3i Group Sees Revenue Forecasts Raised 11%, Yet Action’s Slowdown Caps Stock Recovery

3i Group's shares fall 34% year-to-date as strong earnings and dividend hike fail to offset concerns over Action's slowing sales growth, despite insider buying.

The market’s mood around 3i Group could hardly be more conflicted. Even as analysts bumped up their 2027 revenue forecast by a hefty 11% and the company posted a 22% return on equity, the stock keeps shedding value. After a report that included a billion-pound profit and a boosted dividend, shares briefly plunged more than 14%. They now trade at €24.74, down almost 34% since the start of the year and barely above their recent floor of €24.37.

Behind that selloff lies a paradox: the underlying portfolio is performing well, but its centrepiece is wobbling. The British investment group said net asset value per share rose 19% to 3,030 pence, and the board proposed a total dividend of 84.5p a share — a 15.7% increase. A share buyback programme of up to £750 million, run through Barclays Capital Securities, has already begun, with 701,317 shares bought back for roughly £15 million.

Yet the market refuses to celebrate. The culprit is Action, the Dutch discount retailer that makes up 65.4% of 3i’s portfolio value. Like-for-like sales growth at Action slowed to 2.4% by early May, down sharply from 6.8% a year earlier. 3i’s management blamed cool weather, a pullback in French consumer spending, and a noticeable decline in foot traffic across German stores.

That deceleration matters far more than any single forecast. Analysts now expect 3i to generate around £6.2 billion in revenue by 2027, 11% above prior estimates, and earnings per share are forecast at £5.77 — growth that would handily beat the industry average of just 0.3% a year. But the stock’s target price has been trimmed by roughly 7%, and the consensus now stands at £35.52, a level that looks distant after the rout.

Insiders, however, are placing their own bets. Finance chief James Hatchley bought shares worth £208,000, and non-executive director Peter McKellar invested £519,000. Both purchases were made at around 2,080 pence a share. Such transactions are often read as expressions of confidence, especially when the stock is under siege.

But they do little to change the immediate calculus. Chairman Simon Borrows pointed to rising inflation and elevated geopolitical risks, warning that the operating environment remains tough, especially for consumer-sensitive investments like Action. While the valuation gap to net asset value is wide, that discount will only shrink if Action’s growth stabilises. If it continues to soften, the market is likely to keep pricing in a steep discount.