May 10 - American Apparel Inc posted a narrower quarterly loss as it cut costs by closing underperforming stores and streamlining operations, and the clothing chain expects to achieve positive comparable store sales this year.

American Apparel Summer 2010 campaign

The retailer, known for racy advertising and its founder's legal problems, raised prices to offset higher yarn and fabric costs in the first quarter, boosting margins.

The company has been facing a long string of troubles, from possible covenant breaches to immigration probes of its workers to shareholder litigation and a long-running sales slump.

In April, the company said in the risk factors section of a regulatory filing that it might file for bankruptcy if it does not get enough money to keep running and might even have to liquidate.

For January-March, American Apparel posted a loss of $20.7 million, or 28 cents a share, compared with a loss of $42.8 million, or 60 cents a share, a year ago.

Revenue fell nearly 5 percent to $116.1 million in the quarter, hurt partly by the shift of the Easter holiday to April.

The company's shares closed 5 percent higher at $1.28 on Tuesday on the American Stock Exchange.

(Reporting by Renju Jose in Bangalore; editing by Andre Grenon)