Nike (NYSE: NKE) beat earnings and revenue expectations in its fiscal third quarter. But despite this win, shares dropped sharply after the report. Why were investors spooked? First, expectations were low, so beating those low expectations wasn’t an enormous achievement. But the largest reason for the stock’s decline is probably going management’s outlook. In brief, it appears like fiscal Q4 can be even worse than fiscal Q3.

Is that this pullback a buying opportunity for investors, or is it a warning sign to remain away?

Hill and his team are attempting to tug the corporate out of a rut brought on by strategic decisions made in previous years. In the course of the COVID pandemic, the corporate leaned heavily on the newest styles while pulling back from key wholesale partnerships. This worked within the short term but ultimately backfired over the long run. Today, Nike is working to rebuild those relationships and clear excess inventory, even when it comes at the fee of profitability.

The corporate’s disappointing state is obvious in its quarterly results. Sure, the sportswear giant reported earnings of $0.54 per share, well ahead of the $0.29 analysts were expecting. But those earnings were down from $0.77 within the year-ago quarter. Moreover, revenue declined 9% 12 months over 12 months to $11.3 billion.

Nike CEO Elliott Hill didn’t sugarcoat it. During Nike’s fiscal third-quarter earnings call, he said he was “not satisfied” with the corporate’s results.

Capturing some specific areas of trouble within the quarter, Nike’s direct-to-consumer sales fell 12% 12 months over 12 months, wholesale revenue declined 7%, and gross profit margin contracted 330 basis points to 41.5% because of heavy markdowns.

Management’s commentary about its expectations for the present quarter actually didn’t help calm investors. In the course of the call, Nike chief financial officer Matt Friend said the corporate expected the short-term headwinds from its strategic efforts to be even worse in fiscal Q4.

Making matters trickier, the negative impact on its business is predicted to be magnified by “several external aspects that create uncertainty in the present operating environment, including geopolitical dynamics, latest tariffs, volatile foreign exchange rates, and tax regulations, in addition to the impact of this uncertainty and other macro aspects on consumer confidence,” Friend explained.

Specifically, Nike guided for fourth-quarter revenue to be down “within the mid-teens range, albeit on the low end.” Further, management forecast its gross profit margin to be down 400 to 500 basis points 12 months over 12 months.