Bloomberg reported on Friday (August 23) that Burberry Group Plc, the largest luxury goods manufacturer in the UK, is on the brink of being dropped from the FTSE 100 Index.
For the past 15 years, Burberry has been a constituent of the FTSE 100 Index.
Affected by slowing global demand and brand restructuring, Burberry’s stock price has fallen by one-third in the past three months, leading to a decline in its market ranking. This is the benchmark used by the index compiler FTSE Russell to determine constituent stocks.
FTSE Russell is set to announce interim changes in the quarterly review next Tuesday (27th). Burberry has a market value of £2.5 billion (approximately $3.3 billion), ranking 140th among mid-cap stocks in the FTSE 350 Index in the UK, well below the ranking position required for FTSE 100 Index constituents.
According to FTSE Russell’s guidelines, when rebalancing index constituents, stocks ranked 111th or below by market value among qualifying stocks will be removed from the FTSE 100 Index, while stocks rising to 90th or above will be added to the index.
The final adjustment of the FTSE 100 Index will be announced after the European market closes on September 4.
At the time of deadline, Burberry had not responded to Bloomberg’s request for comment.
The luxury goods industry is experiencing a slowdown, particularly with the decline in consumer spending in the Chinese market, which has severely impacted international luxury brands, leading to frequent profit warnings from these companies in recent times.
Furthermore, under the pressure of global currency inflation, foreign consumers have become more price-sensitive.
Following Burberry’s profit warning and suspension of dividends announced last month, a report by UBS Group analyst Zuzanna Pusz indicated that “Burberry’s investments are still under pressure, as the brand is currently entering the unknown territory of restructuring and has not yet given up on positioning itself as a ‘genuine luxury brand’.”