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Costco about to blaze trails into new area?

Thursday, 31 Oct 2013 | 6:35 PM ET
Costco CEO: Overall merchandising very strong
Thursday, 31 Oct 2013 | 6:25 PM ET
Costco Wholesale Corporation CEO Craig Jelinek discusses whether the company is different now without former CEO Jim Sinegal, whether his company is changing the behavior of its suppliers and the state of retail.

(Click for video linked to a searchable transcript of this Mad Money segment)

CEO Craig Jelinek tells Cramer he wants to see Costco 'get bigger' in this business.

"I'd like to see us get bigger into cosmetics," Jelinek admitted to Cramer during an interview. "We'd like to have companies such as Estee Lauder and Clinique sell to us – we're looking at that business. We think there's a big opportunity there."

The commentary speaks volumes to Cramer.

The Mad Money host has been a fan of Costco for quite some time, in part because of the way in which Costco understands its customers and always tries to improve the shopping experience for them.

Costco CEO Craig Jelinek (left) and Jim Cramer at a store
Source: CNBC
Costco CEO Craig Jelinek (left) and Jim Cramer at a store

The extension into cosmetics is just one example of that philosophy at work. "We always try to do the right thing by our customers," added Jelinek.

"It's created great loyalty," Cramer noted. "90% of Costco customers renew their membership each year."

That loyalty may account for the premium investors are willing to pay for the stock.

Costco trades at roughly 22 times expected earnings, well above the multiples for competitors such as Wal-Mart and Target, which trade near 13 times expected profit, according to Thomson Reuters data.

However, in this case, Cramer thinks the multiple is warranted.

Last month, while so many other stores struggled, Costco said September sales rose 3 percent, reminded Cramer.

Also the company has significant growth prospects.

With 637 locations already, Costco plans to open 36 new stores, with 18 planned for the United States, 7 in Asia and 2 in Spain, a new country for the company.

"We're excited about Spain," said Jelinkek.

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And, Costco has good leadership, a strong balance sheet, healthy profit margins and as the nation's 4th largest retailer, sizable market share.

All told, "This company may be unstoppable," Cramer added.

If you watch Mad Money regularly, you know Cramer often says 'buy what you know'. In this case, Cramer is putting money where his mouth is. He's a regular Costco shopper and he own shares of Costco on behalf of his charitable trust.

Call Cramer: 1-800-743-CNBC

Questions for Cramer? madmoney@cnbc.com

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com

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