Why the Treasury Wine (ASX:TWE) share price is tumbling 6% on Friday

The pandemic is weighing on Treasury Wine's recovery expectations.

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falling asx wine share price represented by glass of red wine spilling

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The Treasury Wine Estates Ltd (ASX: TWE) share price is selling off on Friday following the company's first quarter trading update.

At the time of writing, the Treasury Wine share price is down 5.78% to $11.58.

What triggered the selloff?

Treasury Wine flagged that operating channel conditions across Asia, the Americas, Australia and New Zealand were slightly below its recovery expectations.

Management was reserved with their commentary, citing that "as we exit the first quarter of fiscal 22, the recovery of key luxury channels impacted by the pandemic are slightly behind the expectations we had at the beginning of the year."

"This is particularly the case in the US where re-openings continued at a gradual pace, but with on-premise depletions growth slower than we had anticipated, and in Australia, where extended lockdowns in Sydney and Melbourne have resulted in the closure of the onpremise channel, delaying our execution plans outside of the large retailers, particularly for Penfolds," said Treasury Wine CEO, Tim Ford.

"In Asia, significant disruptions to key luxury sales channels continue across large parts of the region," he added.

Another factor weighing on the Treasury Wine share price could be the cycling of elevated sales.

Ford said that while the company's retail and e-commerce channels continue to perform strongly, growth rates were moderating compared to the prior year where there were "significant shifts in consumer purchasing behaviour".

The concept of moderating and cycling of elevated sales from FY20 has weighed on many ASX 200 shares in the retail space including heavyweights Wesfarmers Ltd (ASX: WES) and Endeavour Group Ltd (ASX: EDV).

Treasury Wine share price selling off on heavy volume

Almost 2 million shares have traded hands within the first two hours of trade.

To add some perspective, Treasury Wine's 10-day average volume sits at around 1.45 million.

The Treasury Wine share price has largely been range bound since early June, struggling to hold above $13 but finding plenty of buying support as it approaches the mid $11 level.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Treasury Wine Estates Limited and Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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