Staples Profit Falls 33 Percent In 1st Quarter

Standard & Poor's cut its recommendation on Staples to "Hold" from "Buy," despite the better-than-expected profit and same-store sales results.

Retail analyst Michael Souers told investors that was because Staples' contract customers are buying items that bring in less profit to Staples.

"We continue to forecast pessimistic business conditions in the near-term," he wrote in a research note, but added he expects the retailer to ultimately gain market share from competitors, some of whom are closing stores, and benefit from the closing of Circuit City Stores Inc.

Staples shares lost 46 cents, or 2.3 percent, to close at $19.93 Wednesday.

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AP Retail Writer Lauren Shepherd in New York contributed to this report.

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