As Nike writes a comeback story, fixing its operations in China will be a crucial chapter on its path back to full strength for its overall business and its stock price. The legendary brand has struggled globally to rebound from a failed post-pandemic direct-to-consumer strategy under former CEO John Donahoe, who was ousted last year. Elliott Hill, a former longtime Nike executive, replaced Donahoe and started as CEO in mid-October 2024. The 61-year-old Hill was brought in to turn things around. He started at Nike as an intern in 1988 and rose through the ranks to president of consumer and marketplace before his brief retirement in 2020. Since his return, Hill has centered his plans to revive Nike around the love of sport in the U.S. and globally. It’s not going to be easy. Nike shares have been in the doghouse since their record high close of $171.51 each in early November 2021. Turnarounds don’t happen overnight. By his own admission, Hill told CNBC in an interview that aired Monday that it will “take a while.” Speaking to CNBC’s Sara Eisen at the company headquarters in Beaverton, Oregon, Hill made it clear that China is high on his to-do list. “The difference in the China market versus United States as an example is that it’s a mono-brand store. Physical retail is Nike only, and that I think we went too sportswear oriented and not sport enough. Now, we’re reevaluating the concepts that we have in China,” Hill said. The master plan is to refocus on Nike’s connection to sports around the world, including China, the world’s second-biggest economy, which has more than 1.4 billion people. Nike’s new direction is sports-themed stores. “We have a running-led store that is starting to sell through really well [there] because it’s anchored in sport. It has a point of view around sport. There are 5,000 [Nike stores in China], so it’s just going to take time for us to roll those concepts out, but feel good about the consumer-led sports-led concepts there,” Hill told Eisen. Last week, after Nike delivered promising quarter results that indicated progress in Hill’s turnaround, Jim Cramer acknowledged that Nike stock is on the right track. But he said the next leg higher depends on China: “We won’t get to $90 if he hasn’t solved the conundrum of China.” Nike sales in Greater China fell more than 9% to $1.51 billion in the latest quarter, but did exceed expectations. China sales in the quarter were nearly 18% of total Nike revenue. On the post-earnings call, Hill attributed the sales stumble in China to “structural challenges in the marketplace.” Another headwind for Nike in China is U.S.-imposed tariffs that make it more expensive to import goods that are manufactured there. Nike projects roughly $1.5 billion in related costs for fiscal year 2026, up from the $1 billion estimate three months prior. “We now expect the net headwind in fiscal 2026 to increase from approximately 75 basis points to 120 basis points to gross margin,” CFO Matt Friend said on last week’s earnings call. Back in June, Friend described steps Nike has been taking steps to mitigate profitability pressures from tariffs, including optimizing sourcing and production differently across countries; working with suppliers and retail partners to reduce costs; and implementing a “surgical price increase in the United States.” In recent sessions, Nike shares have drifted back down to around $70 after surging 4.5% on Oct. 1 following the earnings release the night before. In a show of confidence, however, we bought an additional 460 shares of Nike on that post-earnings bounce after starting a position with 540 shares on Sept. 26. The Club has an $80 price target on Nike and a buy-equivalent 1 rating . NKE 5Y mountain Nike 5-year performance During the Covid-era Nike shares soared, benefiting from Donahoe’s digital-forward vision that prioritized DTC sales over wholesale partnerships. In 2020, the first year of Donahoe’s tenure as CEO, Nike’s stock rose as much as 44%. A year later, it was hitting records. But from that point, the stock steadily declined as Donahoe’s plan backfired once the pandemic stabilized and shoppers returned to in-store shopping. It’s now almost a year since Hill took the reins at Nike, and Wall Street is more hopeful. KeyBanc upgraded the stock last week to a buy from a hold. “There’s enough visibility to feel comfortable in the broader turnaround story,” said the analysts, who put a $90 price target on Nike shares. They did not have a PT previously. “While we acknowledge some [near-term] choppiness remains from tariffs, digital, and China, we believe that the Sport Offense, innovation pipeline, and marketplace resets will continue to better position Nike for a return to sustainable growth/margin recovery.” Jim agrees. “This fellow Elliott Hill. He’s about sports. He’s competitive,” Jim this week on “Squawk on the Street.” “He will not lose because he’s got such a great brand, and they can make a comeback.” While Hill emphasized that Nike’s recovery won’t be a moonshot, the Club is willing to sit shotgun for the ride. We’re confident in Hill’s moves, which included senior leadership changes, a restoration of retail partnerships, and the launch of his sports-centered “Win Now” strategy. (Jim Cramer’s Charitable Trust is long NKE. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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