If an item in your store becomes damaged, you will most likely want to adjust that item's inventory out of the store using an adjustment reason called "Damaged."
If that item can still be sold at a reduced price, you have two options:
Instead of adjusting out the item from your inventory, you can just mark it down by changing its Current Price.
You can go ahead and adjust it out of your inventory and adjust it back in as a new item that you will create called "Damaged Item."