This can quickly be resolve by adjusting the sensor and calibrating the printer.
Open the printer and ensure the yellow slider is pointing at the corresponding arrow on the printer.
Once aligned, close the printer and press the pause button to un-pause. Hold down the Pause and Cancel button for 7 seconds, some labels will push out.
The printer should print normally now. If this does not resolve the issue, repeat the steps or do a Factory Reset on the printer.