Shares of Office Depot Inc. fell nearly 5 percent on Friday, a day after the office supplies retailer said a soft U.S. economy will hurt its domestic sales and quarterly earnings.

The company said it now expects its second-quarter sales at established North American retail stores to be down 4 to 5 percent, a decline that comes on the heels of a 3 percent drop in the first quarter.

The Delray Beach, Florida-based company attributed the first-quarter decline to lower sales of personal computers because of the launch of Microsoft Corp.'s Windows Vista operating system, which has gotten mixed reviews from consumers, as well as a drop in demand for office furniture.

A weak economy has also hurt its North American Business Solutions division, the company said.

We believe the recent slowdown in the economy continues to impact Office Depot's results, Deutsche Bank analyst Mike Baker wrote in a June 22 research note.

With the economy weaker than it was a year ago, we believe a down quarter makes sense. We are also reducing estimates in the back half, wrote Baker, who has a buy rating on the stock.

Lehman Brothers cut its price target on the stock to $34 from $36.

Office Depots shares were down 4.6 percent, or $1.47, at $30.34 in afternoon trading on the New York Stock Exchange.

Florida Lehman brothers