I just started Chapter 3, so they're just equipped with whatever the best stuff in the shop is. I have a couple of pieces of better equipment from enemies that are higher levels than me that I met in the random battles. When I get to the end of the game though, I plan to use poaching(especially in the final dungeon) to its fullest extent and rob everyone in the later battles that has cool equipment. "Here, here, Elmdor, give me your Genji Gear!"