Old clothing that is too worn out and cannot be donated likely ends up in the landfill. Many other fabrics suffer the same fate. Mined Recreations uses recycled fabrics to make useful items like handbags. Precocious does the same but designs many other clothing items.
A lot of fabrics end up in the landfill and now that a lot companies used more synthetic fabrics and special coatings, like those for stain resistance, the environmental impact is greater than ever. This type of recycling and reusing may not close the loop entirely but it does help.