The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Jennifer Johnson

LONDON, May 14 (Reuters Breakingviews) - Dutch discounter Action has historically thrived amid soaring inflation, and majority owner 3i Group III.L enjoyed the spoils of that success. But Action's latest results reveal a slowdown that could deepen as competition heats up. That raises an awkward question for 3i CEO Simon Borrows: why double down on a fading bet?

Action has been a remarkable investment for 3i, which bought a 45% stake in 2011 for only 134 million pounds. At the end of March, the London-listed investor valued its expanded 65% holding at almost 24 billion pounds, meaning it accounts for over three quarters of 3i's net asset value (NAV). In the last financial year alone, it upped its stake by more than 7 percentage points. However, there are signs that the retail juggernaut, which sells homewares and other non-food-related discount items, may be running out of steam. Chief among them is slowing sales momentum. In 19 weeks to May 10, like-for-like sales growth was 2.4%, versus nearly 7% for the comparable period in 2025.

The group partly attributed the deceleration to a spell of cold and wet weather in key European markets, which meant consumers weren’t buying outdoor items. That wasn’t the case last spring, when a heatwave sent shoppers in search of things like patio furniture and gardening tools. Customer traffic also fell in Action’s German stores following the outbreak of the war in the Middle East at the end of March.

With the situation in the Gulf showing few signs of abating, European consumers are likely preparing themselves for another round of steep price increases. In the past, that has sent them in search of bargains at outlets like Action, which saw higher sales volumes offset its own rising input costs following the Russian invasion of Ukraine. But heightened competition in its key markets could spoil the story this time around.

In 2025, Action's like-for-like sales growth in France, its largest market, was just 1.3%. Borrows cited consumer caution amid geopolitical turmoil , but also highlighted “increased competition and promotional intensity” across the country’s retail sector, which may be a more permanent challenge. Action makes money selling cheap household sprays and tableware. But discount grocers like Aldi and Lidl are increasingly moving into this space as are online retailers like Amazon AMZN.O.

Investors, for their part, don’t appear convinced that historic growth rates can continue. With the shares now hovering at around 2,145 pence, 3i is trading at a near 30% discount to the 3,030 NAV per share figure it reported on March 31. Borrows may reckon that the business is solid and it will thrive in an inflationary environment but if competition proves to be a more powerful force, his decision to double down will look all the more questionable.

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CONTEXT NEWS

Shares in 3i Group plunged by 20% on the morning of May 14, following the release of the UK investment group’s annual results.

Investors were spooked by a slowdown in portfolio company Action’s like-for-like sales growth, which was 2.4% in the 19 weeks to May 10. That’s significantly lower than the 6.8% growth figure it posted for the same period last year.

3i said the deceleration was down to consumer caution in France, and lower traffic in Germany since tensions in the Middle East flared at the end of March.