It depends on who you are.
If you're a young girl, you might say "Nice outfit!" then trash it behind the victim- er... person's back.
If you're a mother or mother-in-law, you'll tell them you think the clothing doesn't look good in a kind, but slightly patronizing manner.
If you're a best friend, you'll be honest, and help the person find something better to wear.
If you're a guy, chances are you won't give a damn- unless you're a boyfriend, in which case you'd better not criticize.
And if you're Godzilla, you'll not tell them anything. You'll just roar and step on them. Threat neutralized.