Disney Posts a Rebound as Tourists Returned to Its Theme Parks

The company posted fiscal third-quarter sales of $17 billion, up 45% from the year-ago quarter, when the pandemic locked down much of the world, but results were still below the $20.2 billion in the 2019 third quarter. Analysts polled by FactSet expected sales of $16.76 billion.

Overall, Disney beat analysts’ estimates for its fiscal third quarter and recorded $918 million in profit, or 50 cents a share, for the three-month period ended July 3, compared with a year-ago loss of $4.72 billion, or $2.61 a share. Adjusted earnings were 80 cents a share. Disney’s stock price climbed in after-hours trading to over $188 a share, up around 5% its close of $179.29 a share before the results were released.

Tourists returning to theme parks bolstered Disney’s balance sheet, as key resorts stayed open throughout the quarter. Executives said they see the momentum continuing. “We see strong demand for our parks,” said Mr. Chapek.

The company’s theme parks and consumer products division posted its first profitable quarter in more than a year. Revenue at the division—which includes its storied Walt Disney World and Disneyland resorts—increased 300% from the year-ago period, and it swung to a profit of $356 million for the quarter.

Disney executives said its parks have more reservations for the future than there was attendance in the third quarter. They didn’t discuss vaccinations or new restrictions due to the Delta variant. Last month, Disney reinstated an indoor mask mandate at its theme parks in the U.S. regardless of vaccination status.

Disney’s results come as the broader travel and tourism industry is seeing a rise in cancellations and a slowdown in bookings as Covid-19 cases rise with the spread of the Delta variant. In its earnings report Thursday,

Airbnb Inc.

said the variant was affecting overall travel behavior.

Mr. Chapek reiterated that the direct-to-consumer streaming strategy is the company’s top priority and noted that moviegoers remained reluctant to go to theaters even as cinemas reopened.

Disney+ subscriber numbers beat estimates, reaching 116 million, up from 103.6 million in the second quarter, but its Hulu services had even higher growth rates. Total Hulu subscriptions rose 21% from a year ago, to 42.8 million. Hulu’s paid service generates more than three times the average monthly revenue per subscriber when compared to Disney+, the company said in its report.

Mr. Chapek also underscored that Disney will be flexible and strategic about using a combination of exclusive theatrical releases, direct-to-streaming releases or a hybrid of the two for its upcoming movies. He said decisions would be made on a film-by-film basis.

While the company has recently employed a hybrid release strategy for big-budget films like “Black Widow” and “Jungle Cruise”—with movies making their debuts both online and in theaters—Mr. Chapek said the company would stick to its plan to release upcoming movies exclusively in theaters. First “Free Guy,” starring Ryan Reynolds premieres this weekend in theaters, followed by Marvel’s “Shang-Chi and the Legend of the Ten Rings” out Sept. 3.

Mr. Chapek cited terms for both productions, which prohibit the company from releasing the two movies simultaneously on Disney+ and in theaters. But he added that giving “Shang-Chi” an exclusive run in theaters of 45 days should provide interesting data as the company evaluates the optimal distribution strategy with future movie releases amid its prioritization of streaming.

Disney’s distribution of movies on its streaming service has provided a new avenue for generating revenue. The company said revenue generated by offering “Cruella” on Disney+ for an additional $30 buoyed the streaming division’s results.

The company employed a similar strategy with the much-anticipated summer release of “Black Widow,” which collected more than $60 million in fees when it simultaneously premiered in theaters and on Disney+.

But, “Black Widow” star

Scarlett Johansson

dropped a bombshell on the entertainment industry when she sued Disney for breach of contract, saying the simultaneous release on Disney+ and in theaters deprived her of tens of millions of dollars. Disney has said the lawsuit has no merit. The dispute has highlighted debate in Hollywood about how stars should be compensated in the streaming age.

Mr. Chapek said both he and his predecessor, the historically talent-friendly Executive Chairman

Robert Iger,

made the decision to release high-profile movies on Disney+ and in theaters. Mr. Chapek also sounded confident that the company hadn’t alienated Hollywood’s creative community but also that additional conflicts will be avoidable.

“Since Covid has begun, we’ve entered into hundreds of talent arrangements,” he said. “And by and large they’ve gone very, very smoothly. So we expect that would be the case going forward.”

—Kimberly Chin contributed to this article.