is up 16.4 per cent over the last year, while Hiscox is up more than 20 per cent.

Other companies on the brink of breaking into the FTSE 100 include Investec and St James’s Place, the latter of which was eliminated from London’s main market in May after 10 years in the index.

The wealth manager’s poor performance saw it plummet to become only the 135th biggest company in the UK, but a recent surprise set of results left analysts shocked and pumped up its share price 26 per cent over the last month.

These two companies are on the brink of eliminating Endeavour Mining and Sports Direct owner Frasers Group from the FTSE 100, but it remains to be seen if their fortunes can change before next month.

In the FTSE 250, new entry Rasperry Pi has soared to success, rising from its IPO offer of 280 pence to 417.2 pence currently.

Rasperry Pi is expected to displace IP Group, which focuses on intellectual property and invests in companies pursuing breakthroughs in life-sciences and technology.

“Although there’s been a slowdown in the fall in net asset values, supply chain disruption, inflation and interest rate trends haven’t been helpful,” said Streeter.

“However, with interest rate cuts eyed on the horizon, increased UK government support expected for science and innovation in the UK, and parts of its portfolio maturing, it has stressed that its long-term fundamentals remain intact.”