It’s not in a landfill. Its chemicals and metals aren’t leeching into groundwater. It is serving a purpose, just as much as a framed picture does, even if it’s just decorative. The goals of recycling are met.
I know of “rag mills” where clothes that people think are going to homeless and poor people are sold by the pound to high dollar “resale” retro clothing stores.
Fact is, it is not the intended audience.
Might as well have an ebay storefront (the kind of private business that says “we will list your items for you”) only don’t give credit or cash to the donors.
That is not recycling/recovery.