The Danbury, CT-based furniture maker and retailer, whichoperates 307 design centers in the US and overseas, said sales forits retail division declined by 1.4%, dropping to $177.4 million,while wholesale sales dropped fell 11.7% to $165.7 million.Same-store sales were also off 8.5% over the prior year's quarter,the company said.

Farooq Kathwari, Ethan Allen's chairman and chief executiveoffice, blamed the quarterly decline on a soft home furnishingsmarket and challenging prior-year comparisons. Despite positivetrends in comparable sales during December, Kathwari said that theoverall retail home furnishing market "remains uncertain" but saidthe company is "within reach" of earning expectations set by WallStreet for the third quarter. Analysts on average expect thecompany to earn 61 cents per share on sales of $267 million.

For the six month period ended Dec. 31, 2006, net sales were$500.2 million, a drop of more than $27 million over the $527.3million in sales during the prior year's comparable period. Retailsales were up 1.5% to $343.4 million while wholesale sales plunged12.2% to $321.3 million. Comparable sales for the last six monthsof 2006 declined by 5.3%, the company says.