Cash-strapped clothing and homeware brand Joules (JOUL:AIM) looks set to be saved by Next (NXT), although we do not expect the FTSE 100 retailer to buy the company outright.

Next is in talks to invest £15 million in Joules and become a strategic minority shareholder. While it has form in taking equity stakes in troubled retailers, its approach typically involves offering guidance and putting their products on its Total Platform e-commerce system so they can be bought via Next’s website. It doesn’t go as far as owning these businesses in full.

Existing Total Platform clients in which Next has equity interests include the likes of luxury clothing brand Reiss, the UK arm of American clothing company Gap (GPS:NYSE), lingerie brand Victoria’s Secret and start-up luxury menswear brand Aubin.

The advantage for Next is it can offer more products on its website which makes it more attractive to customers, and it also earns a fee for handling the e-commerce needs.

Total Platform is an e-commerce outsourcing service that enables third party retailers to grow their sales without large capital costs, operational risks or time developing sophisticated infrastructure. Put simply, it is a low-cost way for distressed brands to reach more consumers.

Joules recently drafted in KPMG to assist in improving its profitability, cash generation and liquidity headroom as the cost-of-living crisis bites.

Known for its posh wellies, Joules’ shares have received a serious kicking from investors following a string of profit warnings triggered by disappointing sales, supply chain problems and rising costs.

Confirmation that Next was in talks with Joules saw the latter’s share price soar by 34% to 44p on 8 August, albeit still a fraction of the 300p price at which the shares traded last summer.

Next taking equity stakes in retailers has echoes of the modus operandi of Mike Ashley-controlled Frasers (FRAS), the deal-hungry Sports Direct, Evans Cycles and House of Fraser owner. Frasers is different to Next in that it likes outright acquisitions of brands it can slot into its platform.

Frasers continues to find opportunities in a retail sector grappling with rampant cost inflation and consumer confidence. For example, it bought Studio Group and fallen online women’s fashion retailer Missguided out of administration, took a 28.7% stake in Australia-based fashion marketplace MySale (MYSL:AIM) and snapped up online fashion retailer I Saw It First.

These build on strategic stakes in the likes of German fashion brand Hugo Boss (BOSS:ETR) and posh handbag maker Mulberry (MUL:AIM), but in future, Frasers may find it is in competition with Next for retail assets with long-run potential.

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