Its comparable sales in the quarter ended Jan. 29 declined 2.3% compared with a year earlier, worse than the 1% to 2% drop its guidance implied, and earnings per share of $2.62 were below analysts’ consensus estimate of $3.10.

Best Buy is the sole surviving consumer-electronics specialty store of national scale, but even it couldn’t dodge supply-chain issues. Inventory shortages across certain categories—especially mobile phones and computing—were even worse than the company had expected. Another bottleneck was labor shortages: The Omicron wave resulted in high levels of employee call-outs, which led to a temporary reduction in store hours in January.

Despite the sobering numbers, Best Buy’s shares jumped almost 8% by the afternoon. Part of that is because of the seasonal hangover Best Buy shares tend to see post-Black Friday.

Best Buy’s shares reached their all-time peak of $138 a share ahead of 2021’s big shopping day before declining precipitously after conservative guidance for the holiday quarter. Even following Thursday’s rally, Best Buy’s shares are trading 21% off their peak.

Just as significant was the company’s upbeat outlook. This year the company expects revenue to shrink, but it expects it to then rebound to as much as $56.5 billion by 2024, which would be 9% more than what it managed in 2021. That is an upgrade from its prior guidance and above Wall Street expectations. Best Buy also expects operating margins to improve to 6.3%-6.8% by that year—an ambitious target given last year’s 6% rate.

With stimulus dollars exhausted, consumers are expected to slow down spending on consumer electronics, a lot of which are one-off big ticket items for many households. NPD Group expects industrywide consumer electronics sales to keep declining year over year until 2024. That means growth will depend more heavily on emerging categories like Best Buy Health, outdoor living (Best Buy bought Yardbird, an outdoor furniture company, last year) and metaverse-related categories such as virtual-reality headsets. The company is also betting that Totaltech, the company’s relatively new membership program, will scale to a level that will boost margins.

The early evidence is encouraging. Best Buy figures that Totaltech members are spending 20% more than they would have without the membership. It is unclear, though, how much the metaverse will affect electronics buying behavior. Best Buy said sales of virtual-reality headsets doubled last year compared with 2020.

Anthony Chukumba,

equity analyst at Loop Capital, wrote in a report earlier this year that the chain is well-positioned to benefit from any growth in the metaverse, which could lead to a “massive PC upgrade cycle” and “exponential growth” in VR and augmented-reality devices.

Over the past few years, Best Buy was able to grow its revenue and profitability through tangible, easy-to-understand steps such as through finding operational efficiencies and consistently superior customer service. Betting on its encore requires a larger leap of faith from investors.

Write to Jinjoo Lee at jinjoo.lee@wsj.com