Urban Outfitters is 'losing momentum'

Urban Outfitters' prices are staying flat, while competitors are getting teens to spend more.

Despite rolling out higher-ticket items like Adidas shoes and Calvin Klein underwear, the average price at Urban Outfitters was unchanged in the third quarter, analyst Eric Beder at Wunderlich Securities wrote in a note to clients.

This means that Urban is having to sell merchandise on sale and clearance rather than full-price, according to Beder.

Competitors American Eagle and Hollister both sold merchandise at higher prices, an indication the companies' merchandise assortment and marketing strategies are working.

"We are increasingly worried that Urban Outfitters is losing momentum to its other teen competitors," Beder wrote in the note.

His firm downgraded Urban's shares to "hold" from "buy," an indication that analysts believe the investment is risky. Shares have declined by about 20% in the past 6 months.

Urban is the fifth-most popular brand among upper-income teens, behind Nike, Forever 21, American Eagle, and Ralph Lauren, according to research firm Piper Jaffray's recent survey on teen spending.

The retailer, along with Abercrombie & Fitch, American Eagle, and Aeropostale, has been hurt by fast fashion companies like Forever 21 and H&M, which offer ultra-trendy items at a fraction of the price.

While these companies have made steps to offer cheaper clothing, they are still much more expensive than fast fashion. They have to rely on smart marketing and advertising to get teens to shell out for their products.

And it's harder than ever to capture those dollars.

A recent report by Morgan Stanley shows that millennials are spending more on expenses like rent, cellphones, and personal services than young people a decade ago.

This leaves less money for buying clothes.