sWhen a private equity firm’s crown jewel keeps outperforming, investors take notice.
That’s the case with 3i Group PLC (LSE:III), where its major portfolio holding, discount retailer Action, is driving optimism at Citi.
In a recent research note, Citi reiterated its high-conviction 'buy' rating on 3i, highlighting promising signs of accelerating growth at Action, even as near-term metrics shift slightly.
At the heart of Citi’s confidence is Action’s aggressive store expansion strategy, particularly in key European markets like Switzerland and Germany.
While this shift means some existing store sales (known as like-for-like or LFL) are cannibalised by new locations, Citi sees the trade-off as a positive.
The maths is telling: moving some sales from older stores to new ones shaves about 60 basis points off LFL growth.
As a result, Citi has trimmed its 2025 LFL forecast to 7.7%, down from 8.6%, but sees long-term benefits from faster store rollouts.
Why does this matter? Because new store growth not only brings more sales but also suggests that demand is strong enough to support a denser store network.
Citi believes Action’s projections for store potential are still conservative, pointing to untapped "white space" in key regions.
Short-term sales trends also look upbeat. Action reported 8.1% LFL growth for weeks 13–19, and Citi sees the potential for acceleration in the coming weeks, driven in part by supportive weather patterns.
The next set of key performance indicators is expected on June 26 and will give investors another look at momentum.
Financially, Citi hasn’t made big changes to its core earnings forecasts for 3i. However, a recent dip in risk-free rates, a key variable in valuing future cash flows, has led the bank to nudge its target price from £48.50 to £50.00.
Heading towards the close, the shares were trading 1.6% higher at 4,334p.