Costco has recently been dragged down by Walmart’s blunders, creating a rare opportunity to purchase shares at a discount. Action Alerts PLUS Portfolio Manager Jim Cramer and Director of Research Jack Mohr discuss why they initiated a new position in Costco after Walmart’s guidance reduction took down the entire retail complex. Cramer and Mohr believe Costco is simply eating Walmart’s lunch -- the company has a differentiated business model that lends itself to taking share from archaic players like Walmart. In their view, Walmart’s waning profitability is largely the result of the fact that it is early in a new, three- to five-year investment cycle, in which expenses are set to outpace sales. This is the death knoll for any retailer, at least in the intermediate term. Costco is on a different level. COST has strong international growth potential and higher margins in international locations. COST’s proven expense structure is in a league of its own. From a sales perspective, the company continues to gain market share due to store expansion and 3%-5% traffic increases. It is truly rare to find a proven international model, and COST has a lot of room to grow in Canada, Mexico, Australia and Asia.