UPDATE 2-Abercrombie gives outlook below Street view

(Adds details on outlook, analyst comments, expectations, tax benefit, stock activity)

NEW YORK, Feb 15 (Reuters) - Abercrombie & Fitch Co (ANF.N) on Friday forecast earnings for the first half of 2008 well below analysts' estimates -- but Wall Street appreciated the retailer's conservatism.

The company, which sells trendy clothes for kids, teenagers and young adults, also reported quarterly profit in line with analysts' estimates, excluding a 4 cent-per-share tax benefit.

"Guidance was well below our and Street expectations, and while disappointing, we believe managing the Street is wise in this environment," wrote Oppenheimer & Co analyst Roxanne Meyer in a research note. "We expect other companies to follow suit."

Meanwhile, there's a good possibility the company will end up beating its outlook, according to Thomas Wiesel Partners analyst Liz Dunn.

"We believe the guidance could prove conservative," wrote Dunn. "Abercrombie is typically very conservative and has an excellent track record of delivering favorably versus guidance."

The operator of the Abercrombie & Fitch and Hollister chains said net profit rose to $216.8 million, or $2.40 per share in the fourth quarter ended Feb. 2, from $198.2 million, or $2.14 per share, a year earlier.

The results included a 4 cent per share benefit from a lower tax rate.

Analysts on average were expecting $2.36 per share, excluding items, according to Reuters Estimates.

Sales rose 8 percent to $1.23 billion; however, sales at stores open at least a year dropped 1 percent in the quarter.

The company said gross profit rate rose 0.8 percentage point, helped by higher margins early in the quarter.

That, combined with a lower rate of shrinkage -- theft and lost merchandise -- helped offset deeper discounts later in the quarter, which includes the holiday and post-holiday periods.

Abercrombie said it expects a profit of $1.61 a share to $1.65 a share for the first half of fiscal 2008. The low end of its forecast represents an expected same-store sales decrease of 1 percent in that period, the company said.

Analysts on average were expecting profits of 74 cents per share for the first quarter and 99 cents per share for the second quarter, according to Reuters Estimates, or a first-half total of $1.73.

The retailer expects fiscal 2008 capital expenditure in a range of $420 million and $425 million. About $300 million of that amount would be used for new stores and remodeling existing ones, Abercrombie said.

In fiscal 2008, it expects to add 110 new stores in North America and four in Britain.

Abercrombie shares were off 27 cents at $75.77 on the New York Stock Exchange. (Reporting by Martinne Geller; Additional reporting by Brad Dorfman and Aarthi Sivaraman; Editing by Derek Caney and Gerald E. McCormick)