Urban Outfitters (URBN) appears to be a solid operator, spitting out returns on equity in a range between 15% to 20% over the past decade (not including fiscal 2018, which was impacted by one-time charges, related to things like tax reform). "Headline" return on invested capital has largely followed suit, since the firm's "invested capital" as advertised is all equity - with no traditional debt or capital leases.
The footnotes reveal where the long-term liabilities are hidden
Like almost every other retailer, Urban Outfitters utilizes a sizable amount of "off-balance sheet" operating leases. These leases are long-term and noncancelable, so capitalizing them makes sense to me. If we choose to capitalize these leases, there are many implications for the firm's balance sheet and profitability ratios.
