3i Group Discount to NAV Narrows as Action Quarterly Returns Beat Fears

3i Group‘s discount to NAV stood at 16.8% as of the latest update, even after the shares jumped 6% on Thursday following a first-quarter total return of 3% from Action, the European non-food discount retailer that now constitutes roughly three-quarters of 3i’s £32bn portfolio. The result eased fears about the pace of deceleration, though it did not eliminate them.

Where the 3i Group discount to NAV stands after the rally

The stock remains down 40% over the past 12 months, and the current 16.8% discount compares with a 12-month average of 12.9%. That gap reflects how badly sentiment turned when growth in Action’s core French and German markets began to slow in late 2024, triggering a sharp de-rating that cut 3i shares roughly in half before the partial recovery began.

The 25 June AGM update was the first signal that the selloff may have run ahead of the fundamentals. At that point, Proactive Investors reported that Action’s like-for-like sales growth of 3.3% in the year to 21 June came in below prior full-year guidance of between 4% and 5%, but was ahead of the worst-case readings the market had priced in. Action had opened 105 stores by that date, keeping it on track for at least 400 new openings in the year.

Thursday’s update added texture to that picture. In the six months to 28 June, operating EBITDA rose 13% to €1.1bn, and the store count reached 3,423, up 121 in the half. The 3% total first-quarter return, reported against negative currency movements, was enough to send the shares up another 6%.

Action’s full-year numbers and what they imply

For context on the scale of what 3i holds, Action’s full 2025 financial year produced net sales of €16,000 million and operating EBITDA of €2,367 million, according to 3i’s Capital Markets Seminar disclosure. Those figures were 16% and 14% higher respectively than 2024. Like-for-like growth for the full year came in at 4.9%, sitting at the upper end of that prior guidance range, and 384 stores were added. The operating EBITDA margin was 14.8%, or 15.0% excluding a one-off €26 million payment to staff marking Action’s 3,000th store.

Compare that with the LTM figure from late 2023, when Action’s net sales were €11,324 million and operating EBITDA was €1,615 million, per the 3i Annual Report and Accounts 2024. The compound run of expansion since then has been considerable. Action has also been voted the favourite retail brand of the French public four consecutive years running, from 2023 through 2026, a measure of brand penetration that carries its own defensive quality in the core market.

3i’s H1 FY2026 results for the six months to 30 September 2025 recorded a group total return of 13%. In September 2025, 3i also acquired an additional 2.2% of Action equity from GIC in exchange for 19.9 million newly issued 3i ordinary shares, increasing its already dominant stake at Action’s carrying value as at 30 June 2025. The group’s balance sheet remains conservative, with gross cash of £724m and gearing of just 2%. A £750m share buyback is running alongside a trailing dividend yield of 3.1%, with the 48p final dividend paid tomorrow.

The US expansion: the thesis and the risk

The debate about 3i’s valuation increasingly centres on one forward question: whether Action can replicate its European model in the United States. According to the Capital Markets Seminar, the first US store is planned for late 2027 or early 2028, with an initial rollout targeting 20 locations and an ambition to reach roughly 100 US stores by end-2030. A dedicated US organisation is being built, blending Action’s European operational team with US retail professionals.

The US is a graveyard of European discount retail ambitions. The initial phase is modest enough that failure would not wreck the existing business, but the market will likely price in some probability of success (or failure) well before the first store opens. If the rollout stalls, the 3i Group discount to NAV is unlikely to close quickly. If the concept travels, the re-rating would be substantial.

The nearer-term test is simpler: whether Action’s LFL trajectory, now running below the 4%–5% guidance range that held through most of 2024, stabilises or softens further into the second half. That number, more than any store-count milestone, is what the market will be watching when the next trading update lands.