Urban Outfitters ($URBN), the young-adult clothier known for its fair share of edgy (and sometimes controversial) items, announced that it is starting a clothing rental service for $88 a month. Shareholders are concerned that the new rental service, called Nuuly, will cut into regular sales.

But Urban Outfitters has bigger problems. A history of deep discounts are already cutting into the company's profits. According to its online marketplace data, Urban Outfitters is essentially giving clothes away.

According to retail data on Urban Outfitters' website, the company lists thousands of items on discount with an average discount of anywhere from 35 to 42 percent on every given day. As of May 9th, 2019, the average discount on over 3,400 items was about 37.8%.

One reason that may be behind Urban Outfitters' deep discounts is how it sources its products. The majority of them are imported, and according to Panjiva, Urban Outfitters works with 101 individual suppliers from China.

China, of course, just got hit with more tariffs on their imports into the United States recently.

It's no wonder, then, that Urban Outfitters' stock is declining despite a 1% increase in comparable sales. Right now, Urban Outfitters' stock is trading down a full 50% of its value at this time last year.

It's possible that Nuuly will bring more customers into Urban Outfitter's struggling retail locations. Through the new clothing rental service, customers can pay a monthly fee to rent up to six items per month and return them to the store. Up to $800 of merchandise can be rented for only $88 a month, which to the average consumer, may or may not seem valuable depending on how often they shop here.

Given the company's regular deep discounts, though, as well as the looming impact on increased tariffs for Chinese imports, Urban Outfitters may be going out of style, and shareholders are continuing to take notice.

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