BOSTON — With its losses narrowed and $10 million worth of stock available to reward key executives, Kmart has begun cherry-picking talent to fill top roles.

The Troy, Mich.-based discounter said Tuesday it has hired former Gap veteran Lisa Schultz as chief creative officer, a new position reporting to president and chief executive Julian Day.

Schultz is expected to work closely with a chief merchant, a position the discounter has been working for months to fill.

In a 14-year stint at Gap Inc., Schultz became head of global product development and design for the Gap brand. She left the company in 2001, during an exodus of high-level executives, and has since worked as an independent consultant.

Two other newly appointed executives, Bruce Johnson and Janet Kelly, will also report to Day.

Johnson starts in October as senior vice president of supply chain and operations, the same position he held with Paris-based mass retailer Carrefour SA. Kelly, formerly executive vice president of corporate development with Kellogg Co., starts today as chief administrative officer, focused on human resources and corporate governance.

Tierney Remick, managing director of Korn/Ferry International’s retail and consumer products practice, said Day —whose forte is financial guidance — is choosing talent “with different skills from his [that is] not necessarily coming out of the same environment.”

Kmart’s makeover is a “big task,” she continued. “There are plenty of people wondering [that], if we have a Target and a Wal-Mart, [whether] we need a Kmart. This is his opportunity to pick people, who are strong in their own right, who can say, ‘Yes, we do.’”

Arnold Aronson, managing director of retail strategies for Kurt Salmon Associates, said the appointments were “a real necessity” and might signal a welcome culture shift for Kmart.

“If this means they are going to encourage a primary focus on developing a relevant merchandise assortment, then I think it’s a very strong first step,” he said.

Schultz, who starts next week, was unavailable for comment. In a statement, Day said her “vision and leadership” are “necessary for Kmart to move competitively into the future.”Industry analysts said having worked under Millard “Mickey” Drexler during Gap’s heyday, Schultz brings strong product development credentials.

“Clearly, she came up in a very product-centric environment,” observed Remick. “Kmart is likely looking for a certain taste level that it hopes she is going to provide.”

The move to redraw chief sourcing and product development roles — coupled with Kmarts focus on building exclusive, lifestyle brands — could indicate the discounter is taking a page from competitor Target’s book.

Regardless, execution remains “the big challenge,” Aronson noted. “Kmart has a very sensitive timeline in which to make progress. I would give [executives]credit for a strong first step, to get the people in place. Now, they’ve got to give these people running room.”

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