UPDATE: Morgan Stanley Initiates Coverage on Staples

In a note released Tuesday morning, Morgan Stanley analyst, Simeon Gutman initiated coverage on Staples, Inc.

with an Underweight rating and an $11 price target. The main tone of Gutman's note was: it's going to get worse before it gets better. He noted that the omni-channel transitions are turning out to be more costly and last longer than expected, which will put pressure on margins in the near-term. Although Staples is said to have best-in-class execution and customer satisfaction, Gutman warned that, according to the firm's Alphawise survey, spending for office products over the next 12 months is only expected to rise ~1 percent. Looking to next year, Gutman is estimating a 2015 EPS of $0.95 and a EBIT margin decline 10 basis point larger than the consensus.