DOW JONES NEWSWIRES 

American Apparel Inc. (APP) will sell its products on eBay Inc.'s (EBAY) online-auction site as part of its efforts to expand into new markets and open new distribution channels.

The clothing retailer's shares rose 33% to $1.37 premarket. The stock has fallen 39% over the past year, through Monday's $1.03 close, amid liquidity woes and weak sales.

"There are more than 30,000 searches for American Apparel on eBay each month and right now those customers are not buying from us directly," said Chief Executive Dov Charney. "I'm excited to connect that demand to our vertically integrated production and distribution platform to create a new revenue channel for American Apparel," he added.

The casual clothing retailer, known for its risque marketing campaigns and colorful basic clothing, has its own online retail site and the eBay store will launch in September.

Orders placed through eBay will be fulfilled by American Apparel's Los Angeles factory.

Liquidity problems have dogged American Apparel for more than a year. The company first warned in early 2010 that it could fall out of compliance with its debt covenants before it narrowly averted a default.

American Apparel reported in May its first-quarter loss narrowed although sales fell 4.7%. Online sales grew 28% while wholesale sales slid 4.3%.

-By Melodie Warner, Dow Jones Newswires; 212-416-2283; melodie.warner@dowjones.com