Analysts praise Deckers buy of Tsubo, say products mesh well

Analysts on Wednesday applauded footwear maker Deckers Corp.'s purchase of Tsubo LLC, saying Tsubo shoes will fit in well with Deckers' existing portfolio of Uggs sheepskin boots, Teva sandals and Simple sneakers.

Deckers said Tuesday it bought the high-end casual footwear company Tsubo, which makes boots, sandals and heels, for $6 million in cash plus a potential future earn-out.

JPMorgan analyst Robert Samuels said Tsubo's 20-something target customer and focus on style and comfort is a good fit for Deckers' existing brand strategy.

"We note that the brand's design director, Fiona Adams, was responsible for the very successful launch of Diesel footwear, which helped pave the way for the success of the low profile trend," Samuels wrote.

Also, Tsubo's focus on eco-friendly materials is similar to Decker's Simple brand.

Samuels kept his "Overweight" rating on the stock and said Deckers remains one of the best growth opportunities in the footwear space.

Lazard Capital Markets analyst Todd Slater noted that the purchase price is just 3 percent of the company's $185 million cash that it had at the end of the first quarter.

He noted that Decker bought its most successful brand, Uggs, in 1995 when it was a $14 million brand, and grew it into a $350 million brand.

Slater also said that Tsubo already generates about a quarter of its sales internationally, a higher percentage than its other brands, offering the company "additional global perspective and leverage."

He rates Deckers "Buy."

Deckers shares fell $3.02, or 2.1 percent, to $139.64 during morning trading.