Well, that's certainly one way of looking at it. But still, it's better to resell clothes than to send them to a landfill. I'm not opposed to what they are doing at all, though I will admit to being skeptical about the green spin they've placed on it. People have been reselling clothes for, like, forever. It's nothing new. The green aspect they promote is more like greenwashing. Still, I'd rather give my clothes away than put them in the trash.
Also, they're surely not all "rejects." For example, some of my clothes are just too small for me now, but not in bad shape.
Well, if it is stated up front I don't have much of a problem with it. Some non-profits actually run thrift stores where donated things are resold. But if they are pretending to be a charity but acutally are for-profit, that's something entirely different.
Besides, people can donate elsewhere if they don't want to go with a for-profit business. I use Freecycle all the time.