It’s hard to argue with the claim that retail chain Victoria’s Secret brought sexy lingerie to the mainstream, out from the backwater of catalogs and specialty stores that most consumers wouldn’t be caught dead in. Ironically, however, Victoria’s Secret’s original incarnation was as a specialty catalog.

#-ad_banner-#Founded in 1977, the original target customers of the brand were men who were too embarrassed to buy lingerie for their wives or girlfriends at department stores. But after struggling to the edge of bankruptcy, the business was bought in 1982 by rising mall retailer The Limited, now L Brands (NYSE: LB). The new owner shifted the brand’s focus toward women and translated the catalog into physical stores. And this strategy worked wonders; Victoria’s Secret was off to the races with over 300 locations by 1987.

Why the focus on this division of L Brands? Because Victoria’s Secret is L Brands. The chain contributes 63% of the company’s annual revenue, which has averaged nearly $11.5 billion over the last three years. And the stock is on sale.

As a whole, the retail sector has had a rough go, especially recently due to lackluster holiday sales reports. The performance of the Retail Sector SPDR ETF (NYSE: XRT) tells the tale.

L Brands’ chart is even uglier than the sector as a whole. Comparable sales for the five-week period ending December 31, 2016 were off by about 1%. The company also guided lower for fourth-quarter EPS to $1.85 from $2.00. LB shares have plummeted by almost 35% over the past year.

But despite these problems, net sales for the 48-week period ending on the same day grew by 4%. This means the longer trend is better, and I’ll take that any day.

Drilling down deeper into the numbers, L Brands is rock solid, especially in the tough retail world. Sales have grown at an average annual rate of 4.8% over the last five years to $12.2 billion from $10.4 billion. Net margins have increased at 5% average annual clip for the same time period to 10.3% from 8.2%, an incredibly strong number in the razor-thin-margin world of retail.

The primary driver of this growth is L Brands’ Bath & Body Works division. Contributing 30% of the company’s annual revenue, Bath and Body Works delivered 5% overall sales growth for 2016 and 3% increases for the crucial 5-week holiday period. These advances narrowed the company’s backslide to the previously mentioned 1% decline.

And while management is cautious going forward, the projections are encouraging. 2017 revenues are expected to grow by 3.6%. However, EPS is expected to shrink by about 15% to $3.59 from 2016’s $4.22.

The culprit seems to be the recent closing of all stores from the company’s shrinking The Limited brand. On January 8, L Brands abruptly shuttered all 250 of its remaining The Limited stores. While the company will incur charges in the near term, the longer term outcome should be a net positive freeing of capital, allowing management to focus on the flagship Victoria’s Secret and Bath & Body Works brands.

The balance sheet is also in good shape. Operating cash flow is at $1.9 billion and long-term debt to capitalization sits at an acceptable 30%.

Another strong factor is chairman and CEO Les Wexner, who is still at the helm as the longest-serving CEO of a Fortune 500 company. He also owns 12.1% of the outstanding shares of LB. His wife Abigail is a board member. Wexner earned his retail stripes working in his parents’ clothing store in Columbus, Ohio. It’s still very much a family-run business, which does make a difference.

Risks To Consider: The biggest risk is overall weakness in the retail sector. Consumer spending is always dependent on a healthy economy and a confident consumer. While there seems to be some optimism on the horizon with the incoming Trump administration, the present numbers aren’t quite there. L Brands’ strength compared to its peers are its strong specialty brands, seasoned management, and superior margins.

Action To Take: Although I am not bullish on the whole retail sector long term, I do believe there is some decent value and upside in LB shares. The stock currently trades at around $62.26 with a 3.85% dividend yield which has grown at an average annual rate of 16% over the last five years. Based on better news and successful execution, there should be about a 10% near term (6 months or so) pop in the stock. Factoring in the two quarterly dividends would result in a total return approaching 12%. Not bad for six months’ work.

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