Fitbit Has Another Fire to Put Out

By Rick Munarriz Markets Fool.com

Fitbit (NYSE: FIT)can't seem to catch a break, and now sales that were already going the wrong way may take longer to recover. A Wisconsin woman claims that she was wearing a Fitbit fitness tracker when it exploded on her arm, causing her to suffer second-degree burns.

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Fitbit is naturally looking into the situation, but it's not going to rush into a recall of the Fitbit Flex 2 bracelets. This is the first time that it has been made aware of a safety issue with any of its devices. Fitbit sells a ton of trackers, 22.3 million connected devices last year alone.

One exploding activity monitor is still one too many. The brand and the product line will take a hit, even if Fitbit is ultimately vindicated here. You just know that there was plenty of watercooler chatter across the country this morning whenever someone walked in with a Fitbit. Fitbit was already struggling to drum up sales, and now it may have to fortify its reputation as well.

If you thought that Fitbit had an uphill climb before, hold on for more steps. Image source: Fitbit.

Hard times for hardware

Fitbit has had issues with hardware before, but never to the point where the actual safety of the wearer was concern. A year ago, there were knocks on the accuracy of its heart rate-tracking technology. Earlier this month, there were reports that production issues were delaying its next smartwatch, a problem because the niche giant likely has an update coming in the fall.

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Fitbit stock was already one of last year's biggest losers, surrendering 75% of its value in 2016. Even if this is an isolated incident -- and look out below if more blazing fitness trackers pop -- it's going to be hard to convince retail customers and corporate wellness programs that a device tracker is worth the risk.

Consumers on a health kick and companies hoping to shave insurance costs view Fitbit as a way to encourage active lifestyles. Fitbit is about health. If severe wrist burns become a part of the equation, you can be sure that the trend's days will be numbered.

Sales were already a challenge for Fitbit. Revenue fell 19% in last year's fourth quarter, and Fitbit's outlook calls for a 22% to 31% slide this year. Fitbit reports quarterly results next week, and naturally it will be asked about this if it doesn't conclude its investigation before then. The irony of fitness trackers being potentially bad for your health is cruel.

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Rick Munarriz owns shares of Fitbit. The Motley Fool owns shares of and recommends Fitbit. The Motley Fool has a disclosure policy.