Expectations have been very low for L Brands (NYSE:LB), due to the weak performance of the Victoria's Secret brand. After initially cutting its outlook for the holiday quarter, the company reported better-than-expected earnings for the fourth quarter. 

Non-GAAP (adjusted) earnings of $1.88 were down from $2.14 in the year-ago period but beat the consensus analyst estimate of $1.86. Revenue also came in slightly ahead of expectations at $4.71 billion, but was down 3% year over year, as the Victoria's Secret business continued to pressure the top and bottom line for the company. 

A Victoria's Secret store.

Image source: L Brands.

Same old story, but there's opportunity on the horizon

The stock is down about 3% as of 10:30 a.m. on Thursday, which is understandable even with the earnings beat. It's not impressive to outperform already low expectations. While the Bath & Body Works business is growing, with comparable sales up 10%, Victoria's Secret saw its comparable sales fall 10% in the fourth quarter. 

On Feb. 20, L Brands announced Sycamore Partners would acquire a 55% interest in Victoria's Secret, leaving L Brands with a minority stake of 45%. Sycamore has extensive experience in the retail industry. Management believes this will allow investors to properly value the Bath & Body Works business, which comprises most of the company's operating income, while allowing Sycamore to do a makeover of the underwear business to get it growing again. 

With L Brands retaining a 45% interest in Victoria's Secret, shareholders will still be able to benefit if the brand takes off again. It will be an uphill climb for VS, but if (and it's a big "if") the iconic apparel brand reaches its historic profitability levels, the stock could take off as well.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.