When it happens
Throughout moderate dementia
Why it happens
Memory loss is the main culprit. The person forgets to put the clothes in the hamper to be washed and/or forgets having worn them the day before. Also, as decision making grows impaired, it's easier to choose something familiar -- the comfortable clothes you just took off.
What you can do
Avoid pointing out that clothes being worn are repeats or dirty, which puts the person on the defensive and sets up an argument that won't be believed or understood.
Ask yourself if you're bothered by the repetition of the outfit or by actual dirt or odor. (A couple of generations ago, people didn't change clothes every day.)
Remove soiled clothing from the room at night, once the person is sound asleep. She'll forget about it the next morning if there's something else handy to put on.
Buy an identical replacement for favorite outfits (same color, style), so you can wash one while the other is being worn.
Pare down the closet to fewer options. Stock solids in favorite colors instead of patterns. (Solids are often preferred; patterns are distracting.)