* M&S has been FTSE 100 member since index created in 1984
* Company has struggled with tough competition
* Final results of quarterly FTSE 100 reshuffle due Wednesday
* Micro Focus, Direct Line also on the cards for demotion
* Polymetal, Hikma, Meggitt likely replacements (Adds details from FTSE press release, investor comments)
By Josephine Mason
LONDON, Sept 2 (Reuters) - Marks & Spencer shares fell on Monday on expectations the 135-year old retailer will be relegated from London's FTSE 100 index blue-chip stock market for the first time and a "sell" rating from Goldman Sachs.
Removal from the blue chip index in its quarterly review would be another blow for Archie Norman, who became M&S chairman two years ago to work alongside Steve Rowe, who was named CEO in 2016 and has been with the company for three decades.
Losing FTSE 100 membership would mean M&S shares could no longer be held by investment funds that only track the index of Britain's top companies, forcing them to dump the stock.
M&S shares, which have been part of the FTSE 100 since it started in 1984, have lost about 40% of their value since January 2018 as the British high street stalwart has struggled with competition in clothing and food, particularly online.
At Monday's close, the shares were down 1.4%, lagging the FTSE 100 index, which closed 1% higher.
Goldman Sachs reinstated its coverage of the stock with a 'sell' rating on M&S, which embarked on a major turnaround plan as fast-fashion chains such as Zara and H&M that have eroded profit in its clothing business.
FTSE Russell, London Stock Exchange-owned index provider, said Direct Line, Marks & Spencer and Micro Focus are likely to be removed from the blue-chip index based on Friday's closing prices.
While, precious metals mining firm Polymetal, generic drugmaker Hikma and aerospace and defence group Meggitt are the likely replacements. Polymetal, Hikma and Meggitt have all been in the top 100 index before.
The final FTSE 100 review will be based on closing prices on Tuesday, with the results announced after the end of trading on Wednesday and going into effect on Sept. 23.
Valued at 3.76 billion pounds ($4.6 billion), M&S is ranked 112th in the FTSE 350 of large and mid-cap companies based on Friday's market capitalisation, a position which would mean automatic eviction from the FTSE 100.
In order to avoid constant changes to the index as a result of day-to-day price volatility, companies are only demoted when they drop below 110 in the ranking.
But the ousting of a British household name has caught investors' attention.
Adrian Lowcock, head of personal investing, Willis Owen said it was a sign of the times.
"High Street retailers have been struggling for some time and M&S continues to look for that balance between quality and price," he said.
"The wider list at risk of dropping out, if not this time around possibly next – which includes ITV, Kingfisher, Sainsbury's and WM Morrison Supermarkets - shows how markets evolve and trends change."
M&S is only one of just 28 original members still in the FTSE and one of only 16 with the same name, highlighting how hard it is to stay at the top for long, A&J Bell investment director Russ Mould said.
"In a way a spell out of the spotlight may well do it some good and based on the performance of previous companies that have fallen out of the UK benchmark it hasn’t been too long before they have returned," said Michael Hewson, chief market analyst at CMC Markets UK.
The shares trade at a hefty discount to their retail peers and the broader stock market.
($1 = 0.8145 pounds)
(Reporting by Josephine Mason, editing by Louise Heavens/Alexander Smith/Jane Merriman)