Circuit City Pulls Plug on Guidance

For its part, Best Buy also pointed out macroeconomic concerns Tuesday and lowered its earnings projection for the year.

Both companies have also been caught by the rapid decline in prices of flat-screen TVs. As well, frequent manufacturer upgrades have forced the retailers to lower prices on older models of TVs, cutting into margins.

"You're left with a more expensive inventory than you just ordered a few weeks ago, but you have no choice," says Scott Rothbort, founder of LakeView Asset Management and a contributor to Street Insight. "It's like car dealerships that want to get rid of the old models."

Rothbort said Costco(COST Quote) is also pressuring retailers with lower-priced electronics, to the point that it is a bigger factor than even behemoth Wal-Mart(WMT Quote).

"Costco has much more floor space for flat-screen TVs," he says.

Craig Johnson, president of consulting firm Customer Growth Partners, sees Circuit City caught between a woofer and a hard place.

He points out that the company doesn't offer the kind of after-market services that Best Buy does, such as Geek Squad, which can provide a recurring revenue stream and insulation against the vagaries of the market. But the company can't compete on pricing with Costco and Wal-Mart.

"They're in a difficult position," he says. "It's not an impossible position, but they're clearly in turnaround mode, and they need to step up the execution to get back in shape."