The Association of Charity Shops has denied its members are losing money because they have to recycle goods they cannot sell.
Earlier this month, Oxfam claimed that figures from the association showed the sector wasted as much as £4.5m a year "sorting, recycling and storing unsuitable donations".
But the association said that all charities raise funds by passing unsaleable clothing to textile recyclers. They lose money, it claims, only on items that cannot be recycled, such as heavily soiled or torn clothing.
A spokeswoman for the association said the Textile Recycling Association provided an invaluable service to charities. "So many goods are donated that many charity shops would close down without it," she said.
Oxfam has launched a campaign, Sorted, to encourage the public to sort through goods they want to donate to charity shops, and to remove items that cannot be sold as they do so.
But the ACS spokeswoman warned against being too selective. "We don't want to discourage people from giving items to charity shops even if they are not sure they can be sold," she said.
Pet charity PDSA said it raises more than half a million pounds a year through recycling clothing.
"The only items we ask supporters not to donate are pieces of damaged furniture, broken electrical goods or books that are in poor condition," said Hugh Forde, head of trading at the PDSA. "These items cannot be sold, and it does cost us to dispose of them."