Finally, someone admits to doing something wrong. Circuit City (NASDAQ:CC) CEO Philip Schoonover came right out and told us that he's disappointed in the weak third quarter his company delivered, and that the issues behind it all "are primarily self-induced and are within our control to improve."

Circuit City is trying to remake itself, remodeling the stores and cleaning out a crusty old corporate structure. Management didn't think the process would hurt sales and profits the way it did. The new plan is to slow things down a bit, "focus on execution," and figure out how the new "The City" store concept really works before shoehorning it into every available location.

That sounds like a more responsible approach, not to mention more realistic. Circuit City could still take it a few steps further, though. In a semi-scientific approach that this company would do well to emulate, Blockbuster (NYSE:BBI) is trying out multiple new store layouts for a while, and may eventually roll out a couple of the best ones side by side. Who knows -- perhaps an electronics store with a dedicated play area for the kids could be a hit. At least it'd keep the youngsters occupied when all the video game demos are in other hands.

Circuit City is playing catch-up behind the leading specialist store, Best Buy (NYSE:BBY), but also behind mass retailers like Target (NYSE:TGT), Wal-Mart (NYSE:WMT), and Costco (NASDAQ:COST). These days, Best Buy is 26 times bigger than Circuit City by market cap, though only about three times the size in terms of sales or assets. Over the past year, Circuit City's stock has lost 76% of its value; it now trades in penny-stock land, at less than $5 a share.

In other words, this stock could be a sweet, sweet Cinderella story if Schoonover's gang pulls off a decent turnaround. The trouble is that the improvement is far from guaranteed. This was the fourth quarter in a row of missed Wall Street targets, which hardly inspires confidence even if you don't take much stock in analyst estimates.

So thanks for owning up to your faults, gentlemen. Now, fix them!

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Wal-Mart and Best Buy are Motley Fool Inside Value recommendations, while Costco and Best Buy sit on the Motley Fool Stock Advisor scorecard.

Fool contributor Anders Bylund holds no position in any of the companies discussed here, though he is always a great deal. The Fool has a disclosure policy.