Clothing retailer American Apparel Inc swung to a first-quarter loss, cut its full-year outlook and said it may have to restate prior financial statements due to the classification of its revolving credit facility, triggering a 20-percent slide in its stock.

The company, which earlier in the day settled a suit bought by film director Woody Allen for $5 million, said operating expenses rose 21 percent to $69.3 million in the quarter, while sales were up 2.4 percent to $114.3 million.

For the quarter ended March 31, American Apparel, which operates over 265 retail stores in 19 countries, posted a net loss $9.0 million, or 13 cents a share, compared with a profit of $1.1 million, or 2 cents a share, a year ago.

American Apparel said any change to the classification of its revolving credit as a long-term obligation and certain other balance sheet matters, may result in a restatement of prior financial statements, but is not expected to hurt net cash flows, cash position, revenues or net income.

It now sees income from operations of $40 million to $50 million in 2009, compared with its prior view of $55 million to $65 million. It now expects net sales of $550 million to $575 million in 2009 compared with its earlier forecast of $575 million to $600 million.

The company's often flamboyant Chief Executive Dov Charney said that while in the first quarter the company had to deal with severe liquidity constraints that hurt sales and margins, its recently completed financing with Lion Capital puts it on more solid footing for the future.

Shares of the Los Angeles-based company were trading at $4.40 in trading after the bell, after closing at $5.47 on the American Stock Exchange Monday.

(Reporting by Renju Jose in Bangalore; Editing by Anthony Kurian)