UPDATE 3-Ethan Allen Q2 profit misses view, cuts dividend

* EPS $0.19 ex-items vs Wall St view EPS $0.20

* Net sales drop to $189.6 mln vs yr-ago $259.5 mln

* Cuts qtrly dividend to $0.10/shr, pvs $0.25/shr

* Reaches agreement to amend existing credit line

* Shares down 5.7 percent

(Adds dividend cut, share move)

NEW YORK, Jan 29 (Reuters) - Ethan Allen Interiors Inc (ETH.N) posted a sharply lower quarterly profit that missed expectations as recession-hit consumers cut spending, and the furniture maker and retailer slashed its quarterly dividend.

Its shares fell 5.7 percent in early trading.

Net profit fell to $5.5 million, or 19 cents a share, for the fiscal second quarter ended Dec. 31, compared with $20.6 million, or 70 cents a share, a year earlier, the company said on Thursday.

Excluding restructuring and impairment charges, its profit of 19 cents per share fell short of analysts' average expectations by a penny, according to Reuters Estimates.

Ethan Allen cut its quarterly dividend to 10 cents per share from 25 cents per share.

Net sales fell to $189.6 million in the quarter from $259.5 million a year earlier.

U.S. furnishings companies, reeling from an industrywide slump, have been forced to trim operating costs as the recession and weaker home values pressure consumer spending.

Ethan Allen announced earlier this month that it was consolidating its manufacturing operations and retail service centers, while others like Furniture Brands International (FBN.N) and La-Z-Boy (LZB.N) have announced job cuts in recent months.

Ethan Allen said it reached an agreement with its lenders to amend its existing, undrawn revolving credit line to give it additional covenant flexibility and reduce the total line to $100 million.

"Although we have not drawn on the line of credit, and only used our existing credit facility to support Letters of Credit, the new covenants provide greater flexibility going forward," Chief Executive Farooq Kathwari said in a statement.