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3i Group Shares (LON:III) Back on Track Leading Into Earnings – What To Watch

Asktraders News Team trader
Updated 14 May 2025

3i Group's shares (LON: III) have had a strong start to 2025, with the YTD increase of 14.83% an impressive outperformance on the FTSE 100‘s gain of 4.15% over the same period.

Zooming out to the 5 year chart, and the trajectory of the stock appears very healthy, with III shares delivering 440% in gains for long term holders. The pullback between February and April, as broader markets dealt with the initial shock of tariffs, now appears to be behind 3i, with eyes now focused on the next financial report, due tomorrow.

Analysts forecast revenue of £5.637 billion, a 14.6% year-over-year increase, with an EPS of £5.63 GBP, up nearly 42%. These results will be closely watched for confirmation of margin resilience and Action’s recovery post-ERP transition.

Importance of Action

Action’s financial health has been a cornerstone of 3i’s returns. In December 2024, the retailer distributed a £215 million dividend to 3i, further bolstering the group’s liquidity. As of March 2025, Action accounted for approximately 70% of 3i’s net asset value (NAV), highlighting its outsized influence on shareholder returns. Analysts project that Action’s expansion into underserved European markets could support a 17.5% annual revenue growth rate for 3i over the medium term.

On March 20, 2025, 3i Group’s shares fell by 4–8% following a trading update that revealed weaker-than-expected like-for-like (LFL) sales growth at Action, the Dutch discount retailer in which 3i holds a 57.6% stake. Action reported a 17% year-over-year increase in total sales to €2.95 billion for the first 11 weeks of 2025, but LFL growth of 6.1% fell short of analyst expectations, notably Citi’s 9.0% estimate. The underperformance was attributed to temporary inventory availability issues stemming from Action’s enterprise resource planning (ERP) system transition, which disrupted supply chains in select stores and distribution centers.

Despite the Q1 2025 hiccups, Action delivered exceptional results in 2024, with net sales rising 22% to €13.78 billion and operating EBITDA increasing 29% to €2.08 billion. The retailer expanded its store network by 352 locations in 2024 (compared to 303 in 2023) and achieved a 10.3% LFL growth rate, demonstrating sustained demand in the discount retail sector. In July 2024, Action completed a €2.1 billion refinancing and capital restructuring, enabling 3i to reinvest €821 million to increase its equity stake from 54.8% to 57.6%. This move underscored confidence in Action’s long-term value creation, with the company ending 2024 with €814 million in cash.

The View From The Street

Analysts maintain a consensus price target of 4,402, suggesting a perceived 6% upside from current levels.

Key risks include geopolitical uncertainty in Europe, currency fluctuations (39% of NAV is euro-denominated), and reliance on Action’s continued execution. However, 3i’s liquidity position—£792 million in gross cash and a £900 million undrawn revolving credit facility—provides flexibility to navigate macroeconomic headwinds.

3i Group’s journey through early 2025 demonstrates the interplay between short-term volatility and long-term strategic execution. While operational hiccups at Action briefly rattled investor confidence, the underlying growth story remains intact.

With a diversified portfolio, disciplined capital allocation, and a proven ability to capitalise on market dislocations, 3i is well-positioned to deliver compounded returns. The upcoming earnings release and further updates on Action’s performance will be key catalysts to watch.

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