Staples (SPLS), J.C. Penney (JCPN.Q), American Eagle Outfitters (AEO -2.20%), Sears Holdings (SHLDQ) and Abercrombie & Fitch (ANF -3.86%) are all potential turnaround plays. It's not likely that all five of these companies will be around five years from now, but it's not likely that all of them will fail, either. The trick is figuring out which one offers the most upside potential. That will ultimately be up to you to decide, but I'll report the numbers and each company's current situation in simple form. 

We'll first take a look at No. 5 on the list for "The Bottom 5 Retailers for the Third Quarter." Then we'll work our way up to No. 1 -- the weakest retailer in the third quarter. These results were compiled by RIS News, and they're only based on the largest 35 retailers.  

No. 5

Staples(SPLS) saw its third-quarter net sales drop 4% year-over-year. Though not positive, that's not a terrible number, especially considering that 1% of the loss was due to 107 store closings throughout the United States and Europe, and another 1% of the loss was due to a foreign exchange impact due to the strength of the U.S. Dollar.

Staples has been fighting against Amazon for office product sales, which has hurt its business. Staples is attempting to fight back by increasing its online product offerings by 50%, or 70,000 products. Staples was also ahead of schedule with its $150 million cost-reduction plan for 2013, and it's looking to streamline its organization in Europe.

Staples appears to be capable of a turnaround, and it yields 3.10%. Therefore, investors are paid while they wait. This isn't to say that a turnaround will be easy. 

No. 4

It might surprise you that J.C. Penney isn't No. 1 on this list. After former CEO Ron Johnson's dismal attempt to make J.C. Penney "America's Favorite Store" by offering everyday low prices, the embattled retailer has been struggling to get back on its feet.

In the third quarter, net sales declined 5.39% year-over-year. However, don't get carried away with optimism too quickly. J.C. Penney was such a mess a year ago that any type of improvement was relatively easy to deliver. The real test will be what comp sales look like after one year with CEO Mike (or Myron) Ullman running the show.

J.C. Penney lost many of its bargain-hunting shoppers during the Johnson era, and it has been a struggle to get them back. Combine this with all of the retail competition out there and J.C. Penney's return to prominence is much in doubt.

No. 3

American Eagle's(AEO -2.20%) third-quarter net sales slipped 6% year-over-year. CEO Robert Hanson has owned the poor performance, which is the first positive sign. Some CEOs make excuses. Hanson, rather, is looking for solutions. He points to a highly promotional retail environment in North America as the key challenge, and he wants to make improvements in merchandise, marketing, efficiency, and inventory. He's also gearing the company toward high-return segments, such as omni-channel, global expansion, and factory stores.

If American Eagle divests underperforming stores while putting that freed-up capital toward higher-growth segments, then a turnaround is possible. On top of that, American Eagle has a stellar balance sheet: $357.21 million in cash vs. no long-term debt. It currently yields 3.50%.

American Eagle is far from the safest investment at this point in time, but it might have a better shot at a turnaround than most companies on this list.

No. 2

Sears suffered a 7.23% net sales decline in this third quarter. Figuring out the Sears situation is relatively simple. It all comes down to competition. For instance, if you're looking to purchase home-improvement items, where are you most likely to go? If you're like most people, then your answer is Home Depot or Lowe's. If you want to shop for on-trend apparel brands all in one place, then you're likely to visit Macy's. If you're on the hunt for bargain prices on just about anything, then you're probably going to opt for Wal-Mart. If you want bargain prices in a more appealing atmosphere than Wal-Mart, then you're going to choose Target. Sears lacks differentiation. 

No. 1

With J.C. Penney and Sears already on this list, you're probably wondering what retailer is No. 1. This company also saw net sales plummet 12% year-over-year in the third quarter. That would be Abercrombie & Fitch(ANF -3.86%).

Ever since CEO Mike Jeffries' comments about targeting cool kids hit social media, the brand has lost its coolness. Investors wanted the board to show Jeffries the door, but he was instead rewarded with a restructured contract, which is performance-based. This in itself could be a positive catalyst. Nothing motivates people like money. However, Jeffries still has a difficult road back. He will have to make the brand cool again, which won't be easy. The good news is that the company can focus on global expansion, where consumers don't know about, or don't care about, Jeffries' "cool" comments. It will be interesting to see what Jeffries has up his sleeve.

Turnaround retailers?

In my opinion, Sears and J.C. Penney face steeper challenges than the other companies on this list. Staples, American Eagle, and Abercrombie & Fitch have better shots at turnarounds. However, the deck is stacked against all of them. Please do your own due diligence prior to making any investment decisions.