Treasury Wine Estates' (ASX:TWE) overall US wine category remains challenged, although some positive signs are emerging in the luxury segment with prices above $20 per bottle, according to a Tuesday Jefferies note.

The investment firm said that Treasury Wine continues to underperform the broader market by a "significant" margin, but the performance gap relative to the market appears to be narrowing somewhat.

There are ongoing risks to earnings due to two key factors, including the need to reduce a substantial level of excess inventory held in distribution channels and the potential for further disruption among distribution partners in the US.

Jefferies kept a hold rating on Treasury Wine Estates with a price target of AU$5.