Avon Products Inc reported a 2 percent drop in quarterly sales after seeing the number of active sales representatives fall and the company dealt with higher costs, Reuters reported.

Avon, the world's largest direct seller of cosmetics, also said net income fell 81.5 percent in the first quarter, hurt by more "reps" leaving, with the exodus in North America the most pronounced.

The company, which last month rebuffed a $10 billion takeover bid from smaller rival Coty Inc, last year shelved a top-to-bottom business review until its new CEO started.

Sheri McCoy, previously a senior executive with Johnson & Johnson, took the reins of the company on April 23, replacing Andrea Jung after a 12-year stint.

Avon reported a net profit of $26.5 million, or 6 cents per share, on revenue of $2.58 billion in the quarter that ended March 31, compared with net income of $143.6 million, or 33 cents, on revenue of $2.63 billion a year earlier.

Excluding certain items, Avon had a 10 cent profit, well below the 28 cents Wall Street was expecting, according to Thomson Reuters I/B/E/S.

Avon has been bedeviled by heavy competition from drugstores in the United States, aggressive pricing by rivals in Eastern Europe and inadequate ordering systems that have frustrated representatives in Brazil.

The company, which has begun laying off employees, said its gross margin fell 3.1 points to 60.8 percent of sales, hurt by labor costs and the costs to make its cosmetics.

There were nonetheless signs of improvement. Sales in Brazil, its top market, rose 2 percent excluding the impact of currency exchange despite aggressive competition, helped by an increase in the number of reps.

But in North America, sales continued their long slide, falling 4 percent, hurt by a 10 percent drop in reps.