Loblaw president and CEO Allan Leighton today (23 February) warned that the economy would remain “tough” for the next two years in Canada with unemployment remaining high and consumer debt growing.

Leighton told analysts that he disagreed with those who believed a recovery was near and said conditions would remain challenging.

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“Unemployment is still north of 8% and, if I look out over the next two years, I don’t see that number getting any better,” Leighton told the CIBC Retail and Consumer Conference in Toronto, adding that household debt was “rocketing away”.

Leighton’s caution echoed comments from Loblaw executive chairman Galen Weston, who said last week that the Canadian retail sector would be more competitive in 2010.

Weston was speaking as Loblaw posted a 19% jump in fulll-year earnings amid a company-wide restructuring programme, that takes in IT, supply chain, distribution and stores.

Leighton described the revamp as the “biggest retail restructuring in the world” and outlined Loblaw’s progress on the programme. The company plans to boost its investment in IT and its supply chain and Leighton said the business would maintain capital expenditure of CS$1bn in 2010.

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“We’ve got to go through a lot of pain in the short term but it’s going to be worth it,” Leighton said.

Leighton reminded investors of the competitive nature of Canada’s retail sector but insisted Loblaw was a growing business and would benefit from “unmatchable” characteristics, including its real estate and its scale.

The Loblaw boss insisted the company’s discount business and its acquisition of ethnic food retailer T&T Supermarkets would drive growth.

“This business is still growing its share in Canada,” Leighton said. “It’s a different business and growth will come from different areas.”