Shares in 3i Group PLC (LSE:III) fell sharply to their lowest level since early 2024 after the private equity firm reported good growth from its main investment, discounter Action,
Action also confirmed it had identified "clear potential" for its discount format in the United States after an in-depth market study, with a first store targeted for somewhere in the south-east of the US by end of 2027 or early 2028.
The sharp fall in the shares may reflect market worries about the investment needed in any attempt by Action to penetrate the highly competitive American market.
3i shares dropped 16% to 2,344p, falling deeper as the session wore on, after the group held a capital markets seminar on Action, revealing it grew net sales 16% to €16 billion in 2025 and added 384 stores across the year.
The update, while solid, might also have fell short of the elevated expectations baked into 3i's valuation.
Action guided for like-for-like sales growth of 4-5% in 2026 and said it would hold its operating margin at 14.8%, with at least 400 new store openings planned.
France, Action's largest market, showed signs of recovery with like-for-like growth of 0.9% in the first 12 weeks of the year, though that remained below the performance of the rest of the estate.
Analysts at Citi recently calculated that 3i shares, before the Action update, were trading around 15% below its net asset value estimate, with Action implicitly valued at just 20 times 2027 forecast earnings, a level that priced in sales growth of 3-4% over the medium term.
Earlier, RBC Capital Markets suggested Action may be entering a period of diminishing returns as macroeconomic pressures mount and competitive headwinds intensify.
RBC's caution was based on Action trades at around 28 times 2026 earnings, more than some other large European retailers, such as 24 times for Inditex, while warning that growth in the discount retail sector was slowing as the post-inflation trading-down trend among middle and higher-income shoppers began to fade.