Like many other household-goods manufacturers, Clorox
On the first score, Hurricane Katrina has not helped. Unlike Procter & Gamble
It looks as though Clorox is going to risk losing some sales in an attempt to mitigate the higher production costs. The company will be raising prices on about 40% of its portfolio, and the price hikes should go into effect at the turn of the year. That puts a damper on the notion that inflation isn't a problem. Here's a real-life example of higher gas and chemical prices being reflected in higher consumer prices.
It should be noted, though, that Clorox won't be passing on all of its added costs -- hence the lower full fiscal-year guidance. This is where the company's high margins will help. Unrecouped increases in raw-material prices will chew away at the margins, but the company will still be profitable and cash-flow positive.
Of course, Clorox isn't alone in blaming Katrina for its woes. McCormick
I'm not suggesting that Clorox is trying to pull a fast one. I really do believe that the company is getting squeezed by shortages and much higher production costs. As for the stock, it's not looking too expensive relative to past levels. But I wouldn't go so far as to say that it's a screaming bargain, either.
For more on household goods:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).