Often these donated items are low quality clothing manufactured in sweat shops, and dumping them into communities puts local clothing sellers out of business. Hundreds of thousands of shitty Superbowl Loser tee shirts and sweat shirts and shorts and windbreakers and letterman jackets and hats that will fall apart in a few years but are available now for free.
Not to mention all of the cheap plastic jewelry and sunglasses and foam fingers and toys and shit that serve no actual purpose so nobody wants it and it all ends up in a landfill.
We'd all be better off if they didn't produce any of it.