Female with new hat and close-fitting dress (6)
I believe the answer is:
Here is my best explanation:
'close-fitting dress' is the definition.
'female with new hat' is the subsidiary indication.
'female' becomes 'she' (**).
'with' means one lot of letters go next to another.
'new' indicates an anagram.
'hat' is an anagram of 'ath'.
'and' is the link.
(Other definitions for sheath that I've seen before include "Scabbard", "coat", "Condom", "Covering for blade", "Sword case", "Blade-cover", "Holder for a dagger", "case for weapon", "jacket" and "Cover protecting".)