A look at its rival reveals that consumer electronics retailing is hot, but

Circuit City

(CC) - Get Report

still hasn't come in from the cold.

The embattled retailer, which was robbed years ago of its lead position in the electronics race, reported Friday that its first-quarter loss widened unexpectedly thanks to high costs and languishing sales.

Circuit City reported a loss from continuing operations for the quarter totaling $13.1 million, or 7 cents a share, compared with $5.2 million, or 3 cents a share, in the same quarter last year. Wall Street analysts were expecting an improvement to a loss of 2 cents a share.

The company's shares were recently down 74 cents, or 4.2%, to $16.91.

On the top line, Circuit City reported a 6.4% gain in sales from a year ago to $2.23 billion, but same-store sales, those at stores open at least a year, were flat.

In a sharp contrast, Circuit City's chief rival,

Best Buy

(BBY) - Get Report

, earlier this week reported an 85% increase in earnings for the quarter on a 4.5% jump in comps. Rick Weinhart, an analyst with Harris Nesbitt, points to the disparity between the two companies' performance as evidence that Best Buy has continued to "clobber" Circuit City.

Circuit City's sales figures were actually in line with Weinhart's forecast, but he says Best Buy's stellar performance in the sector should have foreshadowed better-than-expected results from Circuit City as well, and Friday's news amounts to a disappointment. Specifically, he points to its comparable revenue in information technology sales, which Circuit City said suffered a double-digit drop.

"Best Buy is clearly continuing to grab market share at a decent clip," Weinhart says.

Furthermore, he said the unexpected leakage on the retailer's cost side was especially troubling. One-time charges included $11.9 million in pretax expenses to write down inventory related to rebranding the company's Canadian stores that had operated under the

RadioShack

(RSH)

brand name.

The company also reported $4.9 million in pretax costs for the U.S. business associated with consulting services to improve store productivity, merchandising and marketing.

However, costs were also high on an operating basis.

"They missed operating margins by about 50 basis points relative to my model," Weinhart says.

The disappointment brought Circuit City's shares back below the $17 level. In March, Circuit City rejected a $17-a-share buyout offer from Boston hedge fund Highfields Capital. The bidder expressed dissatisfaction with management's performance and proposed taking the company private in order to fix problems away from the glare of the financial markets.

Now, Circuit City trades at roughly 21 times its earnings estimates through 2007, while Best Buy trades closer to 18 times its corresponding estimates. While few observers would suggest that Circuit City has brighter prospects than its best-in-breed competitor, the market appears to see more room for improvement in Circuit City's performance.

Hopefully, no one is holding their breath.