H+M slashes up clothes to be unwearable as people freeze outside (nytimes.com)

It wasn't H&Ms standard practice in the first place, and they stopped the store that was doing it. Their standard practice was to donate the unsold clothes to charity.

http://cityroom.blogs.nytimes.com/2010/01/06/hm-says-it-will...

This is old, was posted on reddit a while back, along with another post about how they are now donating them.