Nike Shares surge, boosting consumer ETFs

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Nike (NYSE: NKE) jumped to an all-time high on Friday after an exceptional full-year outlook, lifting exchange-traded funds linked to the consumer discretionary sector.

Friday the IShares US Consumer Goods ETF (IYK) increased by 1.1%, and SPDR Consumer Discretionary Sector (NYSEArca: XLY) gained 0.6%.

Meanwhile, Nike shares jumped 15.0% on Friday. NKE represents 5.4% of the underlying portfolio of IYK and 4.3% of XLY.

Nike has recovered after the sportswear maker projected annual sales exceeding $ 50 billion as the company recovers from the coronavirus pandemic, CNBC reports.

Strengthening prospects, sales in greater China improve as Nike management believes the company can regain the trust of Chinese customers after threats to boycott Western brands over comments expressing concern over forced labor suspected in Xinjiang.

“These are times when strong brands can get stronger, and each quarter that reality becomes even clearer,” Nike CEO John Donahoe said on a conference call Thursday.

What’s more, Nike sees shoppers around the world coming back and buying new edgy sneakers and tracksuits to wear as economies reopen and repressed consumers start to walk out again.

“Management confidence is at an inflexion and the fourth quarter results indicate the digital acceleration of the financial model,” Cowen & Co. analyst John Kernan said in a note to clients, projecting the market capitalization of the company to one day exceed $ 300 billion.

Telsey Advisory Group analyst Cristina Fernández argued that Nike is capitalizing on its membership program, higher full-price selling, data usage and a wholesale model with strong partners like Foot Locker.

“The strong momentum of the Nike brand globally more than offsets the pressure in China and supply chain constraints,” Fernandez said in a note to customers.

At least 12 brokerages have already improved their pricing targets on Nike after the release of the fiscal fourth quarter.

“The company is emerging from the Covid period to become the largest [profit and loss]changes in our hedging universe, ”said Michael Binetti, Credit Suisse analyst.

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