Treasury Wine Estates (ASX:TWE) is still "significantly" underperforming the market but has managed to bridge the gap to some extent, Jefferies said in a Tuesday note.

California distributor disruption is a factor in the underperformance, and Jefferies pointed to earnings risk due to a requirement to work through material excess channel inventory and the possibility of further US distributor disruption.

Nielsen US wine category data for the four weeks to March 21 shows Treasury Wine underperforming in both value and volume terms. The company's brands declined 6.1% in value terms vs. a 1.9% fall for the broader market on a year-over-year basis, and fell 7.1% in volume terms vs. a 3.2% retreat for the broader market.

Meanwhile, the company's luxury portfolio declined 2.6%, compared with 3.5% growth for the luxury market, as its key distribution partner faces challenges in markets outside of California, too, the equity research firm said.

Jefferies maintained its hold rating and AU$4 share price target on Treasury Wine Estates.