American Apparel signed a multi-year deal with EBay Inc for an online store, as the retailer continues efforts to turn around its sagging sales, sending its shares up as much as 12 percent before the bell.

The company, which has faced problems ranging from covenant breaches to immigration probes of its workers to shareholder litigation, expects the venture to become a multi-million dollar business within the first year, it said in a statement.

Weak same store sales in the first half of the year and fears of bankruptcy have shaved off more than a third of the company's value in the last three months.

But Chief Executive Dov Charney, fighting charges that he treated an ex-employee as a sex slave, expects the venture to open a new revenue channel for the company.

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, Charney said in the statement.

The store is slated to open in September and will offer a full assortment of products chosen by American Apparel, including hoodies and T-shirts.

Shares of the American Apparel -- known for its racy advertising -- were up 9 percent at $1.12 in morning trade on the American Stock Exchange.

(Reporting by Abhishek Takle in Bangalore; Editing by Prem Udayabhanu, Saumyadeb Chakrabarty)

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