Sept. 9 (Bloomberg) -- McDonald's Corp., the world's largest restaurant company, reported August sales that rose more than some analysts estimated as consumers battered by higher gasoline and grocery bills bought $1 sodas in the U.S. and snack-sized chicken wraps in France.

Global sales at restaurants open at least 13 months climbed 8.5 percent compared with a year earlier, helped by an 11.6 percent gain in Europe and the dollar's decline against other currencies, the Oak Brook, Illinois-based company said today.

The global increase was the biggest since February and signals Chief Executive Officer Jim Skinner's strategy to promote lower-priced items in the U.S. and Europe is winning cash-strapped customers from Burger King Holdings Inc. and Wendy's International Inc. Those chains boosted advertising of discount foods last month after posting slower same-store sales growth than McDonald's in the quarter through June.

Europe's gain ``was particularly important in assuaging investor concern about slowing macros in that region,'' John Glass, a Morgan Stanley analyst in Boston, wrote today in a note to investors. He recommends investors buy McDonald's shares.

McDonald's increased 77 cents, or 1.2 percent, to $63.19 at 4 p.m. in New York Stock Exchange composite trading. The 7.3 percent gain in 2008 has outpaced the Dow Jones Industrial Average's 15 percent decline and would be the sixth straight year the company has surpassed the index.

Sweet Iced Tea

Almost one-third of U.S. restaurants sold large sodas and sweet iced tea for $1, part of Skinner's emphasis on discounts that are also drawing customers overseas. European stores spurred value-menu sales with a promotion giving away Coca-Cola Co. glasses while advertising tied to Summer Olympics in Beijing lifted U.S. demand for chicken sandwiches.

Slowing economies in Germany and the U.K. didn't dent McDonald's performance in Europe. That region's increase was the second biggest in at least a decade following the February advance, McDonald's spokeswoman Heidi Barker said today in a telephone interview.

February's results had an extra selling day because of the leap year, adding about 4 percentage points to global sales.

``McDonald's does well in bad economies because people trade down,'' John Kornitzer, who oversees $5 billion at Kornitzer Capital Management, said yesterday in an interview. The Shawnee Mission, Kansas-based firm owned 189,710 McDonald's shares through June.

August sales in the U.S. advanced 4.5 percent while gaining 10 percent in the region encompassing Asia, the Pacific, the Middle East and Africa, McDonald's said in a statement.

Analysts' Estimates

Three analysts estimated a median increase of 4.7 percent globally, 6 percent in Europe and 3.5 percent in the U.S., according to projections compiled by Bloomberg News.

Global same-store sales in August 2007 climbed 8.1 percent.

Snack-sized chicken wraps and Big Tasty burgers spurred sales in France, while U.K. sales rose on breakfast foods, Barker said. Olympics promotions lifted sales in the U.K. and Australia.

McDonald's introduced new chicken sandwiches and biscuits in April in the U.S. to compete with Burger King and Wendy's.

Burger King, the second-largest U.S. hamburger chain, increased advertising of three $1.39 sandwich wraps, while Wendy's introduced a 99-cent Double Stack cheeseburger to go along with a 99-cent bacon cheeseburger and chicken sandwich.

U.S. Results

McDonald's same-store sales gains in the U.S. were ``nearly double the U.S. fast-food industry,'' David Palmer, a UBS Securities LLC analyst in New York, wrote today in a note to clients. He recommends investors hold McDonald's shares.

The cost of living was up 5.6 percent in the year ended in July, the biggest jump in 17 years, the U.S. Labor Department said last month.

Over the next year and a half, McDonald's is installing counters to sell cappuccino and lattes, after adding a new blend of coffee in 2006 to capture sales from Starbucks Corp.

Almost all of McDonald's more than 13,800 U.S. restaurants are selling iced coffee while more than two-thirds are offering sweet iced tea, spokesman William Whitman said Aug. 28.

Europeans' confidence fell to the lowest in more than five years in August. The economy contracted in the second quarter for the first time in almost a decade as consumers grappled with higher food and fuel prices.

The U.S. dollar fell 6.2 percent in August 2008 compared with a year earlier, based on the average monthly price against six other currencies.

-- With reporting by Fergal O'Brien in Dublin and Christian Vits in Frankfurt. Editors: Brad Skillman, Colleen McElroy

To contact the reporter on this story: Chris Burritt in Greensboro, North Carolina, at cburritt@bloomberg.net.

Last Updated: September 9, 2008 16:26 EDT