This error can occur when a subscription is initialized manually, and there is a problem creating the directory in which replication scripts are stored. The error can be caused by a permissions issue: when a subscription is initialized without using a snapshot, the account under which the SQL Server service runs at the Publisher must have write permissions on the snapshot folder at the Distributor.
ConceptsCause and Resolution of Replication Errors
Other ResourcesHow to: Specify the Default Snapshot Location (SQL Server Management Studio)
Initializing a Merge Subscription Without a Snapshot
Initializing a Transactional Subscription Without a Snapshot