As Harvard Square undergoes its yearly transformation to red and green, store owners are busy preparing for the onslaught of holiday shoppers and the biggest financial boom of the year.

About 40 percent of a year's business is conducted during the four weeks between Thanksgiving and Christmas, Square merchants said yesterday. The Friday after Thanksgiving is generally considered the busiest shopping day of the year.

Last year, a recession economy cast a shadow of gloom over the Christmas market. But economists are predicting a nationwide increase in gift spending this year, and the current holiday season may prove even more profitable than usual.

Exploiting It

Some merchants have set up their wares especially for the season. Two new stalls in the Garage, Cannables, and Donna French Designs, will be open only for the weeks between Thanksgiving and Christmas.

Cannables is a gift-wrapping store But instead of the usual boxes and paper, Cannables uses decorative cans. Customers bring in their gifts, which are sealed in tin containers.

Dana A. DeGeorges, co-owner of Cannables, said yesterday his first-year venture is "a unique alternative to socks wrapped at the Coop." DeGeorges explained that he set up shop only in December because it is the time when canning appeals to a broad base of people. From January to November DeGeorges packages products for companies.

Donna French Designs sells cotton dyed jumpsuits and pants. Owner Donna French says she has been selling the clothing she designs to boutiques in California for five years, but only opens a formal store for the holidays.

Many merchants use the Christmas season to market expensive items that would sell only during the extravagant buying of the Christmas season.

'One of a Kind'

At Orient in The Square owner Geil Del Castillo said that Christmas is the time when expensive, "one of a kind" merchandise is sold. Items such as beaded sweaters from China are more likely to be chosen at Christmas than during the other 11 months. Del Castillo explained.

Carol Monica, manager of the newly-opened Games People Play, agreed that holiday shoppers are more inclined to purchase "whimsical things" than at other times in the year. Monica said the game "Trivial Pursuit," a trivia quiz contest, "has been a $40 hotcake."

At the Harvard Book Store, Manager Chris Catchick said that publishers plan certain books around the Holiday season. "You know that the books released now wouldn't be released any other time of year," Catchick said, citing humorous books, such as "More Items from Our Catalog," a second spoof on the L.L. Bean Catalog, as big sellers at Christmas. He added that expensive art books are popular gift items but that "they can't sell well unless they are displayed."

At Cardullo's, a gourmet food shop, "the whole business completely changes at Christmas," said General Manager Daniel J. McLaughlan. According to McLaughlan, Cardullo's sells primarily international foods, and each country has a unique culinary way of celebrating Christmas. Food packages such as Godiva Chocolates, Mozarte Candies and maple candy are big holiday items, said McLaughlan.

Even when stores do not plan special holiday items or promotions, they must plan ahead for the increased activity that is unlike any other time of the year. At the WordsWorth bookstore. Night Manager Garvin G. Brennan says the store hires five or six extra people to cope with the increased numbers of customers. Garvin added that although the store doesn't undergo any major reorganization, "we still have to figure out where to put 200 copies of "A Child's Christmas in Wales." Garvin said calendars are "tremendously big sellers," and several lines, such as the National Audubon Society calendar, have already sold out.

At Discount Records, Assistant Buyer Dennis MacDonald said that record sets are popular gifts. MacDonald added that such musicians as Brain Eno, whose record set sells for $70, is "ambient or Harvard Square type music" and sells well.

Brian Spense, assistant manager of the Corn Popper, said his flavored popcorn is "a unique and great last minute gift." The Corn Popper sends popcorn around the country by UPS, and features a tin can containing any six flavors. "Spearmint, Strawberry and Cherry will probably be very popular during the holidays because they are green and red," predicted Spense.