“My sheep refuses clothes!” It happens. Occasionally, you will run into a sheep who completely refuses to wear clothes and has ingenious methods for being rid of her or his garments when you are not looking. There are nudist humans, and there are nudist sheep. There is little inherently wrong with being nude, but human society dictates that the current norm is to wear clothes. As for sheep society… with just a glance, you can definitely see that there is no such norm.
Either way, they, humans or sheep, have a right to be as they wish if they are really so set against clothes. It is simply that humans usually have to be as they wish away from other humans. Sheep have the luxury of being as undressed as they wish wherever they wish without raising too many eyebrows.
If you feel that your sheep ought to wear something, consider a item that is less noticeable to the sheep or which interferes little with its typical habits, such as a nice earring or necklace. I have heard of giving horses nail polish, but that hardly counts as clothes. The women painted head to toe in Times Square are not clothed, and same applies for sheep.
As much as I would like all sheep to be decent and wear clothes, it is not in some of their natures, and there is little point in forcing your sheep to be miserable. More important than whether or not your sheep wears clothes is whether or not your sheep is happy and well-behaved. After all, a miserable sheep may be more likely to stubbornly try to chew on your gold or nibble on your wires despite your admonishments.