I’m pretty sure there is no serious investor who doesn’t rate Warren Buffett as an icon. The ‘Sage of Omaha’ lays down investment guidelines that usually defy contradiction, but like the Oracle in Ancient Greece, the advice is not always straightforward. For instance, I was throwing my investment spyglass over the British cycling and motor parts retailer Halfords plc recently. Using Buffett’s criteria that a target business should be simple and easily understood; the UK operation ranked highly. But the ‘sage’ also recommends that any investment should have a ‘moat’ (meaning a competitive advantage in relation to its competitors) and Halfords does not score so well under that heading, as its recent share price trend suggests.

Halfords has an interesting history and has, in its time, had many owners. Burma Oil was the most recent, prior to its floatation 15 years ago. Today the UK cycles and car parts retailer has outlets all over the UK, with 24 in Ireland, and is valued by the stock market at £473m (€547m).

It recently offloaded its camping and leisure business to focus on motoring and bicycles. Motor-related products account for more than two-thirds of total revenue and include car parts, accessories, car servicing and aftercare.

The company claims that it is uniquely placed by providing end-to-end solutions for car care. Interestingly, declining new car sales are actually a tailwind for Halfords, as older models on the road means a greater need for parts and servicing.

The cycling business, while competitive, has grown on the back of cycling as a health fad. However, the company sees future growth in the less vigorous electric bikes and scooters where it can squeeze a better profit margin.

Most of Halfords bikes are own brands, with names like Carrera, Boardman or Apollo, with prices ranging from £130 to £3,500. As the company buys its bicycles in US dollars from the Far East, this could be a problem if the pound weakens further, post Brexit.

The appointment of new CEO Graham Stapleton, poached from Dixon Carphone, saw him produce a new growth strategy.

However, investors were not impressed and the share price fell. Stapleton planned to pour more money into the business, with capital investment rising from £40m to £60m per year for store refurbishment and improving digital platforms. Sensibly these ambitious plans have been trimmed as storm clouds are gathering.

Christmas trading saw sales fall, margins dip and profit forecasts are not overly optimistic. Stapleton’s plan of being ahead of the curve when bikes and cars will inevitably need new technology as well as more complex and specialist services will have to wait.

As will the strategy of the doubling of its high-end specialist shops, Cycle Republic, to 250 in total.

Halfords financials over the years have been less than inspiring, with pre-tax profit declining by 17pc in the last seven years and overall revenue growth in the same period has been pedestrian.

While revenues last year at £1.1bn were up, investors have not been carried away.

Its shares trade at 239p, down from a yearly high of 390p, and near a decade low. The company’s profit warning during the year hasn’t helped the share price.

Unfortunately profit margins which have declined in the last three years are now in low single figures. The group has been reshaping its real estate in that it has closed some of its traditional stores, and refurbished 36 stores and six auto centres. As a result it expects to reduce its rent bill by more than £1m.

Some observers feel the company missed the boat by not acquiring its smaller, loss-making rival Evans Cycles chain; it was snapped up by Mike Ashley’s Sports Direct. Halfords has committed to grow its dividend, but with free cash flow of £40m and dividend payments costing £35m coupled with high street woes, this promise could be under threat. Halfords may have to do more to get some excitement back into the share price which at the present moment should be avoided.

• Nothing in this section should be taken as a recommendation, either explicit or implicit to buy

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