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.